Mutual Funds

Your Fund Portfolio

Aarati Krishnan | Updated on January 09, 2018 Published on November 26, 2017

I have been investing in HDFC Top 200 over the last seven years via multiple routes such as SIPs and lumpsum investments. The total amount invested is ₹1.5 lakh and now its value is ₹4.50 lakh. The fund is for my retirement corpus.

I do not need the money for the next 10 years. Since the market is up and since HDFC Top 200 is not doing so well, should I redeem and invest my money in any balanced fund, so that the gains can be locked in?

Balaji, Nellore

No, if you are investing towards your retirement and do not need this money for the next ten years, it is best to let the investment grow in a pure equity fund.

Pure equity funds are likely to offer better returns than balanced funds over the long term. So if you have a ten-year plus time horizon, there is no need to book profits in haste.

There can be two problems with booking profits on your equity fund and switching to a balanced fund now. One, booking profits entails timing the market.

Given that no one can predict whether the market will head higher or lower from here, such timing can either backfire or pay off for the investor. Two, while booking profits on your equity fund is easy enough, the difficulty lies in getting back into the fund at the right time so that your money continues to grow until retirement.

On HDFC Top 200 Fund, the fund’s performance suffered a setback in 2015, but has since seen a sharp improvement. Taking stock of its returns today, you will find its one-year return (as on November 8) at 26.3 per cent, which is 3-4 percentage points ahead of the benchmark and category, its three-year return at 10.2 per cent, just matching the benchmark and category, and five-year return at 16.2 per cent, which is 2 percentage points more than benchmark and category.

Given this fund’s 20-year track record of navigating both bull and bear markets quite well with a 21 per cent annual return, and a seasoned fund manager at the helm, it is best not to cash out of the fund because of short-term blips in performance.

But, we do recommend that you own at least three funds in your retirement portfolio to diversify it from performance or fund house-related risks.

Given that you have already invested a sizeable portion of your portfolio in HDFC Top 200, we suggest you make SIP investments in multicap funds such as Franklin India Prima Plus and Quantum Long Term Equity Fund that have a good track record of performance.

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