Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on May 18, 2014

I hold units in Reliance Equity Opportunities fund from its NFO in 2005. It has delivered good returns. Would it be advisable to redeem or switch now?

- Prasad KB

Reliance Equity Opportunities is a multi-cap fund, though its portfolio is biased towards mid-cap stocks. As you have noted, its returns since its NFO have been impressive. The fund has delivered over 19 per cent annually since its launch in 2005, which is among the best in its category and compares favourably with diversified funds of all hues.

But the fund has been underperforming over the past one year vis-à-vis its category, though it still has done better than the BSE 100 – its benchmark.

If you need cash now, you can sell the units. But if you have a slightly higher risk appetite, you may hold on. Since the election results are favourable, there can be further upmove.

I am 29 and work for a private bank in Pune. I have been investing in the following mutual funds through the SIP (systematic investment plan) route. IDFC Premier Equity - ₹2,000; Birla Sun Life Frontline Equity - ₹2,000; HDFC Equity - ₹2,500; Canara Robeco Tax Saver - ₹1,000 (planning to increase the investment to ₹2,000 from FY15) and Franklin India Bluechip - ₹1,000.

My investment horizon is five-ten years. Please let me know if my portfolio is good.

- Ramakant

While your reasonably long investment horizon is good, there are some flaws in your choice of funds and the amounts allocated. For ₹8,500, you will not need more than three funds to ensure diversification.

You could also rethink tax-saving funds and, instead, opt for regular diversified schemes. Options in debt such as PPF and NSC are good for long-term tax-saving purposes.

But if you are insistent on having a tax-saving scheme , the fund may need to be changed. Split ₹8,500 as follows: Park ₹3,250 each in Birla Sun Life Frontline Equity and IDFC Premier Equity, for exposure to a large-cap as well as mid-cap fund.

Invest the balance ₹2,000 in ICICI Pru Tax Plan, a scheme with a proven long-term track record. Please note that each instalment is locked in for a period of three years in tax-planning funds.

Stop the SIP in HDFC Equity and wait for rallies to sell the units in the scheme. In Franklin India Bluechip, there has been relative underperformance for the past 12-18 months compared with large-cap peers, hence exit the units in the fund.

Have a target corpus and book profits or sell units and move to safer debt avenues in case you reach your goal ahead of time.

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Published on May 18, 2014

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