Your Fund Portfolio

February 26, 2015 05:11 pm | Updated 05:11 pm IST

I am 36 and have been investing ₹4,000 a month each in HDFC Top 200, Birla Sun Life Frontline Equity and DSP Black Rock Top 100 for the last four years. I want to add ₹4,000 a month through a large-cap diversified fund only. Please advise accordingly.

Manish Agrawal

You have done well in using the systematic investment route and continuing with your investments over a long period. You seem to have a low tolerance for risk since all your funds are firmly in the large-cap category. For your fresh investment too, you are looking to large-caps.

Split your total of ₹16,000 as follows. Invest ₹4,000 each in UTI Equity and HDFC Top 200, both of which are top-notch large-cap funds.

Put ₹4,000 each in Birla Sun Life Frontline Equity and Axis Equity. DSPBR Top 100 can be exited as it has lagged top peers.

I am 28, single and working with a public sector bank for the past two years. I have already invested in Canara Robeco Tax Saver and Canara Robeco Equity Diversified fund through systematic plans. Now, I would like to invest ₹6,000 a month with a horizon of seven to 10 years in large-cap funds, expecting overall 16-18 per cent return with regular review. I have decided to invest thus: ₹2,000 a month in ICICI Pru Bluechip and UTI Equity and ₹1,000 each in Franklin India Prima Plus and Birla Sun Life Top 100. Kindly suggest whether I can proceed.

Ranjay Kumar

You have done well investing in mutual funds with a horizon of seven to 10 years, which is ample time for gains to play out. Even so, while equity markets have soared in the past year, an annual return of 16-18 per cent is on the aggressive side.

A return of 12-15 per cent is far more reasonable. If you are saving towards a particular goal, either increase the horizon or step up your savings.

The two Canara Robeco funds you have invested in can be retained. For your fresh investment of ₹6,000, split it equally between UTI Equity and Mirae India Asset Opportunities.

I am 36, a first-time investor and fall under the highest tax bracket. I would like to invest in equity funds for the long term and my aim is at least ₹1 lakh annually. Is there a difference between making lumpsum and monthly investments? What are the best mutual funds to invest in? Should I stick with one or invest in more to diversify? I don’t have any other investments. I can take higher risk.

Aby Thomas

Equity investments in mutual funds require a horizon of at least seven to 10 years to deliver. Investing a fixed amount every month or systematic investment plan (SIP) is the best route to take for retail investors.

A SIP works because with regular monthly instalments you would be buying across markets and thus average your costs.

So, if the markets are trending down, your cost of investment gradually averages lower. When the markets pick up, gains are thus higher. But for this benefit to play out, you need to keep the SIP running for four-five years, moving across market cycles.

SIPs also help overcome the problem of timing the market.

Next, investing in multiple funds with different mandates and across fund houses is advised to spread out your risk as well as benefit from different investment styles.

The minimum amount you wish to save rounds off to roughly ₹8,500 a month. Park ₹3,000 each in ICICI Pru Top 100 and Franklin India Prima Plus, which are predominantly large-cap funds. Invest ₹2,500 in ICICI Pru Value Discovery since you can take higher risk.

Also, invest in PPF, as it is among the best tax-saving instrument, especially for those in the highest tax bracket.

Try to increase your monthly savings and diversify into FDs, RDs and gold. Keep an eye on the performance of your funds and move out if they are prolonged underperformers.

Send your queries to mf@thehindu.co.in

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