The Hindu Business Line : Fund Talk

I hold the following funds: HDFC TOP 200, HDFC Long Term Advantage, HDFC Capital Builder, Birla Equity plan, Franklin India Prima, Franklin India Smaller Companies, Magnum Balanced and UTI Energy fund. I have SIPs running of Rs 2,000 in Birla Equity Plan, and Rs 1,500 each in HDFC Capital Builder and HDFC Long Term Advantage. I would like to increase my sip amount from Rs 5,000 to Rs 10,000 and I can invest this amount in SIPs for another 4 years. I am 32 and I don’t need funds for another 10 years. I am not risk averse and would like to grow by taking risks.

I plan to exit Franklin India Prima, Magnum Balanced & UTI Energy Fund and shift the proceeds to one of the opportunities funds such as DSP ML Opportunities fund/Kotak Opportunities or Tata Equity Opportunities. I would like you to review my portfolio and suggest the modifications required and new funds, if any, to park the extra amounts. I would like to have Rs 15 lakh after four years and will invest Rs 10,000 every month during this period. Please suggest/give your views so that I can reach my goal.

Dhanjay

To achieve your target corpus, your portfolio should generate an annualised return of 25 per cent over the next four years. This is a difficult target to achieve and some moderation in return expectations might be called for, especially as we enter into the fifth year of the ongoing bull market. You might have to either 1) step up your investments to greater than Rs 10,000 over this period or 2) increase the months of investment in order to achieve your target.

Your current portfolio needs to undergo a significant overhaul. We recommend the following changes to your portfolio, bearing in mind your aggressive risk appetite.

But you must be prepared for downside considering the increasing volatility in the market. You can, as planned, consolidate your fund portfolio by exiting your holdings in Franklin India Prima, Magnum Balanced and UTI Energy Fund. These funds form a marginal portion (collectively 12 per cent) of your overall holdings.

For your fresh investments, you need to choose diversified funds that invest in a good blend of large-caps and mid-caps say 60-40 or that take focused exposures to select stocks or sectors.

Such funds have an aggressive approach to investing but have the potential to significantly boost your overall returns. We recommend a switch from HDFC Top 200 to HDFC Equity.

You can also consider adding DSP ML Opportunities, Sundaram Select Focus and Birla Sun Life Equity. Investments in mid-cap funds such as Reliance Growth and HSBC Midcap can be considered. Theme funds such as Sundaram Capex Opportunities or Reliance Diversified Power can also perk up returns to your portfolio.

Regarding your existing funds, avoid fresh exposures to HDFC Long Term Advantage. Among the tax-saving funds, Magnum Tax Gain and Sundaram Tax Saver are good choices. HDFC Capital Builder’s performance has recently recovered and can be held for the time being.

While the funds we recommend have established a good track record so far, they are subject to downside risks.

You would have to stay with them through the ups and downs for you to achieve your target. While SIPs can smooth the bumps along the way, timing your investments during market ebbs can also enhance overall returns.

SHANTHI VENKATARAMAN

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