I have been invested in Magnum Contra–Growth for the past four years. Should I continue investing in it? My investment horizon is of 10 years.
-Aman
Magnum Contra was a very good fund, but it has turned mediocre for the past 1.5-2 years. Since you have been investing in it for the past four years, it is possible that you might not have faced any major losses in it. But looking at the current market situation, you should switch your investments from this fund to another. If you feel that you will need this money in the next 3-5 years, move it to a balanced fund.
To continue your investments, you should pick a good diversified equity fund like Birla Sun Life Frontline Equity or HDFC Equity. The accumulated investments in Magnum Contra can also be put into these funds.
(source:valueresearchonline.com)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Wednesday, January 4, 2012
Tuesday, August 9, 2011
High On Insurance, Low On Investment
I am 36 years old, my wife is 33 and our son is 7. My wife and I each have an annual agricultural income of Rs 12 lakh. Our present household expenses are Rs 3 lakh per annum (Rs 25,000/month) and our son’s schooling expense is Rs 3 lakh per annum.
— Nimbalkar Khardekar
The Khardekars have started investing fairly early, are currently earning well and have clear cut goals. If one looks at the basic inflow and outflow, as of now they have an inflow of Rs 24 lakh per annum and an outflow of Rs 11,39,142. The latter includes their monthly household expenses as well as premium payments towards various insurance policies and monthly investments. That leaves them with an investible surplus of Rs 12.60 lakh. While some of this money can be placed in a bank fixed deposit as an emergency fund, the chunk of it can be invested towards their goals. And by invested, we mean equity investments. While they have a bag full of insurance policies and a Public Provident Fund (PPF), they must ensure that equity forms a major component of their portfolio if they are to achieve wealth creation. The returns from equity far outweigh the returns that one would get from a fixed-return instrument. For that reason, equity is a must for virtually every portfolio, though the actual amount allocated to that asset would differ.
Here are some suggestions.
* A health policy must be taken out in the son’s name. An accident, sickness or illness can deplete one’s bank balance rapidly. Health insurance is a must for every individual.
* Despite having so many insurance policies, we would still recommend a term plan for each of the spouses since both are earning. The total value can be around Rs1.5 crore. The tenure can be for as long as possible since it will protect the remaining members against life risks.
* If they discontinue with their insurance current plans, it would be a losing proposition. We recommend that they continue with all their insurance policies.
* They should also continue to invest the maximum annual limit in PPF. This will continue even under the new tax regime of the Direct Tax Code (DTC).
* Since time is on their side and they do not have major liabilities or debts, exposure to equity must increase. Specially if they are saving for their retirement and their son’s retirement too. They can start by just increasing the amounts of their Systematic Investment Plans (SIPs). As their income rises, they can proportionately increase the amount that is channelized towards their investments.
* We recommend that investing in equity funds is always done systematically. This enables the investor to buy more units when the market is down and less when it is high. It is a good strategy to participate in the equity market.
* An annual review of the portfolio is recommended. No one must buy and sit tight. Every quarter, they must look at the performance of their funds via each fund’s benchmark and its peers. They can also keep a tab on the star rating of the fund that is assigned by Value Research. If a fund keeps falling in performance, then it can be replaced by another good performer in its respective category.
* As they approach their goal, they can begin to lower the equity exposure and put the money in a bank fixed deposit or debt fund. They must not wait to sell all their equity investments at one go because that would put them at the mercy of the state of the market then, which is too much of a risk.
* They must create a contingency fund which will help out during emergencies. The amount could be around four months of monthly expenses. This can be kept in a liquid fund or even a savings account or bank fixed deposit which is linked to a savings account and can be accessed instantly.
The Kharkekars have not only planned for their retirement but even their son’s, which is going one big step ahead. But if they stick to the plan, it is certainly achievable and definitely very commendable.
(source:http://www.valueresearchonline.com)
— Nimbalkar Khardekar
The Khardekars have started investing fairly early, are currently earning well and have clear cut goals. If one looks at the basic inflow and outflow, as of now they have an inflow of Rs 24 lakh per annum and an outflow of Rs 11,39,142. The latter includes their monthly household expenses as well as premium payments towards various insurance policies and monthly investments. That leaves them with an investible surplus of Rs 12.60 lakh. While some of this money can be placed in a bank fixed deposit as an emergency fund, the chunk of it can be invested towards their goals. And by invested, we mean equity investments. While they have a bag full of insurance policies and a Public Provident Fund (PPF), they must ensure that equity forms a major component of their portfolio if they are to achieve wealth creation. The returns from equity far outweigh the returns that one would get from a fixed-return instrument. For that reason, equity is a must for virtually every portfolio, though the actual amount allocated to that asset would differ.
Here are some suggestions.
* A health policy must be taken out in the son’s name. An accident, sickness or illness can deplete one’s bank balance rapidly. Health insurance is a must for every individual.
* Despite having so many insurance policies, we would still recommend a term plan for each of the spouses since both are earning. The total value can be around Rs1.5 crore. The tenure can be for as long as possible since it will protect the remaining members against life risks.
* If they discontinue with their insurance current plans, it would be a losing proposition. We recommend that they continue with all their insurance policies.
* They should also continue to invest the maximum annual limit in PPF. This will continue even under the new tax regime of the Direct Tax Code (DTC).
* Since time is on their side and they do not have major liabilities or debts, exposure to equity must increase. Specially if they are saving for their retirement and their son’s retirement too. They can start by just increasing the amounts of their Systematic Investment Plans (SIPs). As their income rises, they can proportionately increase the amount that is channelized towards their investments.
* We recommend that investing in equity funds is always done systematically. This enables the investor to buy more units when the market is down and less when it is high. It is a good strategy to participate in the equity market.
* An annual review of the portfolio is recommended. No one must buy and sit tight. Every quarter, they must look at the performance of their funds via each fund’s benchmark and its peers. They can also keep a tab on the star rating of the fund that is assigned by Value Research. If a fund keeps falling in performance, then it can be replaced by another good performer in its respective category.
* As they approach their goal, they can begin to lower the equity exposure and put the money in a bank fixed deposit or debt fund. They must not wait to sell all their equity investments at one go because that would put them at the mercy of the state of the market then, which is too much of a risk.
* They must create a contingency fund which will help out during emergencies. The amount could be around four months of monthly expenses. This can be kept in a liquid fund or even a savings account or bank fixed deposit which is linked to a savings account and can be accessed instantly.
The Kharkekars have not only planned for their retirement but even their son’s, which is going one big step ahead. But if they stick to the plan, it is certainly achievable and definitely very commendable.
(source:http://www.valueresearchonline.com)
Exit Stocks, Enter Funds
I have received stocks worth Rs 1 crore from my father. He had been actively trading and investing in stocks for the past 35 years. I am not that good at stock investing and I don't know exactly what to do with them. But I do have a long-term investment horizon. Over 70 per cent of these stocks were bought over a year ago. What should I do?
- D Kumar
You are lucky that your father has handed over a portfolio valued at a little over a crore currently, which is doing well. However, such a large and valuable portfolio also comes with attendant responsibilities. That you have listed your financial goals and have a mutual-fund portfolio that rides on systematic investment plans (SIPs) reflects your sound temperament towards investing. That you also have a house of your own and do not service any loan indicates your prudent handling of finances.
Insurance: By opting for a term plan you have made the right selection. The Rs 27 lakh cover is a good start and is about 10 times your current annual household expenses. If you take on any additional liability, consider increasing this cover.
You have Rs 4 lakh worth of medical insurance that covers you and your family members. However, an employer-provided insurance cover lasts only as long as you are employed. Urgently consider supplementing this cover with one purchased by you.
PPF: You have PF deducted from your salary. If the debt component of your portfolio is high, reduce your contribution to PPF.
Pension Plan: You don't need a pension plan. Check its fund value and exit costs and terminate the plan if this does not cause losses.
Financial Goals
That you have been able to quantify your goals and are also aware of the time frame within which you have to achieve them are positives. Now work towards achieving them.
With the Rs13,000 investible surplus that you have, it will not be easy to achieve your financial goals within the time frame you have stated, unless you start dipping into the stock portfolio that your father has given you. Temper some of your goals: postpone your retirement and your plan of buying a bigger house. Instead focus on goals such as saving for your child's education.
At 32, however, you have time on your hand, and your income will increase. Continue investing aggressively in equities as it is one asset class that has the potential to help you achieve your financial goals over the long term.
Financial goals
Monthly investments
Cost (Rs) Years to go @12% @15%
First child's education 20 lakh 9 10,300 8,750
Second child's education 20 lakh 11 7,300 6,000
Retirement and other future expenses 5 crore 19 57,200 38,700
Current portfolio
Schemes Category Rating 3-yrs ret(%) 5-yrs ret(%)
DSPBR Equity Multi Cap **** 15.47 16.16
HDFC Equity Multi Cap ***** 20.89 16.94
HDFC Top 200 Large & Mid Cap ***** 18.95 16.97
ICICI Prudential Fusion Mid & Small Cap Not rated 6.26 6.55
IDFC Premier Equity Mid & Small Cap ***** 18.78 19.94
Reliance Regular Savings Equity Multi Cap **** 13.47 20.5
Returns as on April 6, 2011 Ratings as on March 31, 2011
Suggested portfolio
Schemes Category Rating 3-yrs ret(%) 5-yrs ret(%)
Fidelity Equity Large & Mid Cap ***** 16.34 14.7
HDFC Equity Multi Cap ***** 20.89 16.94
DSPBR Micro Cap Mid & Small Cap **** 14.66 —
AIG World Gold International Not Rated — —
BSL Dynamic Bond Ret Income **** 8.92 8.79
IDFC Premier Equity Mid & Small Cap ***** 18.78 19.94
Returns as on April 6, 2011 Ratings as on March 31, 2011
Investments
You have a diversified stock portfolio of 71 scrips spanning market capitalisations and sectors. Managing such a large portfolio will require you to review and watch their performance closely. On the other hand, mutual funds require less frequent review, once a few good funds have been selected and a portfolio built around them. Your temperament suggests you would be better off having the larger portion of your equity investments in equity mutual funds rather than in stocks.
Do not exit all the stocks you own; hold on to some of them, especially the ones that are part of a large representative index such as BSE 100. These are mostly companies with good financials and fundamentals. They are actively traded and both institutional and retail investors invest in them. By staying invested in these stocks, you can expect the value of your holdings to grow further, as well as earn dividends and bonuses from them, as has been the case in the past. You may exit the remaining stocks in a phased manner by booking profits and without attracting capital gains tax.
Mutual Funds
Your current selection of six mutual funds is not bad, but no thought seems to have gone into making a portfolio out of them. Having three multi-cap funds and two mid- and small-cap funds is diversification in terms of numbers but not in terms of style or market capitalisation. What you need is a diversified portfolio that is easy to manage and has the potential to help you achieve your long-term financial goals. Diversification reduces the volatility within a portfolio.
We have suggested an aggressive portfolio that has 90 per cent equity exposure and have retained two of your existing SIP investments in it. The higher equity allocation and regular investments in this portfolio should help you achieve your financial goals.
You can also adopt a core and satellite portfolio strategy. The core portfolio will comprise funds that need low maintenance, while the satellite portfolio will have to be actively tracked. With this dual strategy you can take advantage of market opportunities without putting your complete portfolio at risk. The core comprises large-cap and large- and mid-cap funds. The satellite allocation comprises multi-cap funds, mid- and small-cap funds, sector funds and even thematic funds.
As the core portfolio comprises funds that are not prone to violent swings, it will cushion your portfolio against market swings while providing steady returns. The satellite portfolio comprises high alpha-generating funds, which will give a fillip to returns. The main advantage of this approach is that it is flexible and can be modified according to the investor's risk appetite.
You have also parked some of your savings in fixed deposits. Transfer them into a liquid fund, which is likely to give superior returns while also being more tax efficient.
(source:http://www.valueresearchonline.com)
- D Kumar
You are lucky that your father has handed over a portfolio valued at a little over a crore currently, which is doing well. However, such a large and valuable portfolio also comes with attendant responsibilities. That you have listed your financial goals and have a mutual-fund portfolio that rides on systematic investment plans (SIPs) reflects your sound temperament towards investing. That you also have a house of your own and do not service any loan indicates your prudent handling of finances.
Insurance: By opting for a term plan you have made the right selection. The Rs 27 lakh cover is a good start and is about 10 times your current annual household expenses. If you take on any additional liability, consider increasing this cover.
You have Rs 4 lakh worth of medical insurance that covers you and your family members. However, an employer-provided insurance cover lasts only as long as you are employed. Urgently consider supplementing this cover with one purchased by you.
PPF: You have PF deducted from your salary. If the debt component of your portfolio is high, reduce your contribution to PPF.
Pension Plan: You don't need a pension plan. Check its fund value and exit costs and terminate the plan if this does not cause losses.
Financial Goals
That you have been able to quantify your goals and are also aware of the time frame within which you have to achieve them are positives. Now work towards achieving them.
With the Rs13,000 investible surplus that you have, it will not be easy to achieve your financial goals within the time frame you have stated, unless you start dipping into the stock portfolio that your father has given you. Temper some of your goals: postpone your retirement and your plan of buying a bigger house. Instead focus on goals such as saving for your child's education.
At 32, however, you have time on your hand, and your income will increase. Continue investing aggressively in equities as it is one asset class that has the potential to help you achieve your financial goals over the long term.
Financial goals
Monthly investments
Cost (Rs) Years to go @12% @15%
First child's education 20 lakh 9 10,300 8,750
Second child's education 20 lakh 11 7,300 6,000
Retirement and other future expenses 5 crore 19 57,200 38,700
Current portfolio
Schemes Category Rating 3-yrs ret(%) 5-yrs ret(%)
DSPBR Equity Multi Cap **** 15.47 16.16
HDFC Equity Multi Cap ***** 20.89 16.94
HDFC Top 200 Large & Mid Cap ***** 18.95 16.97
ICICI Prudential Fusion Mid & Small Cap Not rated 6.26 6.55
IDFC Premier Equity Mid & Small Cap ***** 18.78 19.94
Reliance Regular Savings Equity Multi Cap **** 13.47 20.5
Returns as on April 6, 2011 Ratings as on March 31, 2011
Suggested portfolio
Schemes Category Rating 3-yrs ret(%) 5-yrs ret(%)
Fidelity Equity Large & Mid Cap ***** 16.34 14.7
HDFC Equity Multi Cap ***** 20.89 16.94
DSPBR Micro Cap Mid & Small Cap **** 14.66 —
AIG World Gold International Not Rated — —
BSL Dynamic Bond Ret Income **** 8.92 8.79
IDFC Premier Equity Mid & Small Cap ***** 18.78 19.94
Returns as on April 6, 2011 Ratings as on March 31, 2011
Investments
You have a diversified stock portfolio of 71 scrips spanning market capitalisations and sectors. Managing such a large portfolio will require you to review and watch their performance closely. On the other hand, mutual funds require less frequent review, once a few good funds have been selected and a portfolio built around them. Your temperament suggests you would be better off having the larger portion of your equity investments in equity mutual funds rather than in stocks.
Do not exit all the stocks you own; hold on to some of them, especially the ones that are part of a large representative index such as BSE 100. These are mostly companies with good financials and fundamentals. They are actively traded and both institutional and retail investors invest in them. By staying invested in these stocks, you can expect the value of your holdings to grow further, as well as earn dividends and bonuses from them, as has been the case in the past. You may exit the remaining stocks in a phased manner by booking profits and without attracting capital gains tax.
Mutual Funds
Your current selection of six mutual funds is not bad, but no thought seems to have gone into making a portfolio out of them. Having three multi-cap funds and two mid- and small-cap funds is diversification in terms of numbers but not in terms of style or market capitalisation. What you need is a diversified portfolio that is easy to manage and has the potential to help you achieve your long-term financial goals. Diversification reduces the volatility within a portfolio.
We have suggested an aggressive portfolio that has 90 per cent equity exposure and have retained two of your existing SIP investments in it. The higher equity allocation and regular investments in this portfolio should help you achieve your financial goals.
You can also adopt a core and satellite portfolio strategy. The core portfolio will comprise funds that need low maintenance, while the satellite portfolio will have to be actively tracked. With this dual strategy you can take advantage of market opportunities without putting your complete portfolio at risk. The core comprises large-cap and large- and mid-cap funds. The satellite allocation comprises multi-cap funds, mid- and small-cap funds, sector funds and even thematic funds.
As the core portfolio comprises funds that are not prone to violent swings, it will cushion your portfolio against market swings while providing steady returns. The satellite portfolio comprises high alpha-generating funds, which will give a fillip to returns. The main advantage of this approach is that it is flexible and can be modified according to the investor's risk appetite.
You have also parked some of your savings in fixed deposits. Transfer them into a liquid fund, which is likely to give superior returns while also being more tax efficient.
(source:http://www.valueresearchonline.com)
Increase Equity Allocation
My husband is 30, I am 28, and we have a one-year old son. With both of us having worked abroad for the past few years, we have been able to accumulate some savings. We expect to bring back Rs15 lakh divested from our employer’s 401K plan later this year. Now that we are back in India, we plan to live in our own home that is fully paid for. In his new job in India, my husband’s take-home salary will be Rs90,000 per month. I do not plan to work for the next few years. We estimate that every month we will be able to invest approximately Rs40,000. Of this, we plan to invest Rs25,000 through the SIP route and keep the balance in cash, fixed deposits, or liquid funds.We have endowment insurance policies started in our early twenties. Additionally, my husband’s employer will cover him under a term plan and also provide medical insurance cover for our family.
Our investment style has been rather haphazard so far. We would like to know what steps we need to take to rebalance our portfolio. Is our choice of mutual funds correct?
Your investment decisions appear haphazard both in the selection of funds and stocks. For the sake of simplicity we have compartmentalised your portfolio into funds and stocks. Since you have a greater amount invested in funds we shall make them the mainstay of your investment strategy.
Funds:You have invested in very good funds like HDFC Equity and Reliance Regular Savings Equity. But you have also taken on board below-average performers like Sundaram S.M.I.L.E. and untested funds like Principal Emerging Bluechip or Reliance Small Cap. Your selections are not all bad, neither are they all good. You can improve your portfolio by opting for time-tested funds and by allowing our ratings to be your guide.
We disapprove of the way you have accumulated so many funds in such a short time frame. More importantly, as you have yourself mentioned, most of these are one-time investments. You should have taken advantage of rupee-cost averaging by investing in your mutual fund portfolio via SIPs. The result of investing in lump sum is that so far you have earned almost no returns from this portfolio.
Stocks: Your stocks portfolio has given an absolute return of 15 per cent which is a decent gain. Considering that the market has tanked by 10 per cent since November 2010, this is not a bad start. As you might have realised yourself, Infosys is the mainstay of your stock portfolio. It comprises 29.08 per cent of your portfolio. Relying too much on a single stock increases downside risk. By the way, the funds you have chosen have also bet heavily on this stock.
Since the stock portfolio is meant to provide a kicker to your portfolio return, having a very small exposure to stocks does not make sense. In your portfolio you have got a few stocks that have very negligible impact on the overall portfolio. Try to consolidate your stocks portfolio: only hold onto stocks that you are highly convinced about and which have not underperformed the market for long.
Asset allocation: Your portfolio has a heavy tilt towards debt. The income and obligation profile that you have provided doesn’t require you to allocate such a large proportion of your investments in debt. Your cash holdings are adequate and will enable you to tide over small emergencies.
Pare your debt holdings like fixed deposits and debt funds and allocate more to equity funds. Currently the debt-equity ratio of your portfolio is 53:41. Re-orient your portfolio so that the allocation settles at around 73 per cent in equities and 20 per cent in debt. Try to maintain it at this level by rebalancing (either by selling equities and buying more debt or the other way round) periodically.
What advice would you give us for future investments — the monthly surplus of Rs40,000 as well as the lump sum Rs15 lakh we expect to bring back later this year and the fixed deposits maturing next year?
You have made balanced funds the mainstay of your fund portfolio. We think this is the right way to go. Currently they corner 27.31 per cent of the fund portfolio. The rest of the portfolio is dominated by Mid- & Small-cap funds (30 per cent) and Multi-cap funds (19.25 per cent). Our suggestion would be that you hike your balanced fund allocation to 60 per cent and keep the rest in Multi-cap funds.
As for the debt portion, invest in debt funds rather than in bank fixed deposits. They are much easier to manage than fixed deposits when it comes to rebalancing.
First, invest the amount that will come to you on maturity of fixed deposits and from 401K in a debt fund, then do a systematic transfer into equity funds.
You already have almost six months of your salary in cash. Increasing it further by allocating Rs15,000 every month would therefore be excessive. Rather divert this to your fund and stock portfolio.
Are we on track to achieve our goals?
Your current investment and the future SIPs that you plan to initiate are more than adequate for meeting the goals that you have set. Investment of Rs25,000 every month for the next 27 years at the rate of 10 per cent will give you a corpus of Rs5.6 crore (after paying for your son’s education), enough to see you through your years of retirement.
Portfolio Highlights
Skewed towards debt, equity:debt ratio = 41:53
Fund Portfolio
• Mid- & small-cap oriented exposure is 55.48 per cent
• Out of 15 funds, two are 2-star rated and four are unrated funds
• Mode of investment has been lump sum
• Fairly diversified MF portfolio, with the underlying stock portfolio diversified across 329 stocks
Stock Portfolio
• Dominance of one stock: Infosys
• Biased towards blue chip companies
• In as many as five stocks, exposure is less than 1 per cent
• Top five stocks corner 52 per cent of the portfolio
• Nine stocks in the portfolio have gained over 15 per cent, while 11 are in the red
Suggested Portfolio
BALANCED MULTI CAP MID & SMALL CAP
Birla Sun Life 95 DSPBR Equity Birla Sun Life Mid Cap
DSPBR Balanced HDFC Equity ICICI Prudential Discovery
HDFC Prudence Reliance Regular Savings Equity IDFC Premier Equity
UTI Dividend Yield
(source:http://www.valueresearchonline.com)
Our investment style has been rather haphazard so far. We would like to know what steps we need to take to rebalance our portfolio. Is our choice of mutual funds correct?
Your investment decisions appear haphazard both in the selection of funds and stocks. For the sake of simplicity we have compartmentalised your portfolio into funds and stocks. Since you have a greater amount invested in funds we shall make them the mainstay of your investment strategy.
Funds:You have invested in very good funds like HDFC Equity and Reliance Regular Savings Equity. But you have also taken on board below-average performers like Sundaram S.M.I.L.E. and untested funds like Principal Emerging Bluechip or Reliance Small Cap. Your selections are not all bad, neither are they all good. You can improve your portfolio by opting for time-tested funds and by allowing our ratings to be your guide.
We disapprove of the way you have accumulated so many funds in such a short time frame. More importantly, as you have yourself mentioned, most of these are one-time investments. You should have taken advantage of rupee-cost averaging by investing in your mutual fund portfolio via SIPs. The result of investing in lump sum is that so far you have earned almost no returns from this portfolio.
Stocks: Your stocks portfolio has given an absolute return of 15 per cent which is a decent gain. Considering that the market has tanked by 10 per cent since November 2010, this is not a bad start. As you might have realised yourself, Infosys is the mainstay of your stock portfolio. It comprises 29.08 per cent of your portfolio. Relying too much on a single stock increases downside risk. By the way, the funds you have chosen have also bet heavily on this stock.
Since the stock portfolio is meant to provide a kicker to your portfolio return, having a very small exposure to stocks does not make sense. In your portfolio you have got a few stocks that have very negligible impact on the overall portfolio. Try to consolidate your stocks portfolio: only hold onto stocks that you are highly convinced about and which have not underperformed the market for long.
Asset allocation: Your portfolio has a heavy tilt towards debt. The income and obligation profile that you have provided doesn’t require you to allocate such a large proportion of your investments in debt. Your cash holdings are adequate and will enable you to tide over small emergencies.
Pare your debt holdings like fixed deposits and debt funds and allocate more to equity funds. Currently the debt-equity ratio of your portfolio is 53:41. Re-orient your portfolio so that the allocation settles at around 73 per cent in equities and 20 per cent in debt. Try to maintain it at this level by rebalancing (either by selling equities and buying more debt or the other way round) periodically.
What advice would you give us for future investments — the monthly surplus of Rs40,000 as well as the lump sum Rs15 lakh we expect to bring back later this year and the fixed deposits maturing next year?
You have made balanced funds the mainstay of your fund portfolio. We think this is the right way to go. Currently they corner 27.31 per cent of the fund portfolio. The rest of the portfolio is dominated by Mid- & Small-cap funds (30 per cent) and Multi-cap funds (19.25 per cent). Our suggestion would be that you hike your balanced fund allocation to 60 per cent and keep the rest in Multi-cap funds.
As for the debt portion, invest in debt funds rather than in bank fixed deposits. They are much easier to manage than fixed deposits when it comes to rebalancing.
First, invest the amount that will come to you on maturity of fixed deposits and from 401K in a debt fund, then do a systematic transfer into equity funds.
You already have almost six months of your salary in cash. Increasing it further by allocating Rs15,000 every month would therefore be excessive. Rather divert this to your fund and stock portfolio.
Are we on track to achieve our goals?
Your current investment and the future SIPs that you plan to initiate are more than adequate for meeting the goals that you have set. Investment of Rs25,000 every month for the next 27 years at the rate of 10 per cent will give you a corpus of Rs5.6 crore (after paying for your son’s education), enough to see you through your years of retirement.
Portfolio Highlights
Skewed towards debt, equity:debt ratio = 41:53
Fund Portfolio
• Mid- & small-cap oriented exposure is 55.48 per cent
• Out of 15 funds, two are 2-star rated and four are unrated funds
• Mode of investment has been lump sum
• Fairly diversified MF portfolio, with the underlying stock portfolio diversified across 329 stocks
Stock Portfolio
• Dominance of one stock: Infosys
• Biased towards blue chip companies
• In as many as five stocks, exposure is less than 1 per cent
• Top five stocks corner 52 per cent of the portfolio
• Nine stocks in the portfolio have gained over 15 per cent, while 11 are in the red
Suggested Portfolio
BALANCED MULTI CAP MID & SMALL CAP
Birla Sun Life 95 DSPBR Equity Birla Sun Life Mid Cap
DSPBR Balanced HDFC Equity ICICI Prudential Discovery
HDFC Prudence Reliance Regular Savings Equity IDFC Premier Equity
UTI Dividend Yield
(source:http://www.valueresearchonline.com)
Building A Corpus
I am first time investor in mutual funds and want to invest regularly through SIPs to have Rs 20 lakh at the end of five years. Is it possible?— Madhu Maharana
Let’s work backwards - how much do you need to invest to have Rs 20 lakh at the end of five years? If your portfolio earns an annualised return of 12 per cent, you would need to invest Rs 24,300/month. If the returns are upped to 15 per cent, you would need Rs 22,400/month to reach your goal.
We suggest you invest Rs 10,000/month in two large cap funds (Equity: Large Cap), Rs 5,000/month in a multi-cap fund (Equity: Multi Cap) and the remaining amount in two balanced funds balanced funds (Hybrid: Equity).
If you go on our website, ValueResearchOnline.com, you will be able to see the best performers (5 star ratings) under each category. Make your selection and invest systematically. Keep checking the performance of the funds every six months.
(source:http://www.valueresearchonline.com)
Let’s work backwards - how much do you need to invest to have Rs 20 lakh at the end of five years? If your portfolio earns an annualised return of 12 per cent, you would need to invest Rs 24,300/month. If the returns are upped to 15 per cent, you would need Rs 22,400/month to reach your goal.
We suggest you invest Rs 10,000/month in two large cap funds (Equity: Large Cap), Rs 5,000/month in a multi-cap fund (Equity: Multi Cap) and the remaining amount in two balanced funds balanced funds (Hybrid: Equity).
If you go on our website, ValueResearchOnline.com, you will be able to see the best performers (5 star ratings) under each category. Make your selection and invest systematically. Keep checking the performance of the funds every six months.
(source:http://www.valueresearchonline.com)
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