Your Fund Portfolio

I am 40. I recently started SIPs in the following funds: ₹5,000 in Franklin India Prima Plus; ₹3,000 each in ICICI Pru Value Discovery and Mirae India Opportunities; ₹2,000 each in Franklin Flexicap, ICICI Pru Focused Bluechip, UTI Equity and Tata Balanced. I also have one-time investments in the following: Axis Long Term Equity Fund – ₹10,000 (May 2014); Sundaram World Brand Fund NFO – ₹5,000 (November 2014) and SBI Magnum Gilt Fund Short Term - ₹50,000 (July 2015). Should I rejig my portfolio?

Kiran Raveendran

You have done well to choose funds that sport top quartile returns over the last few years. Out of a total of ₹19,000 per month, you are investing ₹9,000 in large-cap oriented funds (Franklin Prima Plus, ICICI Pru Focused Bluechip, UTI Equity); ₹8,000 in multi-cap funds (Franklin Flexicap and Mirae Opportunities, ICICI Pru Value Discovery) and ₹2,000 in an equity-oriented balanced fund (Tata Balanced). In all, about 58 per cent of your investments every month go into safer large-cap and balanced funds and the remaining into multi-cap funds, which carry a higher risk-return proposition. If you are looking for reasonable annual return of about 12 per cent on your portfolio and have a horizon of at least five years, you can maintain this allocation.

As regards your lumpsum investments, Axis Long-Term Equity being an ELSS scheme, investments are locked in for three years; ditto with the Sundaram World Brand Fund Series, which are closed-ended funds. Hence, you really can’t do much except staying put until the lock-in expires. As far as your gilt fund investment goes, the fund has not been a chart topper among short-term gilt funds in the last one year but it has managed to beat its benchmark and has also clocked close to the average returns of this category. The RBI’s recent measures favour a further rally in short-term securities in the near to medium term. Hence, you can remain invested.

I am 28 and am currently investing ₹8,500 every month in the following funds: ₹1,500 each in Canara Robeco Emerging Equities, Reliance Small Cap, SBI Magnum Midcap, SBI Magnum Emerging Businesses , UTI MNC; and ₹,1000 in Franklin India Prima Plus. Each of these investments was started at different points in the last two years. Please suggest which fund to continue with and which to exit. I can stay invested for 25-30 years and can increase the investment amount as years pass by. I am saving for my retirement at 60.

Nithin

Commencing your investments at a time when the stock markets were gathering steam in 2014, you have put your money predominantly in small and mid-cap funds, which have been the flavour of the season since then. Barring UTI MNC and Franklin Prima Plus, about 70 per cent of your investments are currently going into small- and mid-cap funds every month.

While these funds may be chart toppers now, they may also slip much deeper than large-cap-oriented funds during a market fall. Hence, considering you have a long-term investment goal, it will be better to have a more balanced portfolio. This will peg down the risk as well. Also, for the ₹8,500 you are currently putting in, it is enough if you have a portfolio of three funds. Reallocate your investments as follows: Continue with Franklin Prima Plus and step up your investment to ₹3,500 per month there. The fund is a dependable performer among large-cap-oriented funds. Put in ₹2,500 in ICICI Pru Value Discovery. It is a multi-cap fund which believes in investing in value stocks and will complement the growth strategy followed by the other two funds in your portfolio.

The remaining ₹2,500 can be put into SBI Magnum Midcap. Along with other midcap funds, you can also exit UTI MNC. The MNC theme has worked well in the last few years, thanks to the perception about superior management bandwidth, governance practices and deep pockets that MNC companies tend to have. Despite some corrections, many of these stocks still trade at a premium to their desi counterparts. Thematic funds are also more risky as they may do you good only when you time your entry and exit well. A good mix of diversified funds is enough to build a well-rounded long-term portfolio.

COMMENT NOW