I have been regularly investing in MFs since October 2005 and I have invested in lump sums as well as SIPs. I want suggestions to reshuffle allocations. Apart from what I hold, is there any other scheme in which I should invest? I have a long-term outlook.
-Amit
Hats off for managing such a huge portfolio! You seem to have workerd very hard to search the funds and build such a beefy portfolio. But unfortunately, such an extensive diversification neither achieves effective diversification nor does it position your portfolio towards superior returns. Monitoring a portfolio of 40 funds is bound to be a cumbersome task too.
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With a large number of funds, a portfolio usually starts resembling a broad index, and out-performance becomes difficult. Obviously, there's no point bearing the expenses of funds just to hold an index! A better option is to stick to a maximum of two funds that have a similar objective. Your portfolio has seven odd funds that have a similar large-cap orientation.
Your initial fund selection has been of a high-quality; some of the SIP funds, however, are not as impressive. We have pruned your holdings into 16 funds. We have focussed upon increasing the weightage of funds which have a well-proven track record of superior performance across market cycles. Some of the relatively new funds which have shown a lot of promise have also been retained, while a number of small and insignificant holdings have been done away with. A further rationalisation of your SIPs has been suggested by maintaining investments in four funds. These schemes have also been selected, keeping in mind total exposure to various AMCs.
Fix It
You already have close to 19 per cent of your money invested in technology stocks. Given that technology stocks constitute the largest allocation in most equity diversified fund portfolios, a separate exposure through Franklin Infotech Fund is justified only if you are very bullish upon the sector and want to take a concentrated bet on it. Else, you should exit from Franklin Infotech. We suggest you maintain your holdings in the ICICI Pru Infrastructure, ICICI Pru Services Industries and Reliance Diversified Power Sector, owing to the optimistic outlook for these sectors. Moreover, these funds are themselves diversified to include many companies from different sectors. We also suggest consolidation of your infrastructure holdings in ICICI Pru Infrastructure by moving funds from Tata Infrastructure fund.
The allocation to Templeton India Equity Income has been increased primarily because the fund has emerged as an important diversification tool for your portfolio owing to its exposure to foreign equities. As regards your holdings in various opportunities funds, we have suggested a higher allocation to Franklin India Opportunities fund for its aggressive stance. But if you are a kind of investor who gets nervous seeing his investments plummet in the short run then you could consider allocating more funds to DSPML Opportunities.
Caution
Do not make the suggested changes blindly; assess the tax implications in case of funds held for less than a year. Also there will be entry loads to consider as well. ICICI Pru Fusion will also bear an expense on redemption due to its close ended nature. You can use the portfolio tool on our website which will give you an organised picture of your portfolio and enable you to identify the chinks in your portfolio.
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This article was originally published on May 31, 2007.
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