Fund Talk: Diversify your portfolio across fund houses

I am have been investing in the following mutual fund schemes from June 2012.

1. Canara Robeco Equity Diversified - Rs 5,000

2. Canara Robeco Gold Saving -Rs 5,000

3. Franklin India Blue Chip - Rs 5,000

4. DSB Block Rock Top 100 Equity – Rs 5,000

5. HDFC Balanced – Rs 5,000

I intend to continue investing in these schemes for the next five years.

I wish to accumulate Rs 50 lakh. For how may years should I continue to invest to achieve this goal? Further, can I continue with the same funds or should I make any changes? I can invest an additional Rs 5,000. Where can I invest the same?

M.K. Kadaiah

You should avoid investing in schemes from the same fund house as it would deny you the opportunity to diversify and benefit from the styles of various asset management companies. Also, investment in gold should not account for more than 10-15 per cent of your portfolio, whereas in your case it is 20 per cent.

Coming to your portfolio, you can continue to remain invested in Canara Robeco Equity Diversified, Franklin India Bluechip and HDFC Balanced and invest Rs 5,500 in each of them.

You can consider switching from DSPBR Top 100 to UTI Opportunities, which is a stronger performer with a consistent track record and invest Rs 5,500 in it.

You may park the balance Rs 3,000 in Reliance Gold Savings instead of Canara Robeco Gold Saving.

If you continue to invest Rs 25,000 every month, you will be able to achieve your target of Rs 50 lakh in another nine years, if the return managed by your portfolio is 12 per cent annually.

In case you choose to invest another Rs 5,000, split the amount equally in the above four diversified funds.

If you do so, you can reach the required corpus in eight years.

Review your portfolio once every year and take corrective action, if necessary. If you reach your targeted corpus ahead of time, move the proceeds to safer debt instruments.

We also hope you have made sufficient investments in debt (FDs, RDs, PPF etc) and real estate, so as to have a balanced portfolio.

* * *

I work in a bank and am retiring this month. I will get terminal benefits of around Rs 50 lakh. I intend to deposit half of this amount in the bank’s deposits and the remaining amount in monthly income schemes of mutual funds. I will get a pension of Rs 15,000 a month. Please suggest two or more MIPs where I can invest my money.

P.V.Sathyanarayana

You have a reasonable safety net with bank deposits as well as a regular pension after your retirement.

It is also prudent on your part to seek better returns by investing a portion in monthly income plans.

But you can adopt a different mode for investing in MIPs. While you can perhaps invest the entire sum in fixed deposits, let a portion of your deposits be cumulative in nature. The balance can be invested in a deposit where you get a monthly interest payout.

Invest this interest amount in MIPs every month. Please note that though most MIPs make it a point to give dividends regularly, payouts will depend on market conditions and available surplus.

You could consider HDFC MIP Long-Term, Reliance MIP, Canara Robeco MIP for your investments.

* * *

I am 38, and in Government service. I have been investing in the following schemes for the last six months: Reliance Equity Opportunities - Rs 1,000, SBI Emerging Businesses - Rs 2,000 and Birla Sun life Gen Next - Rs 2,000. Kindly let me know whether the investments are appropriate and for how long I must remain invested in these schemes. Further I intend to invest another Rs 2,000 every month. Please suggest a scheme in which I can invest.

Bhaskar Choudhury

There seems to be no focus or direction in the way you have chosen the schemes in your portfolio. Also, two schemes would suffice for investing Rs 5,000.

Reliance Equity Opportunities is a multi-cap fund with a large exposure to mid-cap stocks. You have also included SBI Emerging Businesses, a mid-cap fund that has done well in recent years and hence there is scope for portfolio overlap.

Retain Reliance Equity Opportunities alone and invest Rs 2,500 in it. Birla Sun Life Gen Next has done well in recent times riding on momentum sectors.

We suggest you switch to Birla Sun Life Frontline Equity, a predominantly large-cap diversified fund with an excellent long-term track record of over 10 years, and park Rs 2,500 there.

If you wish to add another Rs 2,000, split the sum equally across Reliance Equity Opportunities and Birla Sun Life Frontline Equity. You need to remain invested for as long as possible or till such time as you need the money, whichever is later.

Ideally SIPs must be carried on for 7-10 years for significant capital appreciation.

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

COMMENT NOW