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I am 49 years old and have been investing Rs 1,000 monthly through the SIP (systematic investment plan) mode in each of the following funds: HDFC Prudence, HDFC Top 200, DSP Blackrock Top 100 Equity and UTI Dividend Yield. Also, I have been parking Rs 2,000 each in IDFC Premier equity fund and Reliance Gold savings fund from April 1, 2011. Kindly suggest whether I can continue the same investment for the next five years.
T. Vasudevan
It is important to note that while diversification by investing in a bunch of funds is important, the allocation and number of funds should be based on the amount that you wish to invest.
You have spread Rs 8,000 across six funds, which is unnecessary. For this amount you need only about three funds in your portfolio as otherwise you would be spreading yourself too thin.
HDFC Top 200 is a fund with an exceptional track record over the long term. Retain this large-cap fund and invest Rs 3,000 in it. You can continue investing in HDFC Prudence, a balanced fund, and invest Rs 2,000 in the scheme.
Continue investing Rs 2,000 in IDFC Premier Equity and reduce SIPs in Reliance Gold Savings to Rs 1,000.
Since you already have a sturdy large-cap fund in your portfolio, you can exit DSPBR Top 100 Equity as well as UTI Dividend Yield.
*** I want to invest Rs 20,000 a month for the next fifteen years for my children’s education by creating a corpus of Rs 1 crore. I have selected the following mutual funds:
Axis Equity fund – Rs 4,000; IDFC premier equity - Plan A: Rs 2,000; Birla Sun Life India Gen next: Rs 4,000; HDFC Midcap Opportunities: Rs 4,000; Axis long term equity fund (ELSS): Rs 3,000 and ICICI Pru Equity - Volatility Advantage: Rs 3,000.
Please review this portfolio and advise me on the choice of funds.
Anitha
You appear well-placed to achieve the target of Rs 1 crore for your children’s education. If you invest Rs 20,000 every month for 15 years, you will reach the corpus, if returns are 12 per cent, which is a very reasonable expectation.
Having said that, your choice of funds is not appropriate for the purpose and there seems to be no focus in the construction of your portfolio.
Rebalance your portfolio as follows: Axis Equity has been around for only about three years, but has performed reasonably well. You can retain the fund but reduce the amount invested in the scheme to Rs 2,000.
Retain IDFC Premier Equity and invest Rs 4,000 in it. Birla Sun Life Gen Next has been a reasonable performer, but we suggest you switch to Birla Sun Life Frontline Equity fund, which has an exceptional track record over the past 10 years. Park Rs 5,000 in the fund. Retain HDFC Midcap Opportunities and invest Rs 4,000 in it.
You do not need a tax saving fund for investing in the long term. Besides, you already have a scheme from the Axis stable. So exit Axis Long Term Equity.
ICICI Pru Equity - Volatility Advantage is a balanced fund. Since you will be investing for a period of 15 years, we suggest you switch to ICICI Pru Focussed Bluechip Equity and invest the balance Rs 5,000 in the scheme.
Review your portfolio once every year and take corrective action, if necessary.
If you reach your target ahead of expected time, book profits or exit schemes and move the proceeds to debt instruments.
*** I am 60 years old and have retired. I have been investing Rs 1,000 each in the following funds by SIP mode for the last two years: Reliance Regular Savings Equity, Reliance Growth, HDFC Equity, and Rs 2,000 each in HDFC top 200 and IDFC Premier Equity. Please advise me whether to continue in those funds. I want to invest a further Rs 10,000 in SIP mode. Could you suggest funds with attractive returns?
K. Sudhakar Reddy
It is nice to note that you wish to invest in equity funds even at the age of 60. What is more, you wish to step up your investments by Rs 10.000 more.
There are some points of concern, though, regarding these investments. Since you have retired, it is important to have a steady stream of assured income for which debt investments may be the most appropriate avenue.
A smaller portion of your portfolio, say, around 20 per cent, can be invested in equity mutual funds.
We hope you have made investments in FDs, RDs, and NSC etc., before venturing into mutual funds.
Coming to your portfolio, spread your current investment of Rs 6,000 as follows: Invest Rs 2,000 each in Reliance Regular Savings Equity, HDFC Equity and IDFC Premier Equity. Exit Reliance Growth as it has been an underperformer over the past few years. You can also exit HDFC Top 200 as a good part of its portfolio overlaps with HDFC Equity.
If you wish to invest Rs 10,000 more, you can consider bond funds or monthly income plans as these investments tend to beat inflation and are relatively safer than equity schemes. Invest Rs 3,500 each in Birla Sun Life Dynamic Bond and IDFC Dynamic Bond and Rs 3,000 in Reliance MIP.
Queries may be e-mailed to >mf@thehindu.co.in
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