I'm a retired engineer. During the past three-and-a-half years I have been reshuffling my portfolio on the basis of media reports and one-year returns of the schemes. My portfolio is valued at around Rs 1.9 crore. I'm apprehensive of the high weightage (55 per cent) of schemes from HDFC Mutual Fund in my portfolio. For this purpose I was looking at redeeming units of HDFC Top 200 and instead looking at Fidelity India Special Situations Fund, ICICI Prudential Dynamic and Infrastructure. Kindly review my portfolio. I have a long-term outlook and I am not worried about ups and downs in the stock market.
- I P Gupta
We normally advise our readers to keep their holdings limited to a small number of schemes. In your case we have suggested a rationalisation of small holdings. Even if these funds perform extraordinarily, the effect on your overall portfolio returns will be minimal. Your portfolio of 20 funds has been trimmed to 15 funds by dropping six funds and adding one new fund. The one new fund suggested by us is a balanced fund. This has been done to reduce your overall exposure to equity instruments. You can choose such a fund from Mutual Fund Insight's April 2007 issue where we carried a detailed review of the hybrid equity-oriented category as well as an analysis on four schemes.
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We noticed multiple funds with a similar investment objective. While it is wise to have a flavour of different investment styles, too many funds doing the same thing doesn't make sense.
You could pool all your Franklin Templeton holdings (apart from Templeton India Equity Income fund) in either Franklin India Prima Plus or Franklin India Flexi Cap. The mid- and small-cap holdings can also be pooled under Reliance Growth fund.
Owing to the lock in period of ELSS funds we cannot alter their allocation but as and when these funds are redeemable, you should consolidate them under one head.
Your skepticism of being overweight on HDFC Mutual Fund is understandable. But you are invested in the best funds of the asset management company. Instead of redeeming funds, you can reduce the exposure to the asset management company by restricting future investments in the fund house. Since none of the on-going SIPs are in HDFC funds, the proportion of HDFC funds will automatically come down.
Restructure SIP
A Rs 50,000 investment in Fidelity India Special Situation Fund is too high. Of this Rs 50,000 you can transfer Rs 25,000 to Franklin India Prima Plus and build your position slowly in this fund. Another Rs 25,000 SIP ought to be instituted in a balance fund.
We have further reallocated the SIP inflow into DSPML T.I.G.E.R fund to Magnum Contra.
Reshuffling
A constant check on your portfolio is definitely recommended.
However, we would not advise you to reshuffle your portfolio too often. Your policy of dropping funds based on the annualised return produced by them is flawed. One-year period is not enough to pass a judgment on an equity fund. You should look at longer-term performance history. For instance, you could have invested in a 5-Star rated fund such as Magnum Contra at a time when the Sensex was at 14,000 levels and discovered that the fund returned a loss in your portfolio at a time when the Sensex was at 12,500 levels. This doesn't mean that the fund has performed poorly and that you need to exit it. It instead means that you need to ride out this slump by staying invested for a longer period.
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This article was originally published on July 11, 2007.
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