Fund Talk

I am 36 years old and intend to work for another 15 years. I have the following SIPs: Rs 8,000 each in HDFC Equity and IDFC Premier Equity; Rs 6,000 in Quantum Long Term Equity; Rs 4,000 each in Canara Robeco Equity Diversified, DSPBR Equity and HDFC Top 200; Rs 3,000 each in ICICI Pru Focussed Bluechip and UTI Opportunities; Rs 2,000 each in Birla Sun Life Frontline Equity, Canara Robeco Large Cap+, Franklin Bluechip, Mirae Emerging Bluechip, HDFC Prudence, Mirae Asset Opportunities, Sundaram Select Midcap and UTI MNC; Rs 1,000 each in DSP BR Top 100, ICICI Pru Infrastructure, Reliance Banking and Reliance Diversified Power Sector.

These SIPs have been running for a year now. I can continue for at least two years. In 2014, I shall review whether I can continue SIPs of Rs 60,000 a month. Kindly suggest if I can have Rs 60,000 a month of SIPs. What are the funds I can get rid of, so as to reduce holding to about 10-12 funds? How should I invest in order to have decent money for the education of my two children (aged nine and one) and for retirement (I plan to retire in 15 years)? I am hoping my life expectancy will be about 70 years.

Ashish Goel

It does seem like you are investing a large sum in equities through systematic investment plans. But we do not know the details of your monthly income, the surplus you can spare for the long haul every month and the proportion that goes into other asset classes such as debt.

In the absence of such information, we do not wish to judge whether your exposure to equity SIP is too high or otherwise. We, therefore, suggest you do a quick assessment yourself based on the following: first determine your surplus after deducting all your fixed commitments, including loans and household expenses, from your monthly income. After this, decide the proportion of equity, debt or gold you wish to hold. We are not discussing real-estate here but ensure that asset forms a part of your asset holding.

Let us assume, based on your risk appetite and nature of goals, that you decide to have 60 per cent of your assets in equities, 30 per cent in debt and 10 per cent in gold. If you have a surplus of Rs 60,000 a month, then Rs 36,000 should be allocated to your equity SIPs, Rs 18,000 to various debt options and Rs 6,000 in gold. Please note that this is merely an illustrative example.

You will have to choose your allocation based on your risk appetite and financial goals. You will also have to decide how much you will need on retirement or for your kids' education. If you have arrived at Rs 60,000 a month SIP after following a similar allocation strategy, there is no cause for worry.

If you are unable to do this, we suggest you approach a financial planner. Since your investments appear large, we assume your retirement needs may be high. It is best discussed with a qualified planner. And remember, your SIP money should be an amount you can afford to invest regularly and be able to meet the commitment over the long term. If you cannot spare the monthly SIPs over 5-10 years at least, then it is best you plan your goals with a lower SIP amount. You may always hike it when your income increases.

Portfolio changes

Once you are done with the exercise of arriving at your equity allocation, you can consider reducing the number of funds you hold. We can suggest a portfolio of diversified funds with a few mid-cap schemes thrown in to prop returns. Sector funds are only meant for those who can actively track the sector and reasonably time their entries and exits.

HDFC Equity, Canara Robeco Equity Diversified, IDFC Premier Equity Quantum Long Term Equity and Franklin Bluechip can form part of your core portfolio. Add Fidelity Equity to this. Ensure that 60-75 per cent of your equity SIPs are invested in these funds.

Continue investing in UTI Opportunities and HDFC prudence and Sundaram Select Cap. To this, add index fund Goldman Sachs CNX 500 index fund and any gold fund-of-fund from Kotak, Reliance or Quantum Mutual, that offers SIPs . You have 8-10 per cent surplus in gold. These can be your satellite funds.

You can exit the other funds. Most of them are above-average performers but need to be exited to make your portfolio compact and to avoid duplication. Sector funds can be sold if you cannot track them. If you wish to hold, you may continue Reliance Banking but stop SIPs and watch for improvement in performance in the sector over the next six months.

Your goals are long-term in nature. If you continue SIPs for the next 10-12 years, you will have a reasonable corpus. The current Rs 60,000 a month for instance, invested over 12 years, has potential to build wealth of Rs 2.4 crore, if it can generate a return of 15 per cent annually.

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