I have been investing through systematic investment plan (SIP) for the past 18 months. The funds, all growth options, include Birla Sun Life Frontline Equity-A, HDFC Top 200, Reliance Regular Savings Equity and DSP BlackRock Equity. I plan to stay invested for 8-10 years. Are these funds good or do I need to change the portfolio? Also recommend another fund for SIP.
The funds in your portfolio are good and well rated. They are the flagship funds of their respective fund houses, and over the last five years they have given at least 20% annualized returns. Two of them are large-cap-oriented funds and the other two (Reliance and DSP BlackRock funds) invest across the market spectrum. However, there is one category of funds that is missing from your portfolio—which focuses on small- and medium-sized companies. So if you plan to add another fund in your portfolio, that would be the way to go. You can choose between IDFC Premier Equity Fund (available only through SIP) and DSP BlackRock Small and Mid Cap fund.
I am 45 years old and want to build a corpus of Rs 2.5 crore in the next 10 years for my retirement with the following monthly SIPs which I have started recently. I invest Rs 10,000 each in DSP BlackRock Top 100 Regular, Reliance Regular Saving Equity and HDFC Prudence, Rs 20,000 in Reliance Regular Saving Fund-Balanced and Rs15,000 each in Birla Sun Life Dividend Yield Plus and HDFC Top 200. Please suggest modifications for my portfolio, if any. Should I add Franklin Bluechip fund in place of Reliance Regular Saving Fund-Equity to make my portfolio more oriented towards large caps?
You are investing Rs 80,000 per month in a portfolio containing six funds. For your corpus to grow to Rs 2.5 crore in 10 years, you need the investments to grow at a compounded annual growth rate of 17%. That is a high rate of expected annual return for this period. Though it is possible, but the equity markets in India would have to replicate the performance of the last decade in the next 10 years to achieve the figure. If you can increase your savings to Rs 95,000 per month, you would stand a much better chance of reaching your target.
As far as your portfolio is concerned, about 50% of your investments are already in the large-cap space. Although only fund classified as pure large-cap is DSP BlackRock Top 100, there are other funds that are large-cap or multi-cap oriented and have healthy large-cap holdings. Given your long-term outlook and aggressive returns requirement, you might redirect one of your balanced fund investment towards a mid-cap oriented fund such as HDFC Mid-cap Opportunities.
Srikanth Meenakshi Founder and director, FundsIndia.com
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