I have invested in the following mutual funds through monthly SIPs of Rs 500 each from January 2011. I will be retiring in December 2023 and have decided to continue the SIPs for ten years, up to 2022.

I hold the following funds under growth option: Principal Smart Equity, Tata Retirement Savings - Progressive plan, HDFC Top 200, IDBI Nifty Index, IDBI Nifty Junior Index, HDFC Gold, SBI Gold, Reliance Regular Savings – equity, Reliance gold Savings, Sundaram S.M.I.L.E, Sundaram Equity Plus, Fidelity International Opportunities, Union KBC Tax Saver, Franklin India Bluechip and Union KBC Equity (Rs 1,000 a month). Please suggest changes if required.

Balachandra Rao

Your portfolio has too many funds. You will find it difficult to monitor them. The choice of your funds also suggests that you have gone for too many new fund offers. New funds do not have a track record for you to choose them based on their performance. Hence, you will only be experimenting with them by investing more. We will address these issues, but in the process we will have to significantly rebalance your portfolio.

Avoid new funds

Principal Smart Equity is a relatively new fund and invests in equity/debt, based on market price-earnings ratio. If you want such as theme, you can go for FT India Dynamic PE Ratio which has a reasonable track record. Or go for a simple balanced fund such as Canara Robeco Balance. Exit the untested Tata Retirement Savings and instead increase SIP in HDFC Top 200. Exit Sundaram S.M.I.L.E and Sundaram Equity Plus. The former's performance has slipped and the latter is relatively new and takes exposure to equity and gold. You do not need such hybrid funds, since you have separate exposure to gold. Instead, shift the proceeds and start SIPs in HDFC Mid-Cap Opportunities.

Stop SIPs in Union KBC Tax Saver and hold it till the mandatory lock-in period. Avoid SIPs in tax-saving plans as every instalment will be locked for three years.

Exit Union KBC Equity and instead move the SIP to Franklin India Bluechip. Stop SIPs in Fidelity International Opportunities and wait for further developments, now that L&T Mutual is set to take over Fidelity Funds. Divert this SIP also to Canara Robeco Balance. Run SIPs of maximum Rs 700 (10 per cent of your total SIPs), in Reliance Gold Savings and exit the rest. Shift them to Canara Robeco Balance. Reliance Regular Savings – Equity requires you to stomach some risks. If you cannot, then switch to Reliance Opportunities.

Exit the index funds as they seldom beat diversified equity funds. Divert the money to Reliance Equity Opportunities and HDFC Top 200. If you wish to buy indices, ETFs from the Goldman Sachs fund house (earlier called Benchmark) are a good idea, that too if you buy them on market dips of, say, 5 per cent or more.

*** I am 56 years old and self-employed. I have monthly SIPs in the following funds: Rs 5,000 in HDFC Growth, Rs 3,000 in HDFC Top 200, Rs 6,000 in DSP BR World Gold Fund and Rs 5,000 in Reliance Gold Fund. I want to retire at the age of 62. At that time I will need Rs 50 lakh. Kindly suggest any modification needed in my portfolio to achieve the same.

Thomaskutty

You have not provided details on when the SIPs were started. We therefore assume it was started only now. That leaves you with only six more years to achieve your goal.

While we can assume that equities will deliver 15 per cent annually over a longer time frame of say 8-10 years, over a five-year period, there is a chance that a market fall can pull down returns. If we assume that good equity funds will return, say, 14 per cent annually, you will need to invest Rs 51,000 a month over the next five years. Stop the SIPs in the fifth year and leave it untouched for a year before you withdraw it to reach Rs 50 lakh. Most funds have an exit load if investments are withdrawn within a year.

If you cannot spare this monthly saving, then you will have to either postpone your goal or look at other sources of savings to make up for the deficit. Your current savings of Rs 19,000 a month will leave you with only Rs 24 lakh, six years hence, if the funds earn 14 per cent every year.

But if you have already been investing for a few years now, you might have a larger corpus after five years.

Portfolio

Now, moving to your portfolio, currently close to 60 per cent of your total investment is exposed to gold. This is a very high proportion . The high returns from the metal in recent years may have prompted you to go for this exposure. It is not a good strategy as this performance may not continue.

Gold, as an asset class, should not form over 10 per cent of a portfolio that has equity, debt and gold. Ensure that your SIP in Reliance Gold Savings is within this limit.

Consider exiting feeder fund DSPBR World Gold and instead start SIPs in Quantum Long Term Equity. Continue investing in HDFC Top 200. While HDFC Growth is a good fund, we suggest you exit it and instead buy IDFC Premier Equity. This is a mid-cap fund and may be required to boost your portfolio returns. But invest not more than 20 per cent of your SIPs in the fund. After the 10-14 per cent exposure in the gold fund, and 20 per cent in the mid-cap fund, Quantum Long Term Equity and HDFC Top 200 can account for the rest of your SIPs. We hope you have adequate investments in debt products.

The recommendations made in this column address the readers' query, based on their risk profile and requirement. They may not be applicable to all investors.

Queries may be e-mailed to >mf@thehindu.co.in

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