I have been investing since 2008 with a 15-20 years horizon. I invest Rs 4,000 each in HDFC Equity, HDFC Top 200 and IDFC Premier Equity Plan A, and Rs 2,500 each in L&T Equity and HDFC Prudence. Please suggest changes if necessary.
You have chosen good funds with a great track record. Although the ratings of HDFC Equity and HDFC Prudence have dropped to three-stars, there is no cause of concern. The fund manager's preference to avoid pricey stocks and stay with fairly valued companies has led to the recent setback in performance.
L&T Equity (erstwhile Fidelity Equity) is also a three-star rated fund. The fund's rating slipped due to its underperformance last year and you should keep an eye on it. If the fund downgrades further, consider moving to a better performing one.
Your portfolio lacks diversification across fund houses. Nearly 60 per cent of your investment is biased towards HDFC as you invest in 3 funds of the AMC. All three funds are managed by Prashant Jain. To put it simply, 60 per cent of your money is being managed by Prashant Jain.
Apart from investing in funds with stocks of different market capitalization, one should also diversify across fund houses to avoid portfolio overlap. HDFC Equity and HDFC Top 200 have a portfolio overlap of nearly 77 per cent. HDFC Equity and HDFC Prudence have a 50 per cent overlap in portfolio.
The similarity in the management style could be risky because the manager’s choice of stocks may not always work. It is good to diversify across fund houses to avoid concentration risk.