Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on January 23, 2018

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Could you please analyse the prospects of Reliance Pharma fund? I have been holding units of the scheme for three years now and have 150 per cent profits on it. Should I book profits or hold on for further gains?

VH Rao

Theme or sector funds are generally not recommended for portfolio building as they require timing of entry and exit, which may be difficult. But there are times when some exceptions can be made.

Pharma as a sector has had a great run over the past five years. Although many frontline and most mid-tier pharma stocks have run up massively and are richly valued, the general consensus is that the sector has strong growth prospects and, to a large extent, premiums may be deserved.

Coming to your query, if you need the money urgently or over the next few months, you can book profits or exit units. But if you do not need the money for the next few years, you can do the following.

Reliance Pharma has underperformed top peers such as SBI Pharma over the last few years. So, switch over from Reliance Pharma to SBI Pharma. If you have a three-year horizon, you can probably look at booking periodic profits or at least take out the capital invested over time while retaining the gains for the longer term.

I want to invest in mutual funds and the equity market. But I have no idea how to go about it. I want to invest ₹7,000 a month for five years. How do I invest this amount to get maximum benefits?

Rajendra Singh Adhikari

Since you have no prior experience investing in markets, mutual funds are the best suited instruments for you.

Equity markets require you to research stocks, take valuation and technical calls as well as time entry and exit. Mutual funds, on the other hand, have seasoned managers who invest in well-chosen stocks to ensure gains over the long term.

So, invest through the SIP (systematic investment plan) mode in a set of quality names over a five-seven-year time frame so that you get market-beating gains. Split ₹7,000 as monthly SIPs in the following schemes: Invest ₹3,000 in Franklin India Prima Plus, a high-quality, large-cap-oriented fund. Park ₹2,500 in ICICI Pru Focused Bluechip. The balance ₹1,500 can be put in HDFC Balanced.

A conservative portfolio with large-cap and balanced schemes has been suggested as you are just starting off. As you gain experience and comfort with mutual funds, you can add more schemes and possibly even those that carry higher risks so as to generate higher returns.

I have been investing ₹2,000 each through the SIP route in the following funds: HDFC Prudence, HDFC Children’s Gift - Investment Plan and ICICI Pru Value Discovery.

I can invest for the long term. Is my portfolio well-diversified? Are any modifications required?

Arvind Kumar

It is wise on your part to invest in mutual funds for the long term.

But you must diversify across fund houses and market-caps so that you have a well-diversified portfolio.

HDFC Children’s Gift – Investment Plan is a high-quality balanced fund. You can continue putting money in this scheme.

Since you already have a scheme from the same stable, you can exit HDFC Prudence. Incidentally, this scheme is also a balanced fund and you may not need two hybrid names in your portfolio.

ICICI Pru Value Discovery is a mid-cap fund with a proven performance record and can be retained.

Now that you have a balanced scheme and a mid-cap fund, you will need a large-cap name to make your portfolio well-diversified. Invest ₹2,000 in L&T Equity, a large-cap name that has delivered well over the past three-four years.

Review the schemes in your portfolio once a year to take corrective action, if necessary, and to rebalance.

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Published on April 19, 2015
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