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I have one financial goal: To achieve the magical figure of Rs 1 crore as soon as possible. So I would appreciate you taking a look at my portfolio and advising me of steps to take to get there. Here's a look at my SIPs which amount to Rs 51,000 every month: Reliance Banking Fund (Rs 25,000), Reliance Media & Entertainment Fund (Rs 5,000), Reliance Diversified Power Fund (Rs 5,000), HDFC Equity (Rs 5,000), Reliance Vision (Rs 5,000), Franklin Opportunities Fund (Rs 5,000) and UTI Infrastructure Fund (Rs 1,000).
-Robin D'souza
If we assume a consistent annual return of 20 per cent from this portfolio, your investments would be worth Rs 1 crore in around eight years. It appears that you are expecting to reach your goal much earlier. And you probably feel so given that the sectors you are bullish on have a lot of momentum. But we have not assumed a higher return because your portfolio is an extremely risky one. It has four sectoral funds, a large concentration of investment in just one fund house and more than half of your monthly SIPs in one single scheme. Your portfolio is largely dependent on the performance of the banking sector and how Reliance Banking plays the theme. No matter how bullish you are on a sector, it is not prudent to channelise that huge an investment into it.
While you are rightly following the SIP route by regularly investing, your portfolio lacks diversification. In our view, well performing diversified equity funds from different fund houses should be the core of a long-term portfolio and sector and thematic funds should play a supplementary role. Following this strategy, you will be better placed to navigate through declines in a sector. A good diversified equity fund will also ensure participation in a performing sector and stocks without your active involvement.
Our suggestion: Allocate more money to funds like Reliance Vision, HDFC Equity, Franklin Opportunities and UTI Infrastructure and lower the allocation to sector funds like Reliance Banking, Reliance Media & Entertainment and Reliance Diversified Power.
This article was originally published on March 07, 2008.
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