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Chuck Underperformers

Replace funds that have not been faring well with ones that have a good performance history…

I have been investing in BSL Midcap, HDFC Equity, HDFC Top 200, Reliance Growth and Reliance Vision, since August 2010. I can continue investing in these funds for a maximum of three years. Are these good funds that I can continue investing in or make changes? I also want to add another fund, Reliance Gold Savings to diversify the portfolio, kindly advice.
- Ashu Tiwari

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BSL Mid Cap Mid & Small Cap **** 8.61 11.4
HDFC Equity Multi Cap ***** 17.45 15.95
HDFC Top 200 Large & Mid Cap ***** 14.68 15.63
Reliance Growth Mid & Small Cap **** 8.12 12.27
Reliance Vision Large & Mid Cap *** 7.91 9.73
Returns as on May 13, 2011 Ratings as on April 30, 2011

You have selected good funds in your portfolio that offers you diversity in both style and number. The only fund that you should consider exiting is Reliance Vision, which has been not been faring well, instead you can go for BSL Frontline Equity or Fidelity Equity. Both are funds in the large- and mid-cap category with a proven track record and performance history. You can continue investing in the other funds, but remember to track the performance of your funds at least once a year to initiate any changes in their holdings.

As for investing in Reliance Gold Savings Fund, it is a good idea to diversify your holdings as long as your allocation to this fund is not more than five per cent of your total investments. However, you should be aware that this is a passively managed fund of fund that invests in the open-ended Reliance Gold Exchange Traded Fund, which in turn invests in physical gold with 99.5 per cent purity. Moreover, this fund comes with a rider: while the Reliance Gold ETF has no load, this fund has an exit load of 2 per cent in the first year. But the bigger problem is the recurring expense that adds up to 1.5 per cent; 1 per cent in Reliance Gold ETF and 0.5 per cent in Reliance Gold Savings Fund that you should be cautious of. This is the cost of convenience that one will pay when investing in this fund instead of paying annual maintenance charges for a demat account, delivery brokerages charges, transaction charges incurred for investing through the dematerialized mode.

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