Q&A: Mutual Funds

By Value Research

Core & Satellite Approach

I am 40 and investing through monthly SIPs of Rs 1,000 in Reliance Gold Saving, Rs 2,000 in HDFC Top 200 and IDFC Premier Equity and Rs 5,000 in HDFC Prudence. In the past one year, HDFC Prudence gave 13.21% whereas Reliance Regular Savings Balanced gave 17.59%. Both have respectable 3- and 5-year performance. Should I switch from HDFC Prudence to Reliance Regular Savings Balanced? How are the other funds? I have Rs 20,000 more to invest every month, where can I invest this? What could be the value of my portfolio in five years time?

(Ashu Kumar)

Comparing fund performance over short periods is not appropriate when investing for the long-run. As you have observed, there is little to choose between Reliance Regular Savings Balanced and HDFC Prudence in the long-run, and you can continue investing in HDFC Prudence. Your portfolio is made of highly rated schemes with proven track record and performance history.

However, collectively the portfolio lacks purpose. If you are looking for long-term growth you should consider allocating up to 80% of your investments in core funds made of large-cap, large- and mid-cap and equity-oriented hybrid funds, which provide stability to overall portfolio returns and acts as cushion against market swings with its steady returns. The satellite portfolio should comprise of funds such as mid- and small caps, multi-cap, sector funds and even thematic funds. The main advantage of this approach is that it is flexible and can be modified according to your risk appetite.