Mutual Funds

Fund Talk: Too many funds lead to duplication

K. Venkatasubramanian | Updated on June 23, 2012

It’s not easy to track performance of too many funds.

Invest enough in debt instruments, gold and real estate, too.

I have SIPs of Rs 5,000 each in the following funds for the past two years: Canara Robeco Emerging Equities, Quantum Long Term Equity, UTI MNC, HDFC Prudence, UTI Opportunities, Mirae Asset India Opportunities and Mirae Emerging Bluechip. I have been investing Rs 7,000 and Rs 8,000 in Canara Robeco Equity Diversified and IDFC Premier Equity respectively.

My investments (through SIPs of Rs 5,000 from 2009 and stopped) in BSL MNC and ICICI Focused Bluechip Equity have delivered decent returns. I do not know if I will be able to continue these SIPs. But I will try. I will need this money 15 years from now for my kids’ education and marriage (I am 36 now) and some money after 20 years for my retirement.

 Do I need to make any changes in my funds or strategy? — Ashish Goel

You are investing as much as Rs 50,000 a month in the form of SIPs. This is a fairly large sum. We hope you have made sufficient investments in debt instruments, gold and possibly real estate. For your age, you must ideally have an asset allocation of 65:25:10 in favour of equity (including mutual funds), debt and gold respectively.

Your portfolio has a large number of funds with a similar mandate, leading to significant overlap in investment strategy. The number of funds itself, at nine, may not make it easy for you to track and review performance. You can rebalance your portfolio and bring down the number of funds to six or seven at the most.

Coming to the funds that you hold, there are far too many mid-cap schemes. We believe IDFC Premier Equity alone would suffice and you can continue to park Rs 8,000 there. You can exit Mirae Emerging Bluechip as it has a track record of just about two years. If you have the risk appetite for another mid-cap fund, you can continue to invest, but a lower sum of Rs 2,000 in Canara Robeco Emerging Equities.

Again, there are many multi-cap funds in your portfolio. You can retain UTI Opportunities and Quantum Long Term Equity and can invest Rs 8,000 in each of them. Though having a good track record, Mirae Asset Opportunities may be exited as the above two funds itself would serve your purpose.

You can also exit from UTI MNC, which has delivered healthy returns over the past few years. Its theme is restrictive and most of the sectors and stocks that it invests in may have become expensive on valuations.

Invest Rs 8,000 in HDFC Prudence. Add a couple of large-cap funds from Franklin India Bluechip, HDFC Top 200 and ICICI Pru Focussed Bluechip and park Rs 8,000 in each of them.

If you cannot sustain these SIPs for a long time, say, seven to 10 years, reduce the amounts proportionately, but do not discontinue.

It is not clear when you stopped SIPs in BSL MNC and ICICI Pru Focussed Bluechip. You can move the proceeds to safer debt instruments such as bank deposits or NSC and withdraw it closer to your goals in order to meet any shortfall. The amounts from the funds that we have asked you to exit too can be used for the purpose. Book profits in case of abnormal returns during any year; review your portfolio periodically to rebalance and weed out underperformers.

If your target corpus is reached ahead of time and when you are nearing (a year or two before) your goal, sell the funds and move the proceeds to short-term debt schemes such as Canara Robeco Floating Rate Short Term or Birla Sun Life Floating Rate Long Term.

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Published on June 23, 2012

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