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Building A Retirement Corpus

The inclusion of debt & hybrid funds does not make sense in a portfolio to build a retirement corpus…

I am 30 years old and investing in Canara Robeco Income, HDFC Equity, HDFC Top 200, BSL Dividend Yield Plus, HDFC Prudence and starting investment in Benchmark Gold ETF. The total SIP investment is Rs 11,000. Is this a good portfolio for retirement? I also have units in Kotak Indo World Infrastructure which was bought in the NFO in 2007 and currently at a 30 per cent loss. Should I redeem units in this fund?
- Poonam Singhal

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
Benchmark Gold ETF Gold Fund Not Rated 18.14 NA
BSL Dividend Yield Plus Mid & Small Cap **** 28.41 19.31
Canara Robeco Income Debt: Income **** 12.95 10.4
HDFC Equity Multi Cap ***** 25.24 19.83
HDFC Prudence Hybrid: Equity-oriented ***** 24.45 19.51
HDFC Top 200 Large & Mid Cap ***** 22.5 19.84
Returns as on June 30, 2011 Ratings as on May 31, 2011

You have selected good funds. However, there are a few issues with your portfolio. The portfolio lacks focus to build a retirement corpus with the mix of funds it has. Having six funds offers diversity in numbers, not in style. You have age on your side with another 25-30 years to go for retirement; the inclusion of income funds and equity-oriented hybrid funds do not provide the necessary equity exposure and fillip to returns that will help you build a corpus. Likewise, including a gold ETF helps when the portfolio is already well diversified, which is not the case currently.

You need to 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. Select funds such as DSPBR Top 100 Equity or Franklin India Bluechip as large-cap funds and HDFC Top 200 or Fidelity India Growth as large- and mid-cap fund to form the core. All these are funds that have a proven track record and performance history.

Have multi-cap funds, mid- and small-cap fund and sector funds to form the satellite. This way, the investments have the ability to absorb shocks as well as have the potential to earn higher returns over various market cycles. Make sure you invest regularly and assess the performance of your funds at least once a year to track its progress towards your retirement planning goal.

As for your investments in Kotak Indo World Infrastructure, the fund invests in stocks of domestic as well as global infrastructure companies. With the infrastructure theme not doing well, the fund’s performance is impacted. The lesson for you from this investment is the risks involved with a new fund offer; you should invest in these only if the offer has a unique idea which is compelling or missing from your overall portfolio. You should cut your losses in this fund and exit.





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