I am 35 years old. I have been making lump sum investments in mutual funds (MFs) since four-six years, except two funds. The total value of the investment is Rs 10 lakh. The funds are: DSP BlackRock Tiger (D), DSP BlackRock India Tiger (G), HDFC Capital Builder Fund (D), systematic investment plan (SIP) of Rs 2,500 in HDFC Top 200 Fund (G), ICICI Pru Infrastructure (D), Reliance Diversified Power (G), Reliance Growth Fund (D), Reliance Growth Fund (G), SIP of Rs 2,500 in Reliance RSF Equity (G), Reliance Vision Fund (D), SBI Magnum Contra Fund (D), SBI Magnum Global Fund (D), SBI Magnum Tax Gain (D), Sundaram Select Midcap (D), Sundaram Select Midcap (G) and Tata Infrastructure Fund (D). Do I need to rebalance this portfolio? Can I switch from dividend reinvestment to growth option and should I replace non-performing funds?
The good news is that the two funds that you have an SIP in are good funds and you can continue to invest in them. The rest of your portfolio requires some rebalancing. Your portfolio currently allocates 52% of the money to small and mid-cap funds, 23% to sectoral (infra and power) funds and the rest to multi-cap funds. The choice of funds could be better too. You need a portfolio anchored in large-cap oriented funds (at least 60%). It can have an exposure to small/mid-cap funds (about 20-30%) and the remaining can be invested in sectoral funds of your choice. You can find good large-cap oriented funds from the Mint 50 list.
You have 16 funds. You can trim it down to half the size without sacrificing potential performance or diversification.
The upcoming direct taxes code stipulates that dividends be taxed at 5% whether it is paid out or reinvested. So a move to the growth option where the accrued profits stay within the fund is definitely the way to go.
I am 37 years old and can invest Rs 23,000 per month through SIP. I have selected these funds for a 15-year horizon. ICICI Prudential Focus Blue chip (Rs 11,000), HDFC Top 200 (Rs 6,000) and IDFC Premier Equity (Rs 6,000). Please advise.
This is a very good portfolio. You will be investing close to 50% of your funds in a pure large-cap fund, 25% in a large- and mid-cap fund, and the remaining 25% in a small- and mid-cap fund. Hence, it is put together as per the edicts of the core and satellite approach to portfolio design. All the funds chosen are well-rated in their own categories. One thing to note, however, is that this is an 100% equity portfolio. I would hope that outside of this portfolio, you are making debt investments either in the form of deposits or investments in provident fund accounts. That would ensure that your overall portfolio is balanced across asset types.
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