Ask Mint Money | When investing for long term, review portfolio every two years

Since January 2011, I have been investing Rs 2,000 each in Birla Sun Life Monthly Income, AIG-Short Term, HDFC Balanced, Fidelity Tax Advantage and Tata Equity PE. I plan to stay invested in these funds for the next 30 years and will be using them for retirement. I don’t plan to increase the amount of investment. Are these funds good for the long term?

—Sanjay Shah

Currently, you are investing in one pure debt fund, a debt-oriented balanced fund and an equity-oriented balanced fund, apart from two equity funds. The debt component in your overall portfolio works out to about 44% as of now. For a 30-year portfolio, that is on the higher side. While having some exposure to debt even in a long-term portfolio is not bad for a conservative investor, this high a percentage will adversely position your portfolio from the performance perspective. You would do well by shifting out of the monthly income scheme to a large-cap-oriented scheme, such as Birla Sun Life Frontline Equity Fund.

Please note that the Fidelity Tax Advantage scheme may lose its tax benefit after this financial year. At that time, you should consider moving it to an equivalent diversified equity fund. Review your schemes every two years to ensure continuing fitment of funds in your portfolio.

My monthly income is Rs 25,000 and I want to invest Rs 4,000 per month through systematic investment plans (SIPs). Out of Rs 4,000, I want to invest Rs 1,000 in a tax-saving mutual fund. What are the options available?

—Vinit Mundra

There are plenty of options and products available to construct an SIP portfolio with, but much will depend on the time frame of your investment. The number of years you are willing to wait for will largely influence the type of schemes that will form a part of your portfolio. For example, if your time frame is one-three years, your portfolio would contain largely debt funds with little, if any, exposure to equities. As the time frame increases, the exposure to equity-oriented funds in your portfolio can be increased.

The tax-saving mutual fund is the easy part. You can go with either HDFC Tax Saver or Religare Tax Plan for Rs 1,000. For the rest of the folio, assuming your time frame is higher than three years, you can split the Rs 3,000 and go with a balanced fund such as HDFC Balanced and a large-cap fund such as Franklin India Bluechip in equal parts. Also, remember that your tax-saving SIP should only be for a year (until March 2013) since the fund may lose the tax benefit, starting next financial year.

Srikanth Meenakshi is founder and director, FundsIndia.com

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