Fund Talk

I am 38 years old and work in a software firm in Bangalore. I have the following funds through SIP mode. In ICICI Pru Infrastructure, DSPBR Top 100, ICICI Pru Focussed BlueChip Equity, HDFC Equity, Birla Sun Life Mid Cap, IDFC Premier Equity Fund and Reliance Vision Fund, I have a monthly SIP of Rs 5,000 each. I also invest Rs 7,500 each, every month, in HDFC Top 200 and Reliance Growth. Is the selection of the funds alright? Should I stop some of the SIPs or add new ones?

Considering my age, I would like to be an aggressive investor for the next 10 years. Please advise accordingly.

Rahul Mish

You have about Rs 50,000 worth SIPs. This is a fairly large sum. Ensure that this is something that you can spare for the long haul. We assume that you have made sufficient investments in safer avenues such as fixed deposits, PPF and the like. If not, allocate at least 20-25 per cent of your corpus in such instruments.

Given your long investment horizon and stated aggressive appetite, it is likely that you will want to build a large corpus.

However, there seems to be no specific goal towards which you are saving. This is important in deciding the quantum and avenues of investments.

Many of the funds in your portfolio have a strong track record, while others have had a disappointing run over protracted periods of time. Also, your portfolio is a bit ‘all over the place' and can do with some rebalancing.

Exit ICICI Pru Infrastructure, as this theme itself has underperformed and is loaded with macroeconomic risks. You can also sell Reliance Growth, Birla Sun Life Midcap and Reliance Vision, all three of which have been quite disappointing over the past three-four years. From proceeds of selling these, consider upping SIPs in the other funds.

Henceforth, consider investing Rs 10,000 each in HDFC Top 200, IDFC Premier Equity and ICICI Focussed Blue Chip Equity, three of the best performing funds over the past few years, with ability to contain downsides as well. Since you have an aggressive risk appetite, switch from HDFC Equity, a multi-cap fund with an excellent long-term track record, to HDFC Mid-cap Opportunities to the tune of Rs 8,000. You can consider switching from DSPBR Top 100 Equity to Quantum Long-term Equity, a multi-cap fund with a robust five-year track record and invest Rs 8,000 there. The balance amount of Rs 4,000 can be invested in UTI Opportunities fund.

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I am 29 years old, working in a software company. My annual tax slab comes to 30 per cent. I have been investing in the funds mentioned below on a monthly Rs 1,000 in SIP: Canara Robeco Tax Saver, ICICI Tax Saver, HDFC Tax Saver. I do not have any housing loan and insurance plans at present. Kindly let me know the best ways to reduce my tax outflows and also suggest best investments.

Satya Prasad

A common mistake committed by investors is to confuse tax planning and investments. Clubbing the two does not necessarily guarantee optimal results. Testimony to this fact is that most tax savings funds have not matched regular diversified funds in their performance despite having a lock-in period of three years for each investment.

Having said that, you can continue your investments in HDFC Tax Saver and Canara Robeco Tax Saver, both of which have superior track records, but exit ICICI Pru Tax Saver.

It must be noted that each SIP instalment is locked for three years. Hence SIPs in ELSS is not a good idea. Also, it is uncertain if tax benefits would be extended to ELSS schemes when the new tax code comes into force from the next fiscal.

Our suggestion is to stop SIPs in ELSS schemes after this year.

Instead, for tax saving purposes, explore traditional avenues such as PPF (where rates and investment limits have been raised recently) or increasing your provident fund contribution at your office.

You can also invest in infrastructure bonds such as those from IDFC and L&T Infra currently, to the tune of Rs 20,000, which is over and above the Rs 1 lakh deduction allowed. Please note that tax planning should not be your main worry, when you think of building wealth.

Given that you are in the 30 per cent tax slab, your salary must provide you some leeway to save. Hence, focus on building a balanced portfolio with mutual funds, fixed income instruments, gold and later property, over the long term.

Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line, 859- 860, Anna Salai, Chennai 600002.

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