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I would appreciate your opinion on the following query.
I invested in the following mutual funds over the past 18 months.
TATA Equity Opportunity Fund - Rs 100,000
Reliance Vision Fund - Rs 50,000
Reliance Growth Fund - Rs 50,000
Birla Dividend Yield Plus - Rs 100,000
HDFC Equity Fund - Rs 50,000
HDFC Top 200 - Rs 50,000
Kotak MNC - Rs 45,000
I wish to redeem any two of the above funds. Which two do you suggest?
I have not received any dividend from the HDFC funds, Kotak MNC and Reliance Vision fund in the last one year.
I would like to start a Systematic Investment Plan. Which four funds should I select for that?
- Muhammad Ismail
Let us first talk about the various market caps in your portfolio.
Your overall portfolio is dominated by large-cap stocks which accounts for about 48% of your portfolio; mid-caps account for another 40% while small-caps have been allocated 10% of your investments.
The portfolio looks fairly diversified across stocks and sectors: Engineering, technology and Fast Moving Consumer Goods, commonly referred to as FMCG - stocks accounting for a lion's share.
As regards the dividend, please note that a mutual fund scheme is not obliged to pay regular dividends. It is entirely at the discretion of the mutual fund.
Also, the frequency of dividend payments should not be an important criteria to choose a fund, because it is not something extra. The Net Asset Value (price of a unit of a fund) falls by the amount of dividend paid.
Though you have invested in some good funds, the bulk of your investments, around 45%, happen to be in two relatively younger funds -- Birla Dividend Yield Plus and Tata Equity Opportunities. Hence, we have no way to say how good these funds are.
If you want to redeem a couple of funds (sell the units) and invest through a SIP in some other funds, you can consider reducing your holdings in these two relatively new funds which dominate your portfolio. While doing so, however, give due consideration to the tax implications.
If you are selling the units less than a year of buying, you will have to pay capital gains tax of 10%. It may be worthwhile to wait for the holding period to exceed one year; in that case, you will not have to pay any capital gains tax when you sell your units.
For your SIP investments, you can invest in some of the good funds you already have in your portfolio. Four of your funds -- HDFC Equity, HDFC Top 200, Reliance Growth, Reliance Vision -- are good investments and are suitable for long-term portfolios.
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