Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on November 30, 2014


I have been investing a lot of money in mutual funds through the SIP (systematic investment plan) route. Is my money safe? Will I face any problem during redemption of units? So far, I have not redeemed any units. What will happen in case the fund house goes bankrupt?

Seenu J

You can rest assured that barring the risks of any market-linked instrument, which affects the NAVs of the funds, there is very little to be anxious about. The mutual fund industry is extremely well-regulated, with SEBI keeping a close watch on all asset management companies (AMCs). The top 15-20 fund houses and a few small-sized ones are profitable in varying degrees.

In the last 20 years, there has been no instance of any AMC going bankrupt. When fund houses find the going tough, they generally sell out to stronger AMCs as has been the case over the past four-five years. In any case, the fund house itself cannot tamper with your investments as they are in your name in a folio created for you. You can redeem investments in any open-ended scheme at any time you choose.

I am interested in investing ₹1,000 a month each in these funds through SIP mode: ICICI Prudential Focused Blue-Chip Equity, IDFC Premier Equity, Birla Sun Life Frontline Equity, Reliance Equity Opportunities, HDFC Mid-Cap Opportunities and Axis Long Term Equity. Are my choices appropriate?

KK Gajpal

For the amount you are investing, two or three funds would suffice. For the sake of diversification, if you spread your portfolio too thin, it is counter-productive. Spread ₹6,000 as follows: Invest ₹2,500 in ICICI Pru Focused Bluechip, a high-quality, large-cap fund. Park ₹2,500 in HDFC Mid-cap Opportunities. Invest ₹1,000 in Axis Long Term Equity, if you need a tax-saving fund.

IDFC Premier Equity has lagged top peers over the last couple of years. Since you already have a large-cap fund, Birla Sun Life Frontline may not be necessary, though it is a scheme with a proven track record.

Similarly, you will have a good mid-cap scheme in HDFC Mid-cap Opportunities. Reliance Equity Opportunities, though a quality scheme, has a strong mid-cap bias and can thus be skipped. Review your portfolio regularly and take corrective action, if necessary, and rebalance.

I am 39 and have been investing ₹17,000 every month for the last five years. My financial goals are to create a large corpus for my children’s education, their marriage and my retirement. All goals are still a long time away. I do have a term cover for ₹50 lakh and medical cover from my employer for ₹2.5 lakh. I invest ₹3,000 each in Franklin India Bluechip , DSPBR Top 100, Quantum Long Term Equity and IDFC Premier Equity. Also, I invest ₹2,000 each in L&T Equity and ICICI Pru Dynamic Plan and ₹1,000 in L&T Global Real Assets fund.

Please do review my portfolio.

Satish

Over the long-term of 10-15 years, equity mutual funds will likely beat inflation convincingly and deliver reasonable returns proportionate to the risks taken.

Split ₹17,000 as follows: Invest ₹4,000 each in Quantum Long Term Equity, UTI Equity and L&T Equity. These are predominantly large-cap funds with proven track records. Park ₹2,500 each in ICICI Pru Value Discovery and HDFC Mid-cap Opportunities,mid-cap funds with excellent long-term records.

Franklin India Bluechip, IDFC Premier Equity and DSPBR Top 100, which have robust long-term records, have been lagging top peers over the past couple of years. Discontinue further SIPs in these funds.

Since you have adequate diversification with the funds mentioned earlier, you can stop investing in ICICI Pru Dynamic and L&T Global Real Assets as well. Review the schemes regularly. Book profits or sell units a year before any goal becomes due and move the proceeds to safe debt avenues. Diversify your portfolio with investments in debt, gold and real estate. Take a floater medical policy from an insurer for ₹5 lakh at least to cover your entire family.

Published on November 30, 2014

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