The Core & Satellite Approach | Value Research Use this approach to get stability as well as growth in your portfolio
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The Core & Satellite Approach

Use this approach to get stability as well as growth in your portfolio

I have invested in the funds mentioned below and would further like to invest Rs 10,000 per month through SIPs as well as a lump sum amount of Rs 2.5 lakh. Please suggest the funds to invest in. I want to continue SIPs for the next 20 years
- Atul Agrawal

You have selected good funds. However, there are a few issues with your portfolio. The portfolio lacks diversification; there are three multi-cap funds and there are two funds each from the same AMC. What you need is a diversification in style and not number. Build a portfolio that is based on a core and satellite approach. This approach will provide the necessary stability and growth for long-term wealth creation. Ideally, you should look at investing 70-80 per cent in core funds and the remaining in satellite funds.

You can have 2-3 funds as core holdings comprising large-cap and large- and mid-cap funds, with the satellite component with sector funds and multi-cap funds to achieve long-term wealth appreciation. This way, the investments have the ability to absorb shocks as well as have the potential to earn higher returns over various market cycles.

You should also consider investing regularly and not in lump sum, park the Rs 2.5 lakh in a liquid fund and initiate SIPs in to a large-cap fund such as DSP BlackRock Top 100 Equity or IDFC Imperial Equity Plan A and start regular SIPs in existing funds such as HDFC Top 200 and ICICI Prudential Dynamic fund.

Schemes  Category  Rating  3-yrs Ret (%)  5-yrs Ret (%)
HDFC Equity Multi Cap **** 13.38 18.43
HDFC Top 200 Large & Mid Cap ***** 11.67 18.52
ICICI Prudential Dynamic Multi Cap **** 10.5 18.36
Reliance Growth Mid & Small Cap **** 5.55 16.58
Reliance Regular Savings Equity Multi Cap **** 5.38 23.48
Returns as on February 22, 2011 Ratings as on January 31, 2011

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