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Is it a Balanced Portfolio?

My investment portfolio is spread across a number of debt and equity schemes. Are these funds doing a good job or should I reshuffle my portfolio? Are there some other funds which I should own?

In the past one year I invested in the growth option of several mutual funds. As of today, my fund portfolio comprises the following:
Debt funds: Zurich India High Interest and Templeton India Income Fund.
Balanced funds: Alliance '95 and Zurich India Prudence Fund.
Tax-saving funds: Alliance Capital Tax Relief 1996 and Zurich India Tax Saver.
Equity (diversified): Alliance Equity Fund, Franklin India Bluechip and Zurich India Equity.
Do you think I have a balanced portfolio? Do I need to re-look my choice of funds?
Murali, via e-mail


Going by Value Research's performance analysis, we can say that you have a five-star portfolio, as most of your funds have delivered superior risk-adjusted returns in the past three years compared to their peers. One thing you have to remember here is that a fund may not always remain a five-star fund. Or its performance will not be the same as it was when you bought the units. Therefore, you need to track your portfolio on a regular basis.

For instance, take the case of the three Alliance Capital funds in your portfolio. Till 1999, these schemes were superb performers and in 2000 they suffered the least. Since then, however, these funds have experienced a pronounced slowdown and moved towards the bottom half of their categories.

The same holds true for your income funds too. A sharp decline in interest rates during the past two-three years helped these funds deliver returns similar to equity funds. During 2002, Zurich India High Interest Fund posted superior returns compared to Templeton India Income Fund. But since late January this year—with interest rates moving upwards—Zurich's net asset value has fallen at a faster pace than that of Templeton. This does not mean that you should press the sell button. Before you decide to do some portfolio juggling, first answer this question: are your current fund investments helping you realise your financial goals? What is the timeframe you are looking at—one year, three years or five years?

If your investment horizon is over three years, then you needn't worry about your investments. Although the performance of all Alliance funds has been disappointing lately, funds from the Alliance family should bounce back in a rising market with a star manager at the helm. And if that doesn't happen, then you can think about exiting these schemes. As far as investments in debt funds go, it is high time you re-aligned your expectation of returns from these funds.

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