Don’t have too many funds from the same house

Aug 24, 2013 09:56 PM

I am 29 and have been investing in mutual funds through SIPs (systematic investment plan) for the past four years. I have invested Rs 5,000 each in IDFC Premier Equity (Growth) and HDFC Top 200, Rs 2,500 each in ICICI Prudential Focused Bluechip and ICICI Prudential Discovery.

Please let me know if any changes need to be made to my portfolio. I plan to remain invested for the long term of, say, 15 years.

Pallav

You have chosen a set of quality funds in your portfolio. But the allocation to these schemes needs to be tweaked a little bit.

Before we do that you may want to note a couple of points with regard to your portfolio orientation.

First, there is significant mid-cap exposure, which increases the risk profile of the overall portfolio. Second, you have chosen two schemes from the same fund house, which denies you the opportunity to benefit from the investing styles of different managers.

But an exception can be made as both ICICI Pru Focused Bluechip and ICICI Pru Discovery have delivered quite well across market cycles.

Split the total SIP amount of Rs 15,000 as follows: Invest Rs 6,000 in ICICI Pru Focused Bluechip, Rs 4,000 in HDFC Top 200 and Rs 2,500 each in ICICI Pru Discovery and IDFC Premier Equity.

We have lowered the exposure to mid-cap funds to temper the risks associated with your portfolio.

The corpus building exercise would be far more meaningful if you save for definite goals with specific timelines as that can help decide the appropriate investment avenues.

Keep monitoring the schemes, especially HDFC Top 200, periodically to take corrective action, as and when necessary.

***I am aged 41 and work for a private company. I have been investing Rs 19,000 every month in the following mutual fund schemes through the SIP route from April 2011.

Reliance Regular Savings Equity — Rs 1,500; Birla Sunlife Frontline Equity Rs 1,000; HDFC Equity Rs 4,000; HDFC Midcap Opportunities Rs 3,000; HDFC Prudence Rs 5,000; HDFC Top 200 Rs 2,000; IDFC Premier Equity Rs 2,500.

My aim is to earn Rs 1 crore out of this investment in the next 10 years.

Please review my portfolio and let me know if the amount invested in mutual funds is sufficient for achieving that corpus.

Raj

You have spread your monthly investments across too many schemes. Not only is there a considerable overlap but you have also invested in as many as four funds from the HDFC stable which denies an opportunity for you to diversify across fund houses.

The allocation across the schemes too needs to be reworked, to have a more robust portfolio.

Birla Sun Life Frontline Equity is a fund with an excellent long-term track record. Invest Rs 3,500 in it. HDFC Equity and HDFC Top 200 have considerable portfolio overlap.

Exit HDFC Top 200 and invest Rs 3,000 in HDFC Equity. Reliance Regular Savings Equity too can be exited as it has been an average performer in relation to its peers.

In HDFC Mid-cap Opportunities and IDFC Premier Equity, you can invest Rs 3,000 each.

Consider investments in Quantum Long Term Equity, where you can park Rs 3,500. Move over from HDFC Prudence to Tata Balanced and invest Rs 3,000 there.

It would be difficult for you to achieve your target of Rs 1 crore in the next 10 years unless you can double your investments from now and continue the same for the next decade. This calculation is arrived at assuming a 12 per cent return annually.

Please note that over the long-term, building a healthy corpus entails creating a balanced portfolio, with investments in debt (FDs, RDs, PPF, etc.), gold and real-estate. Review your portfolio once every year and take corrective action and rebalance. We hope you have a term cover and have also taken a medical insurance policy.