Large-Cap Provides Stability

Adopt an approach where a major part of your portfolio is invested in diversified large-cap funds…


I have invested in SBI Magnum Contra, ICICI Prudential Infrastructure, DSPBR T.I.G.E.R, Magnum Global, Magnum Multiplier Plus and Kotak Opportunities Fund. However over a period of time they have been underperforming. I have stopped my SIPs in these funds. My dilemma is whether to completely withdraw from these funds or wait and watch without further investments?
- P J Rao

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
DSPBR T.I.G.E.R Infrastructure *** 2.77 11.96
ICICI Prudential Infrastructure Infrastructure *** 2.67 15.73
Kotak Opportunities Multi Cap *** 5.15 13.73
Magnum Contra Multi Cap ** 6.01 12.81
Magnum Global Mid & Small Cap *** 7.92 10.26
Magnum Multiplier Plus Multi Cap *** 8.70 13.38
Returns as on June 3, 2011 Ratings as on May 31, 2011

Your portfolio of six funds lacks focus and has over laps You have three multi cap funds, two infrastructure fund and a mid- and small-cap funds. Collectively these are all risky and hence the swing in their performance. The infrastructure theme is not playing out as well as expected and reflects in the performance of the funds. On the other hand multi cap funds, unlike large-, mid- or small-cap funds that are subject to restrictions regarding where they can invest, face no limitations regarding the market capitalisation of stocks they can invest in. Their mandate is to buy stocks across the entire market-cap spectrum in order to generate alpha. This also brings in the need for deft fund management which adds to the risk.

You should adopt a core and satellite principle when building a fund portfolio wherein the core is made of large- and large- and mid-cap funds accounting for 70-80 per cent of your investments with the remaining made of satellite funds such as mid- and small-cap, multi cap and sector funds besides gold. This way your portfolio will have stability that the core holdings provide and ability to earn higher returns from the satellite holdings, which are risky compared to the core funds. Your dilemma is understandable and it will be better if you can get rid of these funds and build a fresh portfolio. You will cut your costs and also gain from better opportunities.



comments powered by Disqus
  • Lamp turned off
Home | My Portfolio | Tax | Funds | Insurance | Income | Learn | Invest Correctly | Archive | Ask | Subscribe | About Us | Log In | Free Sign Up