I am a 26-year-old single individual. I earn Rs 20,000 per month. I have two insurance policies for which I pay premium of Rs 4,000 per quarter. My investments in mutual funds are as follows:
I am interested in making my investment portfolio diversified. I would like your opinion about my current portfolio and your suggestions on what type of mutual funds I should select to invest in future. Harshad’’s Portfolio
Amount (in Rs)
ELSS
HDFC Tax Saver Fund 5,000
HDFC Long Term Advantage Fund 5,000
SBI Magnum Taxgain Fund 5,000
Equity: Diversified
SBI Magnum Contra Fund 5,000
HDFC Premier Multicap Fund 7,000
-Harshad Riswadkar
In your current portfolio, large-cap stocks dominate with about 47 per cent allocation, while mid-caps account for 38 per cent, and small-caps make up for the remaining. We think the overall allocation across market capitalisation is quite suitable.
The portfolio looks well-diversified across stocks and sectors. Also, three of your funds happen to be five-star rated, which speaks well for the quality of the funds. However, HDFC Premier Multicap is a new fund, and hence, does not have a performance record. Magnum Taxgain is one of the most volatile funds in the category of tax-planning funds.Invest in it in future only if you can digest the ups and downs that it might go through at different points in time.
For your future investments, go for the equity linked savings schemes till the time they provide you with tax incentives, and you are comfortable locking them in for three years.
Beyond ELSS, look for good diversified equity funds. We suggest that you avoid new funds as they do not have a track record. You will get plenty of good funds with an exceptional performance record to choose from such as HDFC Equity Fund, Reliance Vision and Franklin India Bluechip. Choose a couple of good diversified funds and keep investing in them systematically.
Apart from pure equity funds, you can consider a good balanced fund as well to introduce a bit of debt component. You can consider a fund like HDFC Prudence.
This article was originally published on October 14, 2005.
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