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Quality Over Quantity

Select a few good performers instead of packing your portfolio with too many funds…

I am 26 and earn Rs55,000 per month. I started investing very recently and have investments in 9 funds and the NPS. I do not have any other investments and I am strictly going to stick to this for at least one year. I am single and can take some risks with my investments at this stage. Is this the right approach?
- Sreenath

Existing Portfolio
Schemes  Category  Rating  3-yrs ret (%)
HDFC Prudence Hybrid: Equity-oriented ***** 17.32
Reliance MIP Hybrid: Debt Oriented Conservative ***** 14.65
HDFC Top 200 Large & Mid Cap ***** 14.24
IDFC Premier Equity Mid & Small Cap ***** 14.20
UTI Opportunities Large & Mid Cap **** 13.71
HDFC MIP Long Term Hybrid: Debt Oriented Conservative ***** 12.02
Sundaram Select Midcap Mid & Small Cap **** 11.90
Franklin India Bluechip Large Cap ***** 11.08
Reliance Reg Savings Equity Multi Cap **** 9.57
Returns as on May 12, 2011 Ratings as on April 30, 2011

You have made a good start by investing in mutual funds through SIPs. However, in your hurry you have made investments in a number of funds without a plan. Packing your portfolio with nine funds does not mean it is well diversified. What you need is a mix of style and investment themes to build a robust portfolio. You should look at investing with an objective and work towards it.

Age is on your side and at this stage you can take the risk which you are willing to take and consider a portfolio that is 90 per cent into equities; which means your selection of a balanced fund (HDFC Prudence) does not find place in the portfolio. Also, why do you need to invest in monthly income plans (MIPs)? Continue your investment in the NPS, as it is a good long-term tax planning option, especially once the Direct Tax Code (DTC) kicks in from next year. We have suggested an alternate portfolio. One that will offer superior diversification and is more aggressively tilted. But make sure you do invest regularly in these funds and also track its performance periodically.

Value Research: Aggressive Portfolio
Schemes  Category  Rating  3-yrs ret (%)  Suggested Allocation
Fidelity Equity Large & Mid Cap **** 11.03 25
HDFC Equity Multi Cap ***** 17.03 25
DSPBR Micro Cap Mid & Small Cap **** 10.47 15
IDFC Premier Equity Mid & Small Cap ***** 14.20 15
BSL Dynamic Bond Debt: Income **** 8.67 10
AIG World Gold International Not Rated NA 10
Returns as on May 12, 2011 Ratings as on April 30, 2011

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