I am 27 years old and have been investing through the SIP mode for the past three years in the following mutual funds: DSPBR Top 100 - Rs 5,000; Birla Sun Life Dividend Yield Plus - Rs 10,000; HDFC Top 200 - Rs 5,000; HDFC Equity - Rs 10,000; UTI Dividend Yield - Rs 10,000; Franklin India Bluechip - Rs 10,000; HDFC Prudence - Rs 10,000; Birla Sun Life MNC - Rs 10,000.

By end of this August, I shall be receiving Rs 50 lakh as a gift from my parents, which I propose to invest in long-term tax-free bonds so that the income generated can partially take care of my SIPs for the next 15 years.

Please let me know if my portfolio is appropriate and suggest suitable alternatives.

Darshana Kothari

You have a fairly large portfolio quite early in life. Make sure that you are able to build on it and generate a large corpus over the long term.

The SIP portfolio of Rs 70,000 is quite a large sum for monthly investments. We hope you have also invested in other avenues, such as debt (FDs, PPF and RDs), gold and real estate so as to build a balanced and a well-diversified portfolio.

Coming to your portfolio, there is considerable overlap in the mandate among the funds that you have chosen. You must choose funds with varying mandates and take care to diversify across asset management companies to benefit from various investing styles.

Instead of DSPBR Top 100, move over to ICICI Pru Focused Bluechip and invest Rs 10,000 in it. HDFC Top 200 and HDFC Equity have a huge portfolio overlap. Both funds have proven track records over the long term. Exit HDFC Top 200 and Invest Rs 10,000 in HDFC Equity.

You can continue to invest Rs 10,000 in Birla Sun Life Dividend Yield Plus. Exit UTI Dividend Yield and switch over to UTI Opportunities and invest Rs 10,000 there. Retain Franklin India Bluechip and HDFC Prudence.

Birla Sun Life MNC has performed extremely well in recent years. But its mandate is limited. If you can take higher risk, continue investing in the fund or switch over to Quantum Long Term Equity.

Coming to the second part of your question, it is nice to note that you will receive Rs 50 lakh from your parents.

But in this fiscal, as of now, there are no tax-free bonds open for subscription. Reports suggest that the Airports Authority of India may float such bonds later in the year.

Tax-free bonds pay out interest annually and have an upper limit for investments from retail investors, which is usually Rs 10 lakh.

So, you may not be able to invest the entire sum in tax-free bonds. You may consider investing in fixed deposits that pay out interest monthly and use it to part-finance your SIPs. Given that you will incur Rs 8.4 lakh annually for your SIPs, around half that sum has to come from other sources, such as your monthly income from a job.

Review the performance of the schemes in your portfolio once a year and rebalance, if necessary.

* * * I am 28 and have been investing in the following funds for the last one year: Canara Robeco Equity Diversify –Rs 3,000; ICICI Pru Focused Blue Chip – Rs 3,000; HDFC Top 200 – Rs 2,000; Quantum Long Term Equity – Rs 2,000. I am planning to increase my SIP contribution from Rs 10,000 presently to Rs 14,000 soon.

Should I just increase investments by Rs 1,000 in each of the funds? Are these funds appropriate from a long term perspective (five - seven years)? Should I make any changes to my portfolio?

Suhas

It is nice to note that you have started investing for your future quite early in your career.

You have chosen a good set of funds that have delivered exceptionally well over a period of 7-10 years.

Now that you wish to increase your investments by Rs 4,000, you could allocate this sum as follows. Increase the contributions to HDFC Top 200 and Quantum Long Term Equity by Rs 1,000 each.

Now, if you have a higher risk appetite, you can invest the balance Rs 2,000 in IDFC Premier Equity, a mid-cap fund with an excellent long-term track record. We suggest this scheme as your portfolio already has sufficient exposure to large-caps.

But if you have relatively lower risk appetite, invest Rs 2,000 in Birla Sun Life 95, a balanced fund.

As your surplus increases, also invest in avenues such as debt, gold and real estate. Rebalance your portfolio according to your age, risk appetite and investment horizon.

Please note that five years in the present context may really not be ‘long-term’, if market returns from 2008-13 are anything to go by. We would suggest keeping 7-10 years as the minimum time-frame for equity mutual funds to deliver meaningful capital appreciation.

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