Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on November 24, 2017


I have been investing ₹3,000 each in IDFC Premier Equity, AXIS Focused 25, FT India Dynamic Fund of Funds, HDFC Equity and Franklin India Bluechip through SIP mode.

I can invest another ₹4,000-6,000 every month or make a lumpsum investment of ₹50,000, for which I have short-listed DSPBR TIGER or ICICI Pru Midcap. Does my existing portfolio need any modification?

- Pratik

Your choice of funds does not reflect any specific focus or strategy. Also, for ₹15,000 you can restrict the number of schemes to four, without overlap in mandates, while ensuring adequate diversification.

Of the five funds, you can continue to invest in HDFC Equity and park ₹4,000 in it.

Axis Focused 25 has been around for just about two years and has not delivered well. Stop the SIPs here and exit the units. FT India Dynamic Fund of Funds has also had a lukewarm run. A fund of funds too is unnecessary. You can stop further investments in this scheme and sell the units. Franklin India Bluechip has a track record of over 20 years. But over the past couple of years, it has lagged peers significantly. Hence, you can exit this fund as well. IDFC Premier Equity is a quality mid-cap fund, but has lagged behind other proven names over the past one year. Stop further investments in the fund. You can re-enter once it starts outperforming.

Of the remaining ₹11000, park ₹4,000 in UTI Equity, a proven large-cap name and ₹3,500 each in Franklin India Flexicap and ICICI Pru Discovery which are quality multi- and mid-cap names, respectively.

Coming to the second part of your query, it is not a great idea to invest lumpsums as it would expose the entire amount to market risks. Of course, if you can time the entry and exit, a lumpsum investment makes sense. But that is not easy.

DSPBR TIGER is an infrastructure fund. Though the theme is expected to recover and grow significantly, it may still be a risky play. Tracking the fortunes of the theme would not be easy and timing entry and exit is also crucial.

A quality diversified fund ensures adequate exposure to themes and sectors with potential significant upside. Hence restrict yourself to diversified equity funds. Invest the additional ₹4,000 in Birla Sun Life Frontline Equity, if you have a moderate risk appetite. But if you can take on more risks, park it in Reliance Equity Opportunities, a quality multi-cap fund. Review the performance of your portfolio once every year and take corrective action, if necessary.

I work in a PSU and wish to invest ₹10,000 in mutual funds every month through the SIP route. Please suggest suitable funds. I am covered by my employer’s medical policy. I have also invested in a ULIP and an endowment policy. Is it necessary for me to take any other life insurance policy?

K Prabhu

Your decision to invest periodically in mutual funds is a good one. But your time horizon and risk appetite are not clearly stated. For equity mutual funds to deliver inflation-beating returns, you need to stay invested for 7-10 years. So, all such investments should be directed towards specific goals, such as child’s education or and retirement.

Since you are just starting out on mutual fund investments, start with large-cap and balanced schemes. Split ₹10,000 as follows: invest ₹3,000 each in Quantum Long Term Equity and ICICI Focused Bluechip. Park ₹2,000 each in UTI Equity and HDFC Balanced. Over the long term, try to invest in debt, equity, gold and real estate to create a balanced portfolio. Although you are covered by your employer for medical needs, you still require protection after retirement or for treatment in cases where the employer does not fully cover the expenses. So, take a family floater cover.

Your other investments in a ULIP and an endowment plan may not be ideal vehicles to protect you against risks. These are also expensive products and may not provide adequate life cover. So, once the minimum lock-in period is over, stop paying the premiums and sell the policies during favourable market conditions. For life cover, take a term insurance policy. A term cover is inexpensive and can be taken online.

Published on June 15, 2014

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