I am 30 years old and have been investing Rs 1 lakh annually for the past three year in HDFC Prudence (Rs 50,000) and HDFC Balanced Fund (Rs 50,000). I want to know if I should continue with these funds or look for new funds. I would not like to have more than three funds at a time.
Having a small number of schemes in one’s mutual fund portfolio is always a good idea. It makes the portfolio more manageable and easier to track. I have a simple thumb rule in this regard—if someone taps you on the shoulder in a dinner party and asks you for your portfolio, you should be able to name the schemes without much trouble. However, just three schemes in a portfolio is probably a little less; you can still have a manageable portfolio with six or seven schemes in it and you will be able to cover all the important fund categories with that number.
Regarding your portfolio, you have been investing in two balanced funds from the same fund house for the past three years. You should keep one of these two funds in your portfolio. Between them, you can simply choose the one that has done better. If your current investment timeline is at least three years, you would do well by replacing the other balanced scheme with a large-cap scheme such as Franklin India Blue Chip Fund or ICICI Prudential Dynamic fund.
I am 25 years old and invest Rs 2,000 each in Birla Sun Life 95, HDFC Balanced and Reliance Regular Savings Balanced. Now I would like to invest another Rs 10,000 every month. Please suggest funds that can give good returns. I can take risk at this point of time.
You have done well to start investing in equity-oriented balanced funds. For a new investor, such funds provide the opportunity for an exposure to the equity market with relatively less risk compared with all-equity funds.
It also allows investors to evaluate their risk tolerance and see if investing in equity market with its attendant volatility is something that suits them. It appears that in this case, you have done both—started investing in them and recognized that you can indeed accept the risks involved in equity market investing.
Hence, for the money you are planning to put into your portfolio, you can consider diversified equity funds with strong track record. You can add four funds—two large-cap funds for Rs 2,500 each, a small/mid-cap fund for Rs 2,500 and the remaining in a multi-cap fund. DSP BlackRock Top 100 and ICICI Prudential Bluechip could be the large-cap funds, IDFC Premier Equity can be the mid-cap fund, and HDFC Equity can be the multi-cap fund in your portfolio.
Srikanth Meenakshi is founder and director, FundsIndia.com
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