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Core portfolio

Funds with lower downside risk should make the core of your portfolio

Is there any guideline as to what should comprise a typical CORE portfolio? What is growth and value style of investing?
- Saibal Das

Funds that form the core of a portfolio should be those that don't come crashing down in turbulent times. In fact, they should provide support and stability to the overall portfolio. Another important element is that such funds should be more of buy-and-hold investments, not ones that you have to constantly monitor.

For a growth portfolio, a few large-cap tilted, diversified equity funds (including tax saving funds) can form the core. If it is an income portfolio in question, then a traditional fixed deposit or maybe a monthly income plan (MIP) which doles out dividends at regular intervals (though not guaranteed) can form the core.

Within this universe, we recommend funds that have consistently impressed over the years, not sporadic and volatile performers.

A value investor will look for undervalued stocks that are available at attractive prices in relation to their price/earnings ratio (PE), price/book ratio (PB) or even current/future dividend. Fidelity India Value and ICICI Prudential Discovery are two prime examples of value investing. A growth investor will not look for undervalued stocks. He will go for stocks with strong earnings growth or revenue growth potential. Even if the stock is not cheap, unlike the case of a value investor, a growth investor will pick the stock on its growth potential. While growth stocks have superior earnings growth prospects, they are more volatile and have less downside protection. India being touted as a 'growth story', most funds are growth oriented, though it will not be unusual to find a mix of both investment styles in portfolios.



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