I am a new MFI subscriber and comparatively a new entrant to the world of funds. I have invested my post-retirement benefits in post office schemes, PPF, funds and shares. I have opted for dividend payouts as I need regular income. All my investments are for the long-term-5 years or more. I am expecting 5 to 8 per cent return in the first two years, 9 to 12 per cent in the next three years and 13 per cent+ thereafter. Please review my portfolio.
Funds % Allocation
ABN AMRO Opportunities 6.32
Chola Global Advantage 4.92
Fidelity Equity 5.71
Franklin India Flexi Cap 6.00
Franklin Infotech 0.61
HDFC Core & Satellite 3.66
HDFC Multiple Yield 2.06
HDFC Premier Multi-Cap 5.44
HSBC Midcap Equity 5.28
Kotak Contra 2.31
Kotak Global India 3.23
Magnum COMMA 2.15
Magnum Contra 2.22
Magnum Emerging Businesses 4.47
Magnum Midcap-G 3.06
Magnum MultiCap 4.50
Principal Focussed Advantage 2.65
Reliance Diversified Power Sector 1.94
Reliance Equity Opportunities 2.86
Reliance Tax Saver 8.72
Reliance Vision 2.15
Standard Chartered Classic Equity 4.55
Standard Chartered Premier Equity 8.12
Tata Midcap 2.30
UTI Dividend Yield 4.78
Your portfolio reflects your inexperience. You have bought most funds during their NFO period or immediately after that. In the process, you have collected 25 funds, of which only three have any significant track record. While only time would tell if the portfolio works for you or not, we can definitely say that your portfolio has worked well for your fund advisor/distributor who gets a far higher commission for selling new funds.
A check-up by the Value Research Portfolio Manager shows that nearly 80 per cent of your money is in hands of funds launched in 2005. Equities account for 89.42 per cent of your assets. The two rated funds in your portfolio enjoy five stars from Value Research.
Broadly, we see two major faults in your portfolio. The first is high concentration in new funds. When you invest, the most important thing you look for is the performance track record, the longer the better. The idea is to understand how the fund has performed over various market cycles. Obviously, new funds don't have any record. If a fund doesn't have a track record, then any other characteristics it may have, good or bad, are irrelevant.
Our second problem is with the number of funds. Having more than five or six funds doesn't bring any advantage to you. Far better to choose a handful of funds with a good track record and stick to those.
Now, what's the solution? Frankly, we don't have any concrete answer to your problem. Broadly we can say that you should reduce the number of funds and ignore NFOs in future. Track your funds closely, keep the winners and exit the laggards.
Coming back to your returns' expectation, three years is too short a time to have any meaningful expectation in such a volatile market that is at an all-time high. If most of your new funds turn out to be well-managed then you have a good chance of meeting your expectation of 13 per cent when averaged over perhaps five to seven years.