VR Logo

Fund Selection & Consolidation

Mr. Abdul has just started investing in mutual funds. He asks us to review his portfolio & give guidance

I am new to mutual funds investments. I consulted various people about mutual funds to get an idea about different types of funds. Finally I have come up with a list funds for long term SIP investments. I have started monthly SIPs in following funds from February 2008 onwards for one year. I have divided my investments in Magnum Contra (Rs. 25,000), Sundaram Select MidCap (Rs 25,000), Reliance Equity Advantage - as NAV is low (Rs 25,000), Birla Infrastructure (Rs 25,000), Kotak Balance (Rs 10,000) DSP ML India TIGER (Rs 10,000) and Fidelity India Growth (Rs 5,000). I request you to have a look at my portfolio and let me know whether this is a wise-investment portfolio or not.

You have designed a good portfolio but there are some things you should work on. First, never judge a fund on the basis of its NAV. Have a look at the historic performance of the fund, how it did in the bear and the bull phase, and then invest in it. NAV of the fund is irrelevant while selecting the fund as it is the percentage gain or loss that matters. Coming to your funds, Reliance Equity Advantage and Fidelity India Growth can make way for better diversified and rated equity funds like Reliance Vision, HDFC Equity or Birla Frontline Equity. Both of these are new funds with an average performance history and can be substituted with better picks. Your portfolio consists of two mid cap funds (Reliance Growth and Sundaram Select Midcap) and two infrastructure funds (DSP ML Tiger and Birla Infrastrucuture). This makes the portfolio high on risk. If you are a risk averse investor, avoid investing in these sectoral funds.

Lastly, keep a check on the fund count. You have 7 funds in your portfolio for Rs. 1.25 lakh per month. After consolidation 5 funds should be sufficient for a SIP of Rs 1.25 lakh.

Post Your Query