Q&A: Mutual Funds

Value Research

Invest Through SIPs

I have monthly SIPs in UTI Dividend Yield for 2,500 for the past one year, 2,000 in HDFC Taxsaver for the past six months and 1,000 in Magnum Global. Are these good funds?
Ernest Alvares

You have adopted the right approach to investing in diversified equity mutual funds through SIPs. Of the three funds, you should reconsider Magnum Global, which is not the best fund in the category. You can look at better performing funds instead such as IDFC Premier Equity or Tata Dividend Yield. Moreover, it is our view that when investing in tax planning funds, you should look at investing lump sums over a period instead of monthly SIPs. As tax planning funds have a three-year lock-in; each monthly SIP is locked in for three years before it can be redeemed, which you should be aware of.

Senior Citizen's Portfolio

I am a senior citizen and invest 1,000 every month through SIPs in Franklin India Bluechip, HDFC Equity, HDFC Taxsaver, Canara Rebeco Equity Tax Saver and Fidelity Tax Advantage. I am a long-term investor. Please suggest replacements for the ELSS funds so that I can maintain a balanced and diversified portfolio for the long-term.
Jay Lal

Three good tax planning in a portfolio of five funds is diversification in number and not in style or allocation as it only duplicates the investment idea. Investments in Franklin India Bluechip and HDFC Equity are good as both funds are highly rated with a proven track record and performance history. You should continue investing in these if you understand the associated risks. To build a diversified and balanced portfolio, once you exit the tax planning funds, you can consider adding a large- and mid-cap fund such as UTI Opportunities or HDFC Top 200 and increase your allocation to HDFC Equity and Franklin India Bluechip. Make sure to regularly track the performance of the funds that you invest in at least once a year and ascertain their progress towards your investment goals.