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Is there something wrong with your mutual fund portfolio?

Last updated on: April 18, 2008 13:59 IST
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Do you have too many tax saving mutual funds in your portfolio? Or have you got too many diversified equity mutual funds based on their market cap, theme, sector etc?

Why and how should you invest in mutual funds? What kind of returns can you expect from a good portfolio? Most importantly, what should be your time horizon for achieving your aim?

In a chat with Get Ahead readers on April 16, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.

For those of you who missed the chat, here is the transcript.

amit asked, dear sir, I am salaried, take home is 30000/-, My investment is 70000/- per year in LIC & ULIP plans. I am paying a Housing lon EMI of 10000/-. I have two kids 5 year & 1year old. I need approx. 50-60Lac by 2020 for kids further study etc. I dont know much about mutual funds. How to proceed for this. How much to invest and where to invest. Thanks in advance

Vetapalem Sridhar answers, Assuming a 15% annualized return, u would need to roughly invest 10K p.m. till 2020 to accumulate around 50L by then. But even if u invest smaller amts now, as ur savings potential increases u can invest higher amts in future. Would suggest that u do a SIP in 3-4 funds. U can look at funds like HDFC Growth, Sundaram Select Focus, JM Emerging Leaders Fund, SBI Midcap, etc…

hkg asked, After having look on my porfolio, do you have any suggesitions. I am investing in the following funds through SIP for the last 9 months. My Investment horizon will be 10-12 years. MAgnum Tax Gain 5000/- pm,Hdfc Tax Gain 2500/-, Reliance Vision 2000/- pm,Franklin Temp Prima Plus 2000/- pm, Tata Infra 1000/- pm, HDFC Growth 2500/- pm, kotak tax saver 2000/- pm thanks

Vetapalem Sridhar answers, Hi! Portf structure seems OK. But there is no need for so many ELSS (Tax Savings) Funds. Pick one and continue with it in future. Phase out the rest over time. When u phase out the ELSS schemes u can look at adding an aggressive fund like JM Emerging Leaders Fund or Sundaram SMILE fund.

amit asked, Does gifting money (cash or cheque) to relatives help in saving tax. If yes what's the limit & what proof is required

Vetapalem Sridhar answers, Hi Amit, No it does not. U can gift only that money which is left with u after paying tax.

Pravit asked, I have invested in the following portfolio for Rs 3000/- per month for each fund through SIP - HDFC Equity, Franklin India Prima Plus, DSP ML Opportunities, Birla Frontline Equity, Reliance Vision, Standard Chartered Premier Equity, Magnum Multiplier 93 and HDFC Prudence. I am Looking to stay invested for 5 years primarily for capital appreciation of about 15-20 % YoY. I can take some risk. Is this portfolio okay. Do you suggest any changes ? Additionally can you suggest some debt and value funds to be included to the portfolio ?

Vetapalem Sridhar answers, U have too many funds. Keep one among HDFC Equity and Birla Frontline. I feel that it is better to invest separately into debt and equity instead of putting money in a balance fund. So, u can look at exiting HDFC Prudence. This would take number of funds to a manageable level. The portf would then have a gud mix between large cap and mid cap funds. Ur return expectations r reasonable. U can look at bank FD or one yr plus FMPs which keep coming out at regular intervals to meet ur debt investment needs. Templeton India Growth fund is a gud value fund.

Sourav asked, Is it true that if I invest in the Growth option of any ELSS fund, then the dividend re-invested draws a fresh 3 yr lock-in from the date of declaration of dividend?

Vetapalem Sridhar answers, Hi Sourav, there is no problem in a Growth Option as no additional units are issued in between due to declaration of dividend. But in a dividend reinvestment option, new units issued due to reinvestment of dividend would be subject to a 3 yr lockin from date of issue of those units.

prithvi asked, Sir , I earn Rs 18000 pm. pls suggest me 2 good tax saving funds and 2 good diversified equity funds to invest through SIP for at least 5 years or even more

Vetapalem Sridhar answers, Dear Prithvi, u can look at funds like Sundaram Tax Saver, Principal Tax Savings Fund, HDFC Tax Saver as options for ELSS investment. Among Diversified funds u can look at HDFC Growth, SBI Magnum Equity, Reliance Vision, Sundaram Growth, etc.

rohit asked, Hi Mr Sridhar, I had invested in Reliance Equity Opp Fund through SIP of Rs 2000 pm for 12 months. Also I have invested in Rs1000 pm each in Franklin Flexi Cap & Franklin Asian Equity Fund. This was all done on advise of a reliable and comptent person, but these funds are not performing. I also have SIP of ICICI Infrastructure Fund of RS2000 pm which is doing great. What do u advise, I can hold all these funds for 1-2 years: is it advisable to Hold them, would they give me a reasonable return in 1-2 years?

Vetapalem Sridhar answers, Dear Rohit, ideally u should compare u funds after 2-3 yrs in case u r doing a SIP. And u cannot compare a diversified fund with a thematic/sector fund. The performance is not seen as the mkts have fallen during the last couple of mths. Have patience and u will find that over time most funds will deliver reasonable returns. Would suggest that have atleast a 3-4 more yrs of investment horizon in ur case.

sanjay asked, thanks in advance. sir i am very much new in mutual fund investments.I AM 40 AND HAVING 36 LAC INSURANCE COVER my SIP investment started from april 08 & detail is DSP OPP FUND 3500/,-HDFC TOP 200- 3500/,-SBI CONTRA 3000/,-RELIANCE VISION 3500/,MAGNUM TAX GAIN 1000/-,HDFC TAXSAVER 1000/-FRANKLIN TAX SHILD 1000/--FIDILITY EQUITY FUND 3500/-,DSP BAL 3500/- &HDFC PRUDENCE 1500/- PL TELL ME IS ANY CHANGE YOU SUGGEST.ALL R SIP

Vetapalem Sridhar answers, Dear Sanjay, too many funds. U do not need more than 4-6 funds to build a gud portfolio which can help u achieve reasonable returns. Too many funds add no additional value to ur portf. U can pick and keep only one ELSS fund and also re-allocate money being invested into the balanced funds among the other funds already pick by u. The rest of the funds r reasonably gud.

Parag asked, Sir, I have started investing in MF since Jan 08 in these funds 1.Reliance Growth 2.JM Basic 3.DSP world gold fund 4. DSP TIGER MY horizon period is 5-7 years, 1. what do you suggest, is this a gd period or should i extend the period 2.Should I look at other funds for better prospects by closing these it in a 1 or 2 years 3. Any suggested funds from your end

Vetapalem Sridhar answers, Hi Parag, u can add HDFC Growth Fund to the above. The time horizon is gud for equity investing. U should review ur investments after 2-3 yrs and then decide whether u need to change funds for investment.

jay asked, Sir, I have some investments in mutual funds with a long horizon (10-12 yrs). In the large cap category- Birla Sunlife Frontline Equity(G), SIP Rs. 5000/-. In the madcap category, Reliance Growth-G, SIP Rs. 2000 and in the infrastructure sector, DSMPL TIGER(G) SIP Rs. 2000/-. For tax purpose, SBI Tax gain, SIP - Rs. 1500/- . Could you tell me whether my portfolio is OK or not. My purpose of investment is my daughter's marriage, her education etc. She is now 10 years old. Your suggestion would be of great help.

Vetapalem Sridhar answers, I think a better choice for an aggressive fund would be JM Emerging leaders fund or Sundaram SMILE fund instead of Reliance Growth. Rest funds r OK.

Deepak asked, How much more do you expect the market to go down during American slowdown

Vetapalem Sridhar answers, It is not possible to say with certainty how Indian Mkts will react. It seems that the problems in US still persist. A recession in US will definitely impact the Global Economy. The recent infosys results have ensured that Indian mkts rally inspite of fall in the US mkts. Over time Indian Mkts would slowly but surely be driven by fundamentals of Indian Companies rather that the behaviour of US mkts.

Suggestion asked, Hi Sridhar, I have a portfolio of some funds in which i have been investing for some time now via SIP. HDFC Top 200, SBI Midcap, Franklin India Prima Plus, Magnum Contra, DSPML T.I.G.E.R., JM emerging leaders, Kotak Opportunities Please suggest whether to continue or switch. Any suggestion would be welcome. I am 25 yrs old and have a high risk appetite and already have a term insurance for 30 Lakhs. I plan to remian invested for 3-5 years.

Vetapalem Sridhar answers, Ur portfolio consists of gud funds and has an aggressive tinge to it. Continue with them. Would suggest that u have a 5 plus yrs horizon of investment.

ajay asked, Sir, I wants to take ICICI Prudential life Insurance without risk cover for Rs. 20,000 Per annum for 5 years. Will this policy give me good return after 10 years. Please advise.

Vetapalem Sridhar answers, If u do not want Risk Cover, then why do u want to go for an Insurance Policy. Go for a Mutual Fund itself. The risk in a Equity based ULIP will be similar to that of an equity oriented mutual fund.

Sanjeev asked, Hi Sir, I want to start investing through SIP around 3 thousand per month for long term.Please advice which mutual fund is good to start today? Regards,

Vetapalem Sridhar answers, Hi Sanjeev, u can look at starting ur investing by pick funds like HDFC Growth and Reliance Vision.

Part II: Is your MF investment not giving good returns?

Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at

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