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Loaded With Equity

I am a 71-year old retired person. In addition to my current investments, I am planning to invest further Rs 8 lakh by next month, and considering a few equity funds. Kindly advice me on how to balance my portfolio —Hira Lal

I am a 71-year old retired person. In addition to my current investments, I am planning to invest further Rs 8 lakh by next month, and considering a few equity funds. Kindly advice me on how to balance my portfolio with the goals of low risk and high return.

-Hira Lal




Hira Lal's Portfolio
Fund  % Allocation
Franklin India Bluechip 24.72
HDFC Equity 24.69
HSBC Equity 18.47
HSBC India Opportunities 19.76
Reliance Growth 12.36
Total 100.00


We must complement you for choosing some of the best diversified equity funds. With your current holdings, your portfolio is biased towards large-cap stocks which, we think, is suitable for you. Moreover, your portfolio looks well-diversified across stocks and sectors. As far as investing in equity funds is concerned, you have done a good job.

For further investments, you have asked for advice on balancing your portfolio considering a low risk-high return profile. Yes, even we feel that your portfolio needs balancing. Although your equity funds are good, but given your age, an all-equity portfolio may not be appropriate.

Regarding the low risk-high return profile, please note that an expectation of a higher return will inevitably bring higher risk along with it. The right way is to look for funds which have delivered above average returns while taking relatively lower risk as compared to their peers in the same category.

You have done exactly the same as far your equity investments are concerned. But since equities are inherently a lot more risky, the balance will come from introducing debt component to your portfolio.

Therefore, we would suggest to you additional investments in some good balanced funds MIPs will also suit your portfolio. MIPs are a little more conservative than balanced funds, as they maintain around 20:80 ratio between equity and debt. Further, we would recommend that you spread out your additional investments over a period of time rather than invest at one go.

You can put your money in a safe fund like a floater at once, and start a monthly or a quarterly systematic transfer plan towards the funds you wish to invest into.

Lastly, we believe that portfolio allocation depends upon one's risk appetite, which is governed by factors like one's financial strength, apart from age considerations. What is important is to achieve a fit between your risk-appetite and your investments. Therefore, a person in his twenties may be conservative enough to allocate a higher proportion to debt funds, while a person well past his fifties might invest only in equities. Nothing is wrong with that.

Thus, if your risk appetite permits you to maintain an all-equity portfolio, we won't stop you. In this case, equity-linked tax saving schemes can also be worth a look if you are a tax-payer.

Though such funds come with a three-year lock-in, but they carry a powerful tax saving incentive subject to a maximum investment of Rs 1 lakh. If you are not a tax-payer, then we think there is really no need to add more funds to your portfolio.

Keep investing in your current funds as they are providing you with the right diversity across market-caps, stocks and sectors.