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Core & Satellite

Adopt the core & satellite approach to investing to build a portfolio for long-term growth…

I am 31 and am currently investing in DSPBR Equity, Fidelity India Growth, HDFC Equity, IDFC Premier Equity, Reliance Equity Opportunities, Canara Robeco F.O.R.C.E. and Reliance Pharma through SIPs. These investments have been on for the past 20 months and are for my retirement and my child’s future education. Will this achieve my goals?
- Sriram Padmanabhan

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
Canara Robeco F.O.R.C.E. Equity: Others Not Rated NA NA
DSPBR Equity Multi Cap **** 14.04 18.82
Fidelity India Growth Large & Mid Cap ***** 15.31 NA
HDFC Equity Multi Cap ***** 21.00 19.05
IDFC Premier Equity  Mid & Small Cap ***** 17.64 25.57
Reliance Equity Opportunities Multi Cap **** 20.67 16.49
Reliance Pharma Equity: Pharma Not Rated 35.19 28.26
Returns as on June 23, 2011 Ratings as on May 31, 2011

You have selected some good funds to construct your investment portfolio. However, there are a few issues with it; for instance it has three multi cap funds which only duplicates the idea and does not result in the much needed portfolio diversification. What you need is a diversification in style and not numbers through seven funds. Your portfolio is high on risk currently with the multi cap, mid and small cap, sector and a thematic fund.

While this is not a bad idea; in the long run it works well if you have a portfolio which 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 have the satellite component taken care with the sector, thematic and mid and small cap funds; what you need is to beef up the core holdings. Consider reducing your multi cap holdings and instead add a large-cap fund such as DSPBR Top 100 Equity or Franklin India Bluechip.

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