Mutual Funds

Go easy on gold

K. VENKATASUBRAMANIAN | Updated on February 23, 2013

Spread your investments across equity (mutual funds), debt (FDs, RDs, PPF), gold and if possible real-estate in appropriate proportion.Despite a great rally over the past five years, gold is more an investment that acts as a hedge against inflation.

I would like to have some clarity on my investment options.

I am 24, and earn a salary of Rs 25,000. I am investing Rs 2,000 in ICICI Pru Focussed Bluechip Equity since July 2012 and Rs 2,000 in IDFC Premier Equity from February 2013.

Are these investments appropriate? Can you please suggest some more funds that I can add to my portfolio? Can I add HDFC Gold, for instance?

Also, which of these is the best option for tax saving purposes: Canara Robeco Equity Tax Saver, SBI Magnum Tax Gain or Quantum Tax Saver?

I am looking for long-term investment options and have a high risk appetite.

Visweswaran

By starting out early on the path of securing your future and choosing the right investment avenue, you have given yourself a great chance to build a healthy corpus over the long term of 15-20 years.

You have chosen two funds that have delivered very well and have a proven track record over the past 4-5 years.

ICICI Pru Focussed Bluechip and IDFC Premier Equity would give you exposure to a large-cap and a mid-cap fund, respectively. You can continue your investments in both these funds.

In case you wish to add more schemes to your portfolio, you need to make note of a few points.

You must try to build a balanced portfolio over the long term to achieve all your goals. This means you must spread your investments across equity (mutual funds), debt (FDs, RDs, PPF, etc.), gold and if possible real-estate in appropriate proportion depending on your risk appetite, surplus available and your investment horizon.

At your age, you must invest 70-75 per cent of your surplus in mutual funds. Since you have stated that you have a penchant for high risk, you can consider adding Reliance Equity Opportunities, a multi-cap fund with a track record of delivering strong returns in line with the risk that it takes.

If you want a mid-cap fund, consider HDFC Mid-cap Opportunities, one of the best in its category.

Coming to the second part of your query, you can add HDFC Gold to your portfolio, but ensure that it accounts for no more than 10 per cent of your portfolio.

Although gold has had a great rally over the past five years, it may be better to consider it more as an investment which acts as a hedge against inflation.

For tax saving purposes, you can invest in Canara Robeco Equity Tax Saver as it is one of the best performers in its category and is fairly consistent in delivering returns across market cycles.

Review your holdings at regular intervals (say, once a year) to take corrective action and to rebalance.

*** I am 31 years old and earn a salary of around Rs 40,000. I am married and have one son, aged three.

I had invested in SBI Contra, regular plan-dividend option through the SIP mode to the tune of Rs 1,000 every month for two years. I have received a dividend of Rs 4,500 and the fund value currently is Rs 23,400.

Also, I had invested in SBI Gold fund for one year through SIPs of Rs 500 every month and its current value is Rs 8,300. The tenure of both the SIPs has ended.

Please advise whether I should hold these funds or redeem them. Which are the other funds that I can include in my portfolio? My goal is wealth creation in six to eight years.

Anwar

You have chosen to invest in schemes from the same fund house and have not considered the best options from the diversified category.

SBI Contra has not been a steady performer and has been a laggard over the past 3-5 years. You can exit the scheme. Retain the units of SBI Gold for the time being.

Start SIPs in Quantum Long-Term Equity and Franklin India Bluechip and remain invested in these funds for your stated investment horizon, so that you can have meaningful capital appreciation as well as wealth creation.

Of course, SIPs generally work well over 10-15 year timelines. In your case, 6-8 years is a reasonable period, though not sufficiently long.

As your surplus increases, you can add schemes across a few fund houses to your portfolio. If you want to invest in gold, start SIPs in HDFC Gold or Reliance Gold Saving.

Please also note that you need to take a term insurance policy and a family medical cover to protect all your investments.

(Queries may be e-mailed to >mf@thehindu.co.in )

Published on February 23, 2013

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