Go Long With SIPs | Value Research Monthly investments in mutual funds is the right way to long-term wealth creation…
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Monthly investments in mutual funds is the right way to long-term wealth creation…

I am a student and with my part time job I am able to save Rs 8,000 every month. I want to invest this sum for the next three years and am considering investing in HDFC Equity, HDFC Prudence and Reliance Banking fund. Is this a good choice for me?
- Chetan

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
HDFC Equity Multi Cap ***** 18.42 17.02
HDFC Prudence Hybrid: Equity-oriented ***** 18.13 17.73
Reliance Banking Ret Banking Sector Not Rated 25.6 28.72
Returns as on April 21, 2011 Ratings as on March 31, 2011

It’s encouraging to note that you wish to make the most of your part time income and invest it to maximise your returns. Your idea of monthly investments in mutual funds is the right approach to wealth creation. You have also selected really good funds; however, the issue arises when one views the three funds collectively. For instance, your selection of two funds with higher risk such as HDFC Equity a multi-cap fund and Reliance Banking, a banking sector fund does not go with the selection of HDFC Prudence, a balanced fund.

In the three years that you are looking to invest for; you should ideally have a very strong portfolio of a few funds that have exposure to large-cap and large- and mid-cap funds. You should consider investing in large-cap funds such as DSPBR Top 100 Equity or Franklin India Bluechip and large- and mid-cap funds such as BSL Frontline Equity or HDFC Top 200. Make sure that you invest regularly and track the performance of your funds to make any course correction.

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