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How to Build a Balanced Portfolio

I am a 24-year-old software developer. So far, I have invested around Rs 1 lakh in 11 funds. My aim is to build a balanced portfolio. Should I buy more funds? —Kenneth Pinto

I am 24-years-old and currently working as a software developer. Till date, I have been able to invest about Rs 1 lakh in various mutual fund schemes which consist of HSBC Equity (G), HDFC Top 200 (G), HDFC Premier Multi-Cap (G), Prudential ICICI Emerging STAR (G), Prudential ICICI Power (G), FT India Taxshield (G), FT India Balanced (G), FT India Flexi-Cap (G) and Reliance Equity Opportunities Fund (G).

I have balanced out most of my investments in mid-caps and large-caps. My question is do these funds suffice for a balanced portfolio and can I continue investing in these funds until I am 35 at which point I plan to go for an overhaul.

I also plan to invest in HDFC Taxsaver and Prudential ICICI Tax Plan which brings my total fund count to 11. Do I need more exposure to balanced funds right now and should I buy few more funds? I plan to invest approx Rs 24,000 every year.

-Kenneth Pinto


First, we must congratulate you on your understanding of investments. Very few people have such maturity at such a young age. The only concern we have with your portfolio is that many of your funds are very young and still have to prove their mettle. While you have not mentioned the allocation to these funds, we are assuming an equal weightage. Putting your portfolio through the Value Research Portfolio Checkup, it looks quite well-diversified across stocks and sectors.

We think you can maintain an all-equity portfolio at present, considering that you are planning to stay invested for long.

Otherwise, if you would like to garnish it with a little exposure to debt, you can introduce a good balanced fund in small proportion to your portfolio. Keep a track of your funds over the period of time, and make subtle variations, as and when required, rather than planning an overhaul at the age of 35. For example, right now, you can maintain an aggressive portfolio with a higher allocation to mid-caps.

After a few years, you might like to increase the exposure to large-caps, and introduce debt to bring more stability. In the meantime, if any of your funds fails to perform consistently, or becomes unsuitable for you due to any other reason like a change in objective, then it might be time to move out of that fund.

As far as new investments are concerned, you already have a lot of funds in your portfolio. But since many of them are quite young, you can just add one more established fund to your portfolio and avoid future investments in young funds. For your investments in tax-planning funds, you have one good fund in your portfolio, in which you can keep investing in future too.



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