The Hindu Business Line : Fund Talk

I have invested in following equity mutual funds: Tata Pure Equity Fund (D), Tata Equity Opportunities Fund (D), Tata Capital Builder Fund (G), Sundaram Select Midcap Fund (G), Franklin India Bluechip Fund (D), Fidelity Equity Fund (G), DSPML Opportunities –RP (D), Birla Dividend Yield Plus (D), ICICI Pru CCP Gift Plan and HDFC Children’s Gift (Investment Plan).

I am comfortable with my allocation to equity and would not like to reduce it, though it has appreciated by about 90 per cent. I am a very long-term investor. Please advise if I need to exit from some of these funds in case their performance is not up to the mark.

Please suggest other mutual funds in their place. Also, as market is at high levels now, is it advisable to book profit and enter later?

Kul Uday

Mumbai

If you are a long-term investor and are comfortable with your equity allocation, then there is no need to book profits in a hurry.

However, you need to prepare yourself for periodic shocks to your portfolio returns due to the volatile nature of the equity market. Therefore, ensure that the money you have invested in these funds is not required over the next three-five years at least.

Your portfolio can do with some re-shuffling. Avoid holding too many funds from the same fund house, as there can be an overlap in holdings.

For instance, you hold three funds from Tata Mutual Fund. Tata Equity Opportunities and Tata Pure Equity have 17 stocks in common, a significant chunk of their portfolios.

Both funds have a decent track record over a three-year period. But you can retain Tata Equity Opportunities in light of its relatively superior performance over the past year and exit Tata Pure Equity. As Tata Capital Builder is close-ended, you are forced to hold on to the fund for now, even though it lags the Sensex. If it is a substantial portion of your portfolio however, and continues to trail the index over the next six months, then you could consider withdrawing your money from the fund.

You can retain DSPML Opportunities and Fidelity Equity. However, Franklin Bluechip and Sundaram Select Midcap currently underperform their peers.

You can consider switching from Franklin Bluechip to Franklin India Prima Plus. Birla Mid-cap, in light of its recent performance and longer track record, could be an alternative to Sundaram Midcap.

If you are keen on the value- investing theme, then you can consider Templeton India Equity Income in place of Birla Dividend Yield Plus. The former also invests in dividend yield stocks, but invests up to 35 per cent in high-yielding stocks of international markets as well.

This helps overcome some of the limitations in the Indian markets, where dividend yield stocks have not rewarded investors seeking capital appreciation, over the past couple of years.

Presumably, you have invested in the children’s funds with the intention of maintaining a separate portfolio for your child. However, the asset allocation of these two funds is about the same as that of other equity-oriented balanced funds such as HDFC Prudence and DSP ML Balanced Fund, which have delivered better returns for a similar risk profile.

You can consider switching from HDFC Children’s Gift Plan to HDFC Prudence, if you have not opted for the three-year lock-in period. You can hold on to ICICI Prudential Child Care for now, however, as recent performance has been reasonably good.

SHANTHI VENKATARAMAN

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