What is your view on L&T Equity Fund (earlier Fidelity Equity)? Should I continue with my SIPs? If not, which are the equivalent better performing funds that can replace L&T Equity?

Rasesh Choksi

You can continue with your systematic investments in L&T Equity. It invests mostly in blue chips with some mid-cap stocks added for higher returns.The scheme is quite consistent and is a value play. So, you need to stay invested for a period of 5-7 years for meaningful capital appreciation.

*** I had invested Rs 2,00,000 in HDFC Top 200 in August 2011. What are the tax implications at the time of withdrawal, if I choose to sell the units now?

Swamulu Kandimalla

Equity funds that invest in domestic stocks to the extent of at least 65 per cent of their portfolio are treated like investments in shares for tax purposes. In such schemes, long-term (units held for one year or more) capital gains are fully exempt from taxes.

HDFC Top 200 is an equity fund. Since you have invested the sum in August 2011, you will not have to pay any taxes should you choose to sell those units now.

*** I am 41 years old, investing in mutual funds through the SIP mode for the past two years. I have been investing Rs 19,500 per month as follows: Rs 2,000 each in HDFC Top 200 and HDFC Equity; Rs 1,000 in DSPBR Small & Midcap; Rs 1,500 in UTI Opportunities; Rs 3,000 in IDFC Premier Equity; Rs 7,000 in Reliance equity Opportunities and Rs 3,000 in SBI Emerging business. My time horizon is 15 years. I want to accumulate Rs 1.5 crore. Is it possible to reach the goal or should I add more funds? I can invest another Rs 5,000. Please advise.

P. Joseph

You have been investing Rs 19,500 every month for the past two years. If you add another Rs 5,000 to this amount and invest Rs 24,500 for another 15 years, you will comfortably reach your goal of Rs 1.5 crore, if the returns generated are 12 per cent annually.

But your portfolio needs a makeover as there is too much duplication in choice of funds, imbalance in amounts allocated to individual schemes and too much focus on mid-cap funds. You need not take such a high-risk mid-cap exposure as reaching your target does not demand taking higher risks.

Since you already have a solid mid-cap fund in IDFC Premier Equity and sufficient exposure to such stocks through Reliance Equity Opportunities as well, you can exit DSPBR Mid and Small Cap as well as SBI Emerging Businesses.

HDFC Top 200 and HDFC Equity have significant portfolio overlap. Retain HDFC Top 200 and exit HDFC Equity.

Deploy Rs 24,500 as follows: invest Rs 5,000 each in HDFC Top 200 and ICICI Focused Bluechip Equity, so as to have a solid large-cap exposure. Park Rs 4,000 each in IDFC Premier Equity, Reliance Equity Opportunities and UTI Opportunities.

You can add HDFC Balanced and park Rs 2,500 there for added safety to your portfolio.

In case you wish to diversify your portfolio, consider investing this Rs 2,500 in gold ETFs such as Goldman Sachs Gold BeES or in gold funds such as Reliance Gold Savings.

Review the schemes in your portfolio periodically and take corrective action, if necessary.

If you reach your target ahead of time, book profits or sell units and move the proceeds to safer debt avenues.

In case you manage to generate more surplus, invest in debt instruments such as PPF, FDs and RDs. Real estate investments too can be considered for diversification. These investments are important to create a balanced portfolio.

*** I am 28. I do not have a regular source of income. In order to save for my retirement, probably at 60, I have made one-time investments of Rs 60,000 each in Birla Sun Life Dividend Yield Plus, UTI Dividend Yield.

I would like to accumulate a corpus of Rs 50 lakh by the time I turn 60. Are these investments sufficient to attain my goal?

J.Arun

Not having a steady source of income can be a challenge for building a corpus for the long term.

You have chosen a reasonably good set of funds. If the Rs 1,20,000 that you have invested manages to grow at 12.5 per cent annually for the next 32 years, you will be able to reach your target of Rs 50 lakh.

But there is no certainty that such a return will be generated over such a long term and you can never be sure if just two funds could get you there. So, whenever you are able to generate a surplus, invest in top rated fixed deposits that provide higher interest rates.

After investing in debt instruments, if you still have a surplus, you can consider adding more funds to your portfolio.

Also, you need to take a term insurance cover to protect your goals.

Related Topics
comment COMMENT NOW