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Understanding Diversification

Having a major part of your investments in the same kind of funds does not lead to diversification….

I am investing Rs 2,000 every month by SIP in HDFC Top 200 and Rs 1,000 in HDFC Growth, BSL Midcap, Reliance Equity Opportunities and Reliance Regular Savings Equity Fund. Kindly suggest if I should continue my investments or make any changes to my portfolio? My investment time horizon is 5 years. How much can I accumulate in five years with these investments?- Ranjeev

Fund Scheme  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BSL Mid Cap Mid & Small Cap *** 12.97 14.22
HDFC Growth Multi Cap **** 10.51 14.76
HDFC Top 200 Large & Mid Cap ***** 14.4 15.61
Reliance Equity Opportunities Multi Cap ***** 18.32 14.33
Reliance Regular Savings Equity Multi Cap **** 10.57 16.85
Return as on August 17, 2011, Rating as on July, 2011
A portfolio of five funds with three multi cap funds does not offer diversification. You should consolidate your multi cap holdings to one or at best two funds, and exit BSL Mid Cap and invest in IDFC Premier Equity or BSL Dividend Yield instead which are better performing mid- and small-cap funds. You should also be aware that with 66 per cent allocation to non-core funds your portfolio is risky and should be monitored frequently. The lesson for you from this investment is to track the performance of your investments regularly and assess its progress towards your financial goal.



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