I am working in a private company. My monthly salary is Rs 20,000. After meeting all my expenses, I have Rs 6,000 as surplus, which I wish to invest in mutual funds.

I like to invest in SBI Magnum FMCG. Also suggest a fund from among the following: Birla Sun Life MNC, HDFC Mid Cap Opportunities, SBI Magnum Emerging Businesses, HDFC Balanced, HDFC Prudence and HDFC Equity.— Satheesh Kumar N.

There are a couple of things that we would like you to take note of before suggesting the best funds.

You have a surplus of Rs 6,000, which you wish to deploy entirely into mutual funds. If you have a reasonable risk appetite to digest market gyrations and if you do not need the money for the next five to seven years, this investment is fine.

A balanced portfolio is built by investing in a blend of equity, debt, gold and real estate later on.

So it would be good for you to set aside some portion, say, Rs 2000 in a bank recurring deposit or in avenues such as PPF or other debt schemes.

But if you insist on parking your money only in mutual funds, here are our suggestions.

As a sector, FMCG has done extremely well over the past three to four years as a defensive bet and has also rode the consumption theme. But valuations do appear stretched in many of the stocks and there is no certainty that these segments will do as well when markets turn around and there are other themes to play in the market.

In any case sector funds are risky bets. So you would do well to avoid them.

All the funds that you have mentioned have had a good run over the long term.

For investing Rs 6,000, we suggest the following options for a period of five to seven years at least: park Rs 2,000 each in ICICI Pru Focussed Bluechip, IDFC Premier Equity and HDFC Equity, so that you have exposure to large-, mid- and multi-cap funds.

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I have been investing in Birla Sun Life Frontline Equity since September through an SIP of Rs 2,000 a month. This fund’s rating has been reduced. What should I do? I have an investment horizon of 20 years.— Amarendranath

Birla Sun Life Frontline Equity is a reasonably good fund with a track record of nearly 10 years.

The fund did not have a good run in 2010 and 2011. But it is back in the reckoning over the last six to seven months. In any case, as we mentioned earlier, the fund has a good track record over the long term. Ratings may change based on short-term gyrations.

But in recent times, the fund’s rating has not come down.

For an investment horizon of 20 years, we hope you have a clutch of funds and are not dependent on this single fund.

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I started an SIP of Rs 2,000 in July 2009 and continued it till June last year in Birla Sunlife Midcap plan A. A balance of Rs 24,000 is left in that account. I started a new SIP of Rs 2,000 in Birla Sun Life India Gen Next from July 20 last year. Please suggest whether I should switch over this Rs 24,000 to some other better performing fund and if so, whether I should go for a fund from the same house.— K. Ramachandran

You can move the Rs 24,000 to another mid-cap fund such as IDFC Premier Equity, HDFC Mid-cap Opportunities or ICICI Pru Discovery. If you want to play safe and invest in large-cap funds, park the money in Franklin India Bluechip or DSPBR Top 100 Equity.

Birla Sun Life India Gen Next does not have as robust a track record as few other schemes from the Birla stable. We suggest a switch to Birla Sun Life Dividend Yield Plus or Birla Sun Life Frontline Equity.

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

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