The Hindu Business Line : Fine-tune portfolio when necessary

SHUT your eyes for a minute and consider the portfolio of equity funds that you have created for yourself. Is it making money for you the way you want it to? Is it trailing the portfolio that your friend (or spouse or associate or advisor) has constructed? If the answer to your first question is a thumping yes, you really have no reason to worry. But if it is not, this is just the time to shatter a myth or two.

Portfolios, ladies and gentlemen, are not always fail-proof. They can turn a mighty ambition on its head if constructed wrongly. Ditto for portfolios that are not examined from time to time and re-balanced whenever necessary.

A suite of equity funds comprising perpetual laggards will lead to ruin, suggest fund circles, emphasising particularly on the need to choose good-quality schemes and discard bad ones in the process.

As fund houses further indicate, a large-sized scheme may not be necessarily good for you. It is true that fund managers like their products to attain a certain critical mass. It is also true that a jumbo-sized scheme may be too unwieldy.

Witness Reliance MF's recent move to cap the size of Reliance Growth Fund and you will know why size can sometimes cause distress. Incidentally, HSBC Mutual Fund had earlier tried to limit the size of its mid-cap fund; but that was an NFO, whereas the Reliance MF stand relates to an existing fund. It needs to be seen whether some of the other fund houses will follow the lead taken by Reliance Mutual Fund, especially when it comes to their mid-cap products.

Quite a few of them are around - although not all carry the `mid-cap' tag - and many fund managers are increasingly feeling uneasy about increasing allocations to mid-cap stocks. Investors too need to think twice before they sink fresh money into these schemes.

On another front, a new set of NFOs is on its way. These include funds lined up by Prudential ICICI MF, Sundaram MF and ING Vysya MF. A number of others, including a few tax-saving (ELSS) schemes, are expected to materialise in the coming days; apparently, fund houses are keen to cash in on the new tax norm that has been introduced.

By the way, here is an interesting insight or two culled from a Web site run by Adviser Investment Management, a specialist research outfit. It features what have been called the commonest `retirement savings mistakes'. These are: Taking the do-nothing approach, relying too much on the stock of the company you work for, failing to contribute enough, and investing too conservatively. You may check it out if you wish to know more.

As Adviser puts it in bland language, nearly 70 million baby boomers will reach retirement age over the next five to 10 years. It is clearly talking about the US, but it can be generally said that life expectancies are rising in developing countries and the cost of healthcare is skyrocketing. Therefore, managing your retirement savings and planning for the future are more important than ever. One would like to see MFs becoming a part of your asset allocation strategy.

Feedback may be sent to nilanjan@thehindu.co.in

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
UTI-I to exit from subsidiaries

Franklin Templeton's exposure in Rallis, CCL Products goes up

Fine-tune portfolio when necessary

Mid-cap stocks' higher price-earning ratio worries investors

There's no buy call for this week

Rains may dampen sentiment

Banks, stock markets to remain open in Mumbai despite rains

FIIs hike stake in Hexaware Tech

`Variable fees will form the basis of all our offerings'