I have been investing through monthly systematic investment plan (SIP) in HDFC Top 200 (Rs2,000), HDFC Prudence (Rs1,500) and Reliance Regular Saving Fund (Rs1,500) for the last three years. Are these funds good? I plan to start another SIP of Rs2,000 for five years. Suggest a fund.
Your portfolio contains schemes with good performance record and are well-rated. It includes 40% investment in a large- and mid-cap fund, 30% in a balanced fund and another 30% in a multi-cap fund. The overall portfolio contains 60% in large- and mid-cap funds, about 10% in pure debt while the remaining 30% in multi-cap fund. However, the scheme that is missing from your portfolio is the one that focuses on opportunities in the mid- or small-cap sectors.
You could consider either IDFC Premier Equity fund or HDFC Mid Cap Opportunities fund to invest another Rs2,000.
I want to invest in mutual fund (MF) through SIP. Which are the best schemes for investment? Is dividend income from MF taxed?
MF offers an array of choices, both in terms of debt and equity. However, the goal of SIP is to average the cost of entry into the market—you buy more units when the market is low and less when it is high. This rupee cost averaging concept works best with market instruments whose value moves up and down unpredictably. So, diversified schemes that reflect either the equity market or a segment of it would be the best choice. Dividend income from equity MFs are not taxed currently. The proposed direct taxes code, however, would tax it at 5%. Dividend income from debt MFs is tax-free in the hands of the investor. However, the MF company deducts a dividend distribution tax from the dividend before sending it to the investor.
I have around Rs60,000 in bank deposits. I want to invest this amount in MF and stay invested for a time period of five years. Please suggest some funds. Also how do I allocate the money and in what proportion in order to have a diversified portfolio?
Diversifying your portfolio helps you get a good balance between debt and equity funds, and within equity between different market capitalizations and sectors. The portfolio for a five-year investment period should be anchored around a good, well diversified large-cap fund with some exposure to small- and mid-cap fund as well as some debt.
So in your case, I will suggest 50% allocation to a good large-cap fund such as Franklin Templeton BlueChip fund. The other 50% can be evenly split between a small- or mid-cap fund such as ICICI Prudential Discovery fund and a balanced fund such as HDFC Prudence that also has a debt component.
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