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No Need to have a Banking Fund

Investors don't need to invest in a banking fund because most diversified funds have 25-30% invested in banking stocks

I have 10 years to retirement. I am currently investing in HDFC Top 200, HDFC Prudence and Birla Sun Life Banking & Financial Services. What are the prospects of these funds? Please suggest some ELSS funds to add to my portfolio.
- Pradyup

For someone who is investing for a period of around 10 years, the key should be to diversify in terms of portfolio as well as fund management. HDFC Top 200 and HDFC Prudence are both managed by the same fund manager. At the same time, a good part of HDFC Prudence's equity portfolio is complementary to HDFC Top 200. Hence, you're not as diversified as you'd think by investing in these 2 funds. On the same front, you don't need to be investing in a banking fund like Birla Sun Life Banking, even though the banking sector's prospects look good. Most diversified funds have 25-30 per cent exposure to banking stocks anyway. You would do best by keeping it simple and investing in funds like HDFC Equity, Quantum Long Term Equity and ICICI Prudential Dynamic. Some good ELSS funds to choose from are HDFC Taxsaver, ICICI Prudential Tax Plan and Quantum Tax Saving.

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