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Re-orient To Benefit

Re-orient your portfolio to achieve the necessary diversification & earn from the power of compounding…

I am 32 and started investing in SIPs about two years in HDFC Equity, HDFC Growth, DSPBR Top 100, Quantum Long Term Equity, HDFC Index Sensex Plus and Reliance Regular Savings Equity Fund. My SIP in DSPBR Top 100 and Quantum Long Term Equity is ending next month. Please advise whether to continue investing in the above funds itself and renew both SIPs or should I go for a mid cap fund like ICICI Prudential Discovery fund?- Abhi Agarwal

Fund Scheme  Category  Rating   3-yrs ret (%)  5- yrs ret (%)
DSPBR Top 100 Equity Large Cap ***** 16.11 18.78
HDFC Equity Multi Cap ***** 25.1 20.33
HDFC Growth Multi Cap **** 17.21 19.92
HDFC Index Sensex Plus Large Cap **** 15.9 15.73
Quantum Long Term Equity Multi Cap ***** 22.29 18.14
Reliance Regular Savings Equity Multi Cap **** 18 23.04
Return as on July 20, 2011,Rating as on June, 2011

You have selected good funds to form a portfolio of six funds. However, the issue with your portfolio is lack of diversification in style. You have four multi cap funds and two large-cap funds which is diversification in numbers and not in style which is desired for long-term wealth creation. You should re-orient your investments by adopting a core and satellite approach through which you can achieve diversification and also benefit from the power of compounding that SIP investments offer over the long-term. Moreover, this approach also de-risks your portfolio.
The core should comprise of 70-80 per cent of your investments in large- and large- and mid-cap funds and the remaining in satellite funds which can be made of multi-cap funds, mid- and small cap funds besides sector and thematic funds. Once you have formed a portfolio based on this approach, make sure you review and evaluate the performance of your fund holdings at least once a year to check its progress and make any changes to the holdings if necessary.

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