Portfolio Doctor: Find out why Gowda should get out of sector funds, small cap schemes

How is your mutual fund portfolio doing? Not many investors are able to answer this. This section will provide the answer. The portfolio doctors on our panel will assess the health of the mutual funds held by individuals, examine their suitability and, if required, recommend corrective measures.

While doing so, they will consider the performance of the schemes, the risk profile of the investor as well as the financial goals of the individual. The investor will be given a detailed diagnosis of how his mutual fund portfolio is doing and whether he needs to make changes.

I. Get out of sector funds, small-cap schemes

Harish Gowda is saving for retirement and his son’s college and marriage. Here’s our advice:

PORTFOLIO CHECK UP
*Good understanding of mutual funds. Has been investing through SIPs since 2006.

*Saving for long-term goals, so can go with diversified funds.

*Should avoid thematic and sectoral funds. Diversified funds a better option.

*Small-cap segment is overheated. Best to book profits and switch to large-cap funds.

Note from doctor
*Has invested in good performing funds so no major rejigging needed.

*Keep reviewing your funds’ performance and make necessary changes if they slip.

*All goals on track, but start shifting out of equities 2-3 years before your goal.

INVESTOR’S EXISTING PORTFOLIO

II. Avoid gold funds, bank deposits
Sanjeev Kumar is 30 and wants to create a corpus of Rs 2 crore in the next 20 years. An aggressive saver, he puts away more than 30% of his net in-hand salary of Rs 38,000 a month. Here is what the doctor has advised him:

PORTFOLIO CHECK UP
*Goal is too ambitious. Assuming 12% annualised returns, Rs 6,000 SIP in equity funds for 20 years will grow to Rs 59.95 lakh

*Instead of investing in gold fund and RDs, increase SIP amount in equity funds.

*But even Rs 10,000 a month will grow to Rs 99.9 lakh, short of the Rs 2 crore target.

*Increasing SIP amount every year can do the trick. Raising SIP by 5% will yield Rs 1.37 crore corpus.

*Increasing SIP by 10% a year will mean a corpus of Rs 1.99 crore.

*If investor increases the SIP amount by 15%, the corpus will be Rs 3 crore.

INVESTOR’S EXISTING SIPs