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A Solid Long-term Portfolio

I'm 36-year-old and have been investing in funds for about two years now. I am increasing the size of my portfolio by 50 per cent year-on-year. Please review my portfolio —Raja

I'm 36-year-old and have been investing in mutual funds for about two years now with long-term perspective. I am increasing the size of my portfolio by 50 per cent year-on-year. As for the returns, I have reaped 9 per cent gains (as dividends) at the end of the first year of investing, while at the end of end of the second year, I had gained 25 per cent (including redemptions). I was fortunate to enter the market in early 2003 when it was quite low, and then by means of SIP, I have benefited to a great extent. Lately, I have exited out of bond funds and switched to equities and opportunities funds. Please review my portfolio.

Raja's Portfolio
Funds  % Allocation  Planned (%)
ABN AMRO Equity 4 6
DSP ML Opportunities 11 8
DSP ML Tiger Fund 13 9
Fidelity Equity 5 4
Franklin India Bluechip 4 2
Franklin India Flexicap 4 3
Franklin India Prima  3
FT India Life Stage - 40s Plan 4 2
FT India Life Stage - 50s+ Plan 5 3
FT India Life Stage-20s Plan 4 2
HDFC Capital Builder  3
HDFC Equity Fund 9 11
HDFC Prudence  4
HSBC Equity Fund 14 9
Magnum Emerging Businesses 1 1
Magnum Global  2
Magnum Pharma 1 1
Principal Dividend Yield 5 3
Pru ICICI Dynamic Plan 2 9
Reliance Vision 4 6
Templeton India Growth 7 5
UTI Master Value 3 2
Total  100  100

You have constructed a solid long-term portfolio. Your target portfolio is also on the same line. Though the two are almost identical, the new portfolio looks more apt as per your long-term investment horizon. We have following observations to make on your target portfolio:

Equities are in abundance (over 88 per cent)-a good strategy for investors of your age and risk profile. The equity portfolio is dominated by large-cap stocks (67.31 per cent), while mid- and small-cap stocks too have found a reasonable allocation.

Finally, you have introduced an important angle to your investments-you have decided to invest in a balance fund and selected one of the best funds in the category. HDFC Prudence has been the top performer not only in its category, but even outperformed many good diversified equity funds including Franklin India Bluechip, HDFC Equity and HSBC Equity for a trailing one year period. While we don't actually have much advice for you, we feel you should keep two things in mind while making investments in future. First, you don't need an army of funds to win the battle of investing. Try to keep it simple. Opt for three or four diversified equity funds and one or two balanced and debt funds. While having 23 funds, you create manageability problem for yourself. Secondly, try to avoid new funds, of which you have many.