Diversify across fund houses for lower risks : Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Invest in many good funds in order to diversify and benefit from their varied styles.

I am 40 years old, and working in a listed company. I am investing Rs 15000 per month in HDFC Top 200 for the last two years, and would like to add a further Rs 5000 to it. My time horizon is 10 years, with the risk appetite being above average. I also have a portfolio of Rs 10 lakhs in direct equities. Please suggest a mutual fund portfolio. I expect a minimum return of 15 per cent per annum from it.

— MC

It is good that you have given yourself 10 years to reach your goal. Your return expectations too seem fine. But there are several faults in your existing portfolio.

First, you are investing a fairly large sum in just one fund. Second, you want to increase exposure again to that fund. Finally, your portfolio is skewed heavily towards equity.

So, to rectify these, you must invest in many good funds in order to diversify and benefit from their varied styles.

Your investment in HDFC Top 200 during the past two years would total to Rs 3.6 lakh. It hasn't eroded much and the value would be pretty much at the same levels. Don't add any further exposure to this fund and leave it as such for the next 10 years.

From the Rs 15000, invest Rs 4000 each in Frankin India Bluechip, IDFC Premier Equity and Quantum Long-term Equity. The balance Rs 3000 can be parked in UTI Opportunities. This will give you a mix of large, mid and multi-cap funds.

If Rs 15000 is invested every month for 10 years, you would have a corpus of more than Rs 41 lakh, if you earn 15 per cent per annum.

Building a corpus means a balanced approach with exposure to equity, debt, gold and, if possible, real estate.

You can park the remaining Rs 5000 in high-yielding debt instruments, gold ETF etc, to diversify.

Review your portfolio at least once every year to rebalance and weed out any underperformers.

*******

I work in a public sector bank. I have been investing in the following funds through systematic investment plans since 2008, presently contributing Rs 3,000 each in the following funds (recently enhanced from Rs 2,000): DSPBR Top 100 Equity, Franklin India Bluechip (after discontinuing the systematic investment plan in Franklin Prima Plus recently), HDFC Equity, HDFC Prudence, HDFC Top200 and IDFC Premier Equity.

I would like to build up a corpus for my post retirement, which is 7 years away. My risk appetite is above average.

Please suggest changes, if any required, in my portfolio in order to maximise returns.

— Swaminathan

The funds in your portfolio are fairly good with a good performance record. But it can do with some tweaking. You have invested in three funds from HDFC stable.

Although all of them have an excellent long-term performance record, you should diversify to more fund houses in order to reduce concentration risks and benefit from rest of the fund houses' styles. Discontinuing systematic investment plans in Franklin India Prima Plus was a good idea.

As you already have exposure to large-cap funds in the form of DSPBR Top 100 Equity and Franklin India Bluechip, you can exit HDFC Top 200.

Instead, you can park Rs 3000 in Quantum Long-term Equity or Canara Robeco Equity Diversified.