The Hindu Business Line : Don't overload on equity funds

I have been investingRs 1,000 a month in the following funds for the past year and would like to continue to do so. The five funds that feature in my portfolio are HDFC Equity, HSBC Equity, Franklin Bluechip, Franklin Prima, Reliance Growth. I also plan to include SBI Magnum Global and HDFC Long Term Advantage Fund. I need to know if any of the above funds needs to be excluded due to poor performance. Do I have a balanced exposure to large cap and mid-cap funds?

Seetharaman V.

Sharjah

Based on the relative performance of these funds over a five-year period, we would suggest you include SBI Magnum Contra Fund in your portfolio in place of HSBC Equity Fund. Not only does the Magnum Contra Fund have a record of performance over a longer period, it has also outperformed HSBC Equity over the last one year.

The Franklin India Bluechip Fund, too, has suffered from a slowdown in its performance over the past year. The fund offers relatively safe exposures to large-cap stocks.

However, if you are not too conservative you can consider replacing this fund too, with a fund such as the HDFC Top 200 fund, that invests in a mix of large and mid-cap stocks.

As it stands, you have a good mix of large and mid-cap funds in your portfolio. While Franklin Bluechip (HDFC Top 200) and HDFC Equity are large-cap oriented funds, Prima and Reliance Growth are mid-cap dominated. Contra Fund is again a fund with a blend of mid- and large- cap stocks.

Having more than five equity funds in your portfolio does not seem a prudent move.

After rejigging your portfolio on the lines suggested, it would feature funds from four different fund houses and would offer a good mix of investment styles.

Between them, these funds should offer a reasonable degree of diversification to your portfolio. Expanding your portfolio to include too many funds could be counter-productive as it could become increasingly difficult to keep track of your portfolio and to weed out under-performers.

HDFC Long Term Advantage Fund is a good investment option because of its impressive performance numbers over the past five years. However, it is a mid-cap oriented fund and you should consider adding it only if you are comfortable with a slightly higher mid-cap exposure.

SBI Magnum Global Fund has delivered exceptional performance over the past two years, but its track record in the years before was not too impressive.

Given that your portfolio already features funds with a good long-term record, we would not suggest you include the Magnum Global Fund in it now. Magnum Contra Fund may be the better choice for a long-term portfolio, as things stand now.

Therefore, our choices for the five funds would be: Franklin Prima, Magnum Contra, Reliance Growth, HDFC Equity and HDFC Top 200, in that order.

Queries may be sent to: mf@thehindu.co.in or by post to Q&A, Business Line, 859/860, Kasturi Buildings, Anna Salai, Chennai - 600 002.

Aarati Krishnan

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