Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on June 29, 2014

Go easy on gold First tap the mutual fund avenue with enough diversification

I am currently investing ₹2,000 each in HDFC Gold fund and HDFC Top 200. I wish to invest another ₹4,000 in two other schemes. I want to accumulate a sufficiently large corpus for my child’s higher education in 12-15 years. Does my portfolio need any changes? Also, please suggest funds for the additional ₹4,000 that I wish to invest. I would like my portfolio to comprise 60-70 per cent large-caps and the rest mid- and small-cap funds.

- Babita Mishra

While saving for a long-term goal, it is not necessary to have gold in your portfolio. If you have a sufficiently high surplus and have achieved adequate diversification with mutual funds, then you can explore gold schemes. Even so, it must not account for more than 5-10 per cent of your portfolio. But you will be parking a quarter of your total investments of ₹8,000 (including the additional ₹4,000 that you wish to invest) in gold, which is way too high.

So, stop any further investment in the gold fund.

For the amount that you can invest every month, you should not look at more than two or three schemes, as otherwise your investment would be spread too thin.

Also, with a 12-15 year timeframe, you can afford to take more risks with higher allocation to mid-cap funds.

But you appear to have a limited risk appetite, given that you wish to have 60-70 per cent of your portfolio in large-cap funds.

Now, split ₹8,000 as follows: park ₹3,000 in HDFC Top 200 and ₹2,500 in Quantum Long Term Equity. These are large-cap funds with excellent long-term track records.

Invest the balance ₹2,500 in ICICI Pru Value Discovery, a mid-cap fund that has delivered top-quartile returns across timelines.

Once your surplus increases, you can explore other schemes or increase allocation to the above schemes, depending on their future performance.

About a year or so before the time your child starts higher education, move the proceeds from the mutual funds to safer debt avenues.

Take a term cover and a medical insurance policy in case you have already not done so.

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Published on June 29, 2014

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