Do Away with Overlaps | Value Research Exit a fund that has an overlap with another fund in your portfolio. Find out more…
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Do Away with Overlaps

Exit a fund that has an overlap with another fund in your portfolio. Find out more…

My SIP porfolio is made of Rs 2,000 investment each in HDFC Equity, HDFC Top 200, IDFC Premier Equity, ICICI Prudential Focussed Bluechip and Reliance Regular Savings Equity, Birla Sunlife Frontline Equity and Reliance Banking Fund. Should I continue investing in these funds?
-Suril Patel

Your investment portfolio of seven funds is well diversified with 93 per cent equity exposure and a large-cap growth orientation in 130 stocks. The top three sectors include Financials, Technology and Energy adding up to 51 per cent exposure and the top 5 stocks such as ICICI Bank, SBI, Infosys, ITC and HDFC Bank accounting for 23.5 per cent allocation. However, there is no need for HDFC Top 200, when you are investing in HDFC Equity, for the portfolio overlaps in these two funds.
You should also exit Reliance Banking, especially when the Financial sector is well represented, if you were to exit this fund. By exiting these two funds, you do not lose on diversification as the portfolio has 92.3 per cent equity allocation and the top three sectors remain the same with 41 per cent exposure to the top 5 stocks — Infosys, ICICI Bank, SBI, ITC and Bharti Airtel, adding to 18.78 per cent, which is far more diversified. One should add sector funds to the portfolio only when the portfolio is under-represented by the sector to supplement the low representation. Your portfolio has significant exposure to the Financial sector even without the banking fund, which can be replaced by higher allocation to some of the other funds. Continue investing regularly in the remaining funds and review its performance at least once a year to check the progress.

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