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Reduce Mid, Small-cap Exposure

For a 53-year-old, 37% of the portfolio in mid- and small-cap funds is too high

The funds mentioned below are held by my mother who is 53 years old. She has been investing Rs 5,000 every month since December 2009. Now she wants to make an additional investment of Rs 2,000 via SIP. She plans to stay invested for around seven years. Should she consider IDFC Premier Equity for this new investment? Please suggest.


Current portfolio of funds
Scheme  Investment/month
DSP Blackrock Top 100 Equity Rs 1,000
HDFC Top 200  Rs 1,000
Reliance Growth  Rs 1,000
Sundaram Sel Midcap Reg Rs 1,000
Reliance Diversified Power Sec Retail Rs 1,000
Anirudh Bakshi

Your mother currently invests Rs 1,000 each in five funds. Her fund selection is good but she holds too many funds. Ask her to invest in just three funds instead of five.

If we take an overall view of her portfolio, equity allocation is around 94 per cent; the balance is in debt and cash. While her portfolio has a mid- and small-cap exposure of around 36.95 per cent, which is slightly on the higher side, the large-cap tilt is quite low at 55 per cent at present. If she invests in another mid- and small-cap fund such as IDFC Premier Equity, her mid- and small-cap exposure will rise even higher.



Funds she should invest in
Schemes   Category  Fund Rating  3-year return(%)  5-year return(%)  Suggested investment (Rs)
DSPBR Top 100 Equity  Large-cap ***** 13.55 25.01 3,000
HDFC Top 200 Large- and Mid-cap ***** 18.05 26.64 3,000
Reliance Growth Mid- and Small-cap **** 14.81 24.29 1000(either of the two Funds)
Sundaram Select Midcap Mid- and Small-cap **** 14.43 25.89 
Return and rating as on September 30, 2010

To increase her large-cap exposure, keep only one of the two mid- and small-cap funds in her portfolio. Exit Reliance Diversified Power Sector Retail. It is a sector-specific fund and such funds tend to be volatile. Here is the manner in which her investments should be split among three funds.



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