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Problem of Inconsistency

For long-term wealth creation, you need a portfolio that is active

I am 43 and have investments in stocks and funds, details of which I am sharing with you. I also have Rs 5 lakh in bank deposits, investments of Rs 60,000 in Ulips. I have no outstanding loans, live in my own house. My wife is working and her investments are not clubbed with mine. We have a son who is 15. I want to know if my portfolio is good and what should I do with it? I plan to work till I retire which is another 17 years to go.
Rathnesh Rao

There are no short cuts in life. Successful investing results from careful analysis and hard work; there is no simple solution. Though you do not come across as risk averse investor, your investment pattern reflects someone who is inconsistent. You have investments in most of the financial assets. Your portfolio would have been a lot better than the 13.5 per cent annualised returns that it has managed over the years, if you were active with your investments and tracked it. You definitely need to beef up your life and health insurance needs in adequate measure to meet your requirements.

Jump Start
You need to realise the opportunity loss that you have faced in not being part of the two stock market rallies in the past decade despite investments through the decade. It's not too late for you to bring discipline into your investments. The lesson for you is that investing works well if it is systematic and regular and not a one-time exercise. You do have enough investible surplus that instead of resting in the bank could be invested in a systematic investment plan that would take advantage of the market cycles and help in creating a good wealth corpus for you over the long term.

Portfolio View
Collectively your portfolio comprises of 198 stocks that is well diversified but heavy on the energy sector. You do not have a planned portfolio comprising of core funds, especially large-cap funds and blue chip stocks, which give the necessary stability and stability to your portfolio whatever direction the market takes. The IPO investments work well if there is long-term value in the investments, else it is meant to be exited on listing. You have missed this opportunity to profit. Likewise NFOs in your portfolio work well if they meet the needs that are missing otherwise.

You should definitely move out of funds that are not performing such as AIG Infra and Franklin Infotech. You should try creating a core portfolio holding with large-cap funds such as DSPBR Top 100, which you have and consolidate it with better rated large- and mid-cap funds such as HDFC Top 200or Birla Sun Life Frontline Equity Plan A. And build a satellite portfolio comprising mid-and small-cap funds such as Birla Sun Life Dividend Yield Plus or DSPBR Micro Cap and other sector funds with compelling reasons.

Your stock portfolio has some good stocks, but it also has some real bad ones. It is time you think of exiting Tanla Solution, Sobha Developers and DLF. The loss that you have had in these investments should be a lesson to be active with investments and have an objective with which an investment is made. And do take stock with your Ulips, if they are faring poorly and are done with the lock-in period if any, you should consider exiting them as well. And for better realisation of bank deposits, it may be a good idea if you park them in liquid funds, which are not only tax efficient but better performers in comparison to band deposit returns. Finally, have a financial goal, invest regularly towards it, track investment performance and review it at least once a year.

Cover the Base
You have insurance in the form of Ulips which are a mix of insurance cover and investments and do not do enough justice to your protection needs. Though you do not have any dependents other than your son, who can be financially taken care of if something happens to you by your wife's income, we still suggest you take a term life cover. This is the cheapest form of insurance that covers against death. A good starting point will be to take a cover that is ten times your annual expenses. This way, in case of any eventuality, your dependents will get the money that should take care of ten years of their financial expenses.

Health Check
We suggest you take a health insurance plan for yourself and include your wife and son in it. Take a Rs 3 lakh cover which can be scaled up when you turn 45. Family floater plans are good to have, especially at your age when medical conditions start knocking suddenly.

Fund/Stock  Initial Investment (Rs)  Current Market Value (Rs)  Total Annualised Returns (%)  Star Rating/Index constituent
AIG Infra and Eco Reform Reg-G  25,000   24,285.00  -1.01 Not Rated
DSPBR Top 100 Eqt Reg-G  40,000   92,705.11  21.51 *****
Franklin Infotech-G  10,000   8,075.37  -1.94 Not Rated
HDFC Top 200-G  45,000   112,971.92  23.78 *****
IDFC Small & Midcap Equity-G  30,000   59,059.50  27.28 Not Rated
ING Domestic Opp-G  10,000   12,365.36  8.37 **
Magnum Contra-G  15,000   88,004.50  31.38 ***
Reliance Natural Resources Retail-G  30,000   32,575.50  2.88 Not Rated
Taurus Tax Shield-G  35,000   94,570.87  25.9 ****
Fund Portfolio Total (Rs)  240,000.00 524613.13 19.1 
Coal India  46,765   63,680.00  16670.43 NA
DLF  26,250   15,740.00  -14.02 Sensex
Ranbaxy Laboratories  39,000   57,035.00  8.25 BSE 100
Reliance Industries  154,000   348,215.00  16.62 Sensex
Sobha Developers  100,000   30,485.00  -26.88 BSE 500
Tanla Solutions  2,800   2,335.00  -15.03 BSE 500
Stock Portfolio Total (Rs)  368,815.00 517490 8.57 
Portfolio Total (Rs)  608,815.00  1,042,103.13  13.49