Your Fund Portfolio

I am 36 and have been investing in the following funds through SIP (systematic investment plan) mode for the past one year: IDFC Premier Equity – ₹4,000, HDFC Top 200 – ₹1,000, HDFC Mid-Cap Opportunities – ₹2,000 and ICICI Pru Focused Bluechip Equity – ₹3,000. I am looking to build a good corpus over 10 years. I also have an RD for ₹2,500 a month and around ₹30,000 in gold ETFs. Kindly give your opinion on these investments.

Please suggest whether I should invest a lumpsum of ₹60,000 in ICICI Prudential Technology as it gave returns of over 50 per cent in the last one year. I am looking at a timeframe of two-three years.

- Manoj

You have chosen a set of funds with a strong track record of delivering consistent and above-average returns. You also have enough diversification in the form of two large-cap oriented (HDFC Top 200 and ICICI Pru Focused Bluechip) and two mid-cap funds (HDFC Mid-Cap and IDFC Premier Equity). In terms of amounts invested in each, the 60:40 break-up between mid- and large-cap funds is a bit aggressive suggesting that you have a high risk appetite. But given your age and your investment horizon, the allocation seems justified.

You can continue with these SIPs. If you invest ₹10,000 per month for 10 years and your portfolio manages returns of about 12 per cent, you will have a corpus of about ₹23 lakh at the end of the period.

Review the performance of the funds every two-three years.

As regards lumpsum investment in a technology fund, investing in a sector fund entails high risk, requires good knowledge on the dynamics driving the industry and an ability to time the entry and exit from the fund. Technology stocks have had a good run in the past couple of years and with most IT companies dependent on export revenues, the rupee depreciation in 2013 has given a further boost to these companies.

So, even other IT-focused funds such as SBI IT, DSPBR Technology.com, Birla Sun Life New Millennium and Franklin Infotech have given high returns of 30-40 per cent in the past one year. Invest only if you are confident about the current fundamentals and valuations of technology stocks and believe that there is further upside that can meet your return expectations in the next two-three years. A repeat of last year’s returns is not guaranteed.

Alongside mutual fund investments, building a debt portfolio will give the necessary diversification across asset classes. You have done well to start a recurring deposit. PPF is also one of the best instruments to build long-term wealth. Besides, allocate about 10 per cent of your portfolio to gold as it tends to have an inverse relationship with equity markets and will further help diversification. You have made a beginning through investment in the gold ETF. Monitor this and make changes, if necessary.

I am 31 and have been investing ₹1,000 each through SIP mode, in the following schemes — HDFC Mid-Cap Opportunities Fund and SBI Emerging Businesses Fund — for the last two-three years. Also, I want to invest in more funds for 10 to 12 years, for myself and my wife. Please suggest funds that can give good returns.

- Nilesh Gole

Although you have started investing in mutual funds early, your choice of funds is not been well thought-out. Your only exposure is to two mid-cap funds, which is not the way to go about if you want a good corpus in 10-12 years’ time.

You need to have one or two large-cap oriented funds as part of your core portfolio and can invest in mid-caps if you have a higher risk appetite. Since you are young and can take risks, retain HDFC Mid-Cap Opportunities.

Exit SBI Emerging Businesses as it has been underperforming in recent times. Instead, start SIPs in Birla Sun Life Frontline Equity, a large-cap oriented fund, and Quantum Long-Term Equity, which has a slight value bias to it. Your wife, as a first-time investor, can complement your choice of funds by investing in a balanced fund. With about 30-35 per cent in debt, these funds require lower risk appetite compared with pure equity funds. Start SIPs in ICICI Pru Balanced or Tata Balanced.

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