Q&A: Mutual Funds

By: Value Research


Young Investor & Equities
I am 25 years old and earn Rs 25,000 per month. For the past one year, I am investing Rs 1,000 in HDFC Top 200 and HDFC Equity through monthly SIPs. I want to invest Rs 2,000 more in other schemes; which funds should I invest? I am also investing in the NPS.

You are investing in two highly rated funds with proven track record and performance history which provides good portfolio diversification. At your age you can take more risk and for the third fund, you can add a mid- & small-cap fund to your existing portfolio.

From the fund select feature on our website you can choose a fund from the mid- & small-cap category and continue investing regularly in them. Review the performance of the funds that you are investing in at least once a year to track their progress to continue investing or make any changes necessary to the portfolio.

As age is on your side, you should make the most of the NPS investment by opting for the equity fund allocation in the NPS.

Avoid Style Overlaps

I am investing Rs 2,000 each in HDFC Top 200, DSPBR TOP 100, Reliance Gold, ICICI Pru Banking & Finance, ICICI Pru Discovery, IDFC Premier Equity and IDFC Sterling. I am 50 years old and may continue investing for another 5-6 years for my retirement. Please comment on the fund selection. AK SINGH

There are seven funds in your portfolio which is well diversified and the funds are highly rated with a proven track record and performance history. However, with seven funds in the portfolio there are overlaps in style —with three mid- and small-cap funds — which is avoidable.

We recommend investing in gold when there is a foreseeable need for it in the future; for instance you may need it for a child’s wedding. If there is no such need, you can think of discontinuing investing in the gold fund.

Similarly, we recommend investing in a thematic or sector fund only when the overall portfolio is under represented in that sector. Your current portfolio is well diversified and you should continue investing in it by reducing the number of funds to 4-5 which will not compromise on the diversification and offer growth prospects over the next 5-7 years till your retirement.

(Our expert guides you in matters relating to mutual funds. Email to etquerymf@indiatimes.com)