I have started investing Rs 1,000 each in HDFC Top 200 and Reliance Regular Savings - Equity Option, what is your view on my fund selection? I can also afford to invest an additional Rs 2,000 every month. Where should I invest?
— Sunil Taneja
Your selection of funds is good. And by investing through SIPs, you are building an opportunity to create long-term wealth. However, you should invest with a financial goal or plan in mind. This will help you track the performance of your investments and measure its performance against its peers and the benchmark for you to make any change in your holding to these funds. For instance you can set goals for building a corpus for your retirement or for the down payment of a house. This will also help you in building your mutual fund portfolio better with the right mix of fund categories. When investing for the long-term , the portfolio should look at a 70-80 % allocation to large-cap and large- and mid-cap funds to form the core of your portfolio which brings in stability. The balance should be invested in mid- and small-cap and multi-cap funds which are relatively risky and also offer the necessary boost for the overall higher portfolio returns. Do understand the risks associated with various fund categories before investing in them. You can consider investing the additional Rs 2,000 in large-cap funds such as Franklin India Bluechip, IDFC Imperial Equity Plan A or ICICI Prudential Growth. All of these are 5-star rated with a long and proven performance history. And, do make it a point to track the performance of your investment at least once a year and make any necessary course correction.
This article was originally published on January 20, 2011.
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