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Ask Mint Money | You can consider small/mid-cap funds for a long-term portfolio

Ask Mint Money | You can consider small/mid-cap funds for a long-term portfolio
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First Published: Sun, Nov 13 2011. 10 11 PM IST
Updated: Sun, Nov 13 2011. 10 11 PM IST
I am 30 years old and I have been investing Rs 8,000 in mutual funds (MFs) since 2009. I have DSP BlackRock Top 100, HDFC Top 200, HDFC Equity and HDFC Tax Saver. Are the funds selected okay? For how many years do I need to invest to get a corpus of around Rs 50 lakh?
—Anjan Das
If you continue to maintain a saving of Rs 8,000, you will reach your target of Rs 50 lakh in another 15 years (assuming a long-term annual return of 12%). You can reach your target faster if you increase your investment over this period, or if your portfolio returns are higher.
The funds that you are investing in are all good funds and best in their categories. However, starting next year, HDFC Tax Saver may lose its tax exempt status if the proposed Direct Taxes Code comes into effect. If and when that happens, you should move your investment out of this fund to a different fund. Given the current composition of your portfolio and the long-term outlook that it has, it would be prudent to include a scheme that focuses on small/mid-cap segment. You can consider HDFC Mid-cap Opportunities or IDFC Premier Equity Fund for this purpose.
I have long-term (at least 15 years) systematic investment plans (SIPs) in Reliance Growth (Rs 4,000), Goldman Sachs Nifty Bees (Rs 5,000), Gold ETF (Rs 2,500), Reliance Vision (Rs 2,500) and Sundaram Select Mid-cap (Rs 2,000). My short-term (three-five years) investments consist of SBI Magnum Contra (Rs 2,000) and HDFC Prudence (Rs 5,000). In the last three years, many of these funds have given poor returns. Do I need to make changes?
—Amith
In your long-term portfolio, apart from the two ETFs, the other funds are middle-of-the-road funds that have done well some years and not so well in others. It would be better to replace them with proven out-performers. The good thing is that you have chosen different types of funds. You can replace schemes with better ones within the same category. For example, you can choose Reliance Regular Savings Equity Fund, IDFC Premier Equity fund and HDFC Top 200 funds to replace the managed funds that are currently in your portfolio. If you look at the track record of the suggested funds, you will notice that they have consistently ranked in the top quartile among their peer funds over the past three, five and 10-year periods.
In your short-term portfolio, a bulk of your investments are going into a top-notch equity-oriented balanced fund, which is the right decision. The other fund is an opportunistic fund that tries to unearth hidden gems in the market. This fund has not shown good performance in recent years. You can consider alternatives such as ICICI Prudential Dynamic, a conservative large-cap fund.
Srikanth Meenakshi, Founder and director, FundsIndia.com
Queries and views at mintmoney@livemint.com
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First Published: Sun, Nov 13 2011. 10 11 PM IST