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Saving Taxes

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I have SIP investments for Rs 1,000 each in Fidelity Tax Advantage, SBI Magnum Taxgain and HDFC Taxsaver. These investments were not done for tax saving alone and I can hold these funds for a longer duration. I have also have SIP investments in HDFC Top 200 and Birla Sunlife Frontline equity for 3 years. Is my portfolio balanced? Please suggest funds with a 5 to 10 years horizon
- John Francis

Investing through SIPs in mutual funds is a good way to have equity exposure. Though you have made the start, there are issues in your portfolio holdings. First, if tax savings was not the objective, you should not have invested in them. Your investments would have earned far better returns in large-cap or multi-cap funds instead of tax saving funds, considering your long-term wealth creation objective. Next, having too many funds invested in the same category of funds does not help. Having three tax saving funds instead or one has its perils as you can see in the way they have fared over the past three years. If you can hold these for some time, do so.

To build a fund portfolio over a 5-10 year time horizon, have a 70:30 allocation towards large- and mid-cap funds and large cap funds. This way you will have funds that are stable and also those that can give you the necessary push to the combined portfolio returns. Last, review your fund performance at least once a year. If there are laggards in the holdings, time for you to sell them and invest in better performing funds.



Scheme  VR Rating  3-year return (%)
Fidelity Tax Advantage * * * * * 10.39
SBI Magnum Taxgain * * * 2.01
HDFC Taxsaver * * * * 8.86
HDFC Top 200 * * * * * 13.01
BSL Frontline Equity * * * * * 9.29


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