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Some Fine Tuning is Required

I am 32-year-old IT professional with an above-average capacity for risk and have a 4-5 year investment horizon. My current portfolio comprises of equity, bond, hybrid and short-term funds. Is my portfolio right for me?

I am 32-year-old IT professional with an above-average capacity for risk and have a four to five year investment horizon. My current portfolio is reflected in the Table. Is my portfolio right for me? I am looking to invest 10 per cent of my monthly salary into these funds every month for at least the next 5 years.

Pritam's Portfolio
Funds  Percentage
DSP ML Bond Retail-G 34.24
Pru-ICICI Tax Plan-D 14.94
HDFC-Equity-G 13.80
JM Short Term-G 13.69
HDFC-Top 200-D (SIP) 9.68
Pru-ICICI Power-D 6.40
DSP ML Opportunities-D 3.36
Franklin India Prima-D 3.23
HDFC Prudence-D 0.68
Total  100.00

Appropriate asset allocation, effective diversification and suitable fund selection are the three fundamental goals that every investor should desire from one's investment. We think you have got the most right in all the three fields. According to your current portfolio composition, both equity and debt nearly have an equal weight.

Though it's a good asset allocation but you being so young and having an appetite for higher risk, a higher allocation to equity funds of say 60-80 per cent won't be a bad idea.

For analysing your portfolio, we used the Portfolio Manager section of our website-www.valueresearchonline.com. This showed that your overall equity portfolio is widely diversified both sector-wise and stock-wise, which is the hallmark of any good portfolio. Moreover, the choice of funds is also good. All funds have a decent performance track record and are either rated 5 or 4-star on our ratings scale. The best part is that there is very little duplication of similar stocks. For instance, no single stock accounts for more than 5.5 per cent of your total equity portfolio.

But on debt side, we don't understand what the short-term plan is doing in your portfolio. Short-term plan is for those who want to get their money back in six months. Since you desire to be a long-term investor, more emphasis should be on the core bond funds. And in that area too you lack diversification. You just own one bond fund. We would advise you to spread your debt investments over two or three good bond funds. For that purpose, the scoreboard section of the magazine would be of great help to you.

It's nice that you are planning to invest regularly. For this purpose, opting for Systematic Investment Plan (SIP) in the said schemes would be a better idea. This will take away the headache of filling the forms every month and will also help in controlling your emotions, in case market rises or dips in the short-term. However, don't forget to keep a tight lid on the asset allocation, which is the key to any investment planning.

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