Mutual Funds

Your Fund Portfolio

K. Venkatasubramanian | Updated on August 31, 2014


I have been investing ₹2,000 each in HDFC Top 200 and SBI Emerging Businesses, ₹3,000 in ICICI Pru Focused Bluechip and another ₹1,000 in SBI FMCG. I have a term policy for ₹1 crore and a ₹5 lakh medical cover with family floater option. What are your views on these schemes, please?

- S Seshadri Jaganathan

You have adequate term and medical covers. You may need to make a few changes to your fund holdings.

Exit SBI FMCG, as it is a sector fund. It is quite risky and requires you to time your entry and exit, which may be challenging. It is not suited for long-term portfolio building.

Now, split ₹8,000 as follows: ₹3,000 each in HDFC Top 200 and ICICI Pru Focused Bluechip, which are quality large-cap names with a proven record; ₹2,000 in Franklin India Smaller Companies, which has delivered extremely well over the past 4-5 years. As SBI Emerging Businesses has underperformed peers for a while now, you can exit it.

In general, it is good to have a specified goal as well as timeline and save towards that, rather than just aim for capital appreciation. That way, it would be easier to make suitable fund choices.

I want to invest ₹50,000 in a volatile mid-cap fund for three years. I can take high risks. Please suggest a suitable one for me.

- Anup P Sakhala

It is not a great idea to invest lump-sums as that would expose the entire amount to market risks. A certain degree of timing is required too. You can spread the amount in instalments over a period of time to be able to average the costs.

Three years may not be enough to derive significant inflation- and market-beating returns. In general, it may take 5-7 years for a mid-cap story to play out and catch the fancy of markets. So you can consider investing ₹2,500 a month in two schemes over a period of time.

ICICI Pru Value Discovery and Franklin India Smaller Companies are good additions. If you can take heavy risks, then DSPBR Micro Cap and Reliance Small Cap would be suitable additions.

You must ideally have a return target and book profits when your goal is met, as you are investing in relatively high-risk schemes.

Due to the increase in the Sec 80C investment limit in the Union budget, I would like to invest ₹8,000 a month in tax-saving funds. I expect good returns and can take moderate risk. Please suggest some suitable schemes.

- Surender Raja

Most tax-planning schemes call for some mid-cap exposure, given the three-year lock-in involved. Of course, the mid-cap proportion varies from 15-35 per cent across schemes. Please note that each instalment is locked for three years. So, if you continue the scheme for a three-year period, the last instalment can be exited only at the end of the sixth year. If you opt for the dividend reinvestment option, each dividend payout is again locked-in for three years.

As you have a moderate risk appetite, you can consider investing ₹4,000 each in Franklin India Taxshield and ICICI Pru Tax Plan. They have done well over the long term.

I assume you have explored other tax-saving debt options such as PPF, NSC and five-year bank deposits as well.

Published on August 31, 2014

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