I am nearly 48-year-old. The proportion of my investments in funds can be seen in the table. All the UTI investments are nearly three years old. I am concerned about my investments in UTI Bond Fund and UTI Services and am seriously thinking about exiting from both. Would you recommend this? I intend to stay invested for another three to five years. Should I make any other changes to my portfolio?
We ran your investments through the Value Research Portfolio Checkup and it shows that your overall portfolio is in fine shape. Two third of your portfolio is invested in equity with debt and cash making up for the rest. You are diversified at the fund level also—no single fund is dominating others. At the stock level lso, things seem fine with the sector allocation well spread out.
The only possible issue of concern is that your mid-cap concentration is too high. With 43 per cent of the portfolio in mid-cap stocks, the volatility you will experience will be on the higher side. We would recommend removing Tata Equity Opportunities and reducing exposure to Sundaram Select Midcap by half. Similarly, reduce allocation to Birla Dividend Yield Plus from 15 per cent to 10 per cent.
This will bring down your mid-cap exposure to around 20 per cent. You should add to Bluechip and maybe another diversified equity fund to keep your equity allocation at 66 per cent through large caps.
We don't think there is much to worry about UTI Bond and UTI Services Sector Fund. Years 2002 and 2003 were exceptional good ones for bond markets but all good things come to an end. As interest rates fell and bond prices rose, debt funds delivered handsome returns. But with interest rates most probably bottomed out, returns are expected to remain in the range of 6-7 per cent. This is a reality, which you will have to get used to.
UTI Services Sector Fund is quite concentrated because of its investment mandate. Its performance has also been lower than that of the category due to the exposure to the IT sector, which has not performed as well as other sectors. But this is a small holding in your portfolio and you can stay with or move away from it keeping tax considerations in mind.