I am 38 and started investing in mutual fund SIPs in February 2011 for the long term of ten year tenure and more. My investments are Rs 2,000 in DSPBR Top 100 Equity Reg, HDFC Top 200 and IDFC Premier Equity Plan A; Rs 1,500 in Fidelity Equity and IDFC SSI Medium-term Plan A and Rs 1,000 in HDFC Equity. My goal is to have greater than Rs 10 lakh after ten years for my child's education and more than Rs 30 lakh for my pension after 20 years. Currently, my investments are down 9.79%, which is lesser than the market which is down by 12-15%. I have divided the equity to debt funds in 85:15 ratio. Is my portfolio selection correct given the current market situation? Do I need to change any funds that I have selected or my allocation? Do I need to increase the monthly investment to meet my goals?
Om Prakash
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Your portfolio of six funds has a combined equity allocation of 85 per cent which is an aggressive allocation. The portfolio is well diversified and has investments in 112 stocks depicting a large-cap blended character. The top five sectors account for over 50 per cent allocation in Technology, FMCG, Financial, Energy and Healthcare. The top five stock allocations add up to about 18 per cent allocation made from Reliance Industries, Infosys, ICICI Bank, HUL and SBI.
Your assessment on your portfolio being down 9.79 per cent, which is less than the hit the markets have taken, should only bolster your belief in SIP investments. At the same time you should realise that SIP investing does not always assure positive returns, there will be phases when the SIP returns will be negative. However, what you gain from SIP investing is a regular and disciplined investing habit does not depend on timing the markets, which in the long run benefits from the power of equity as well as riding over different market cycles.
Asset allocation is not a one-time exercise; you need to maintain the asset allocation that suits your risk tolerance and comfort. It is for this reason that we emphasise the need to review your investments once a year so that you can assess the progress made by your investments to effect any change in funds if necessary and also make use of the opportunity to rebalance your portfolio. Given the dip in your portfolio returns you will need to increase your equity investments to maintain the asset allocation of 85:15 in equity and debt.
This article was originally published on January 17, 2012.
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