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A Good SIP Portfolio

I have investments worth Rs 22.05 lakh in mutual funds. I am 33-year-old and my equity investment horizon is over 15 years. Please review my portfolio. -Rajesh Mehta

I have investments worth Rs 22.05 lakh in mutual funds. Out of my total investments, 80 per cent is in RBI, PPF and Post Office schemes. The interest from the Post Office MIS scheme goes straight into an equity mutual fund SIP every month. I also have stock investments worth Rs 9.9 lakh. Currently, my total equity exposure is only 15-20 per cent, which I am trying to increase gradually. I am 33-year-old and my equity investment horizon is over 15 years.
-Rajesh Mehta

Mehta's Portfolio
  Mutual Funds  Allocation (%)
  Franklin India Bluechip* 7.94
  Franklin India Prima* 1.59
  HSBC Equity* 2.49
  HDFC Equity* 2.04
  HDFC Top 200* 1.59
  Reliance Diversified Power 2.27
  HDFC HI-Short-term** 25.40
  Templeton Floating Rate-ST*** 34.01
  HDFC Floating Rate Income-ST 22.68
  Total 100.00
* SIP Investments
** Started STP into HDFC Equity


It's good to answer queries from well-informed investors like you. We are glad that your equity investments are through systematic investment plans (SIP) and you have full awareness of your risk taking ability and the investment horizon.

Since you are only 33 years old, your equity exposure is way too low and should be raised to somewhere around 65 per cent (the '100 minus age' theory says that your equity exposure in percentage should be 100-Age).

Since you have already started moving out of floating rate funds via STP in equity funds and your interest income from PO is going straight into equity SIP, higher equity allocation will get taken care of at least to some extent.

Even so, a higher level of investments in equity funds are advisable. A good part of your investments in debt-centric media can be transferred to equity-oriented hybrid funds like HDFC Prudence and FT India Balanced. Over the long-term, these funds are excellent investment options. For example, HDFC Prudence has delivered a 5-year annualised return of 21 per cent and FT India Balanced has delivered an annualised 26.50 per cent over three years.

Since you have substantial direct investments in stocks as well, we would advise you to check whether these stocks are not making your equity portfolio concentrated in the same sector or stocks given that these stocks may also be present in your fund's portfolio. This check can be made using the Portfolio Manager at www.valueresearchonline.com. You will need to register on the site (which is free) and create your portfolio. Then, choosing the various 'Portfolio Checkup' options on the portfolio display page will show you a detailed analysis of your portfolio. You will get a clear view of the total sector and company exposure based on the aggregate of your direct stock purchases and the underlying portfolios of the funds you own.

Within your funds portfolio, you are currently overweight on technology sector (20.48 per cent). This is mainly because funds like Franklin India Bluechip, HDFC Equity and HDFC Top 200 have nearly 25 per cent exposure to tech stocks. But considering the recent growth in tech stocks this should not be a cause of worry. And since, two-third of your funds' portfolio is in large-cap stocks, we are comfortable with your current portfolio.

And as your debt portfolio largely comprises of government-guaranteed instruments, floating rate and short-term debt funds, we have no complains here. All you need to do is increase your equity allocation.