A portfolio works best only when investments are done with clear goals, to be reviewed periodically.
I have following investments that I don't need immediately. But, I am not sure if these are good. Please advise on restructuring these and how to improve my portfolio. I will be able to make an SIP investment of Rs 10,000 a month. Suggest where to invest?
-Raj Kumar
You have an interesting portfolio, lot of your investments happened in early 2008, at the height of the bull run. Since then, you have made only two investments. Both these were in 2009, into tax planning funds, to avail the tax benefits. You come across as someone not regular at investing or reviewing investments.
Composition
Your portfolio has 96 per cent equity exposure, with large-cap stocks accounting for 66 per cent of the holdings. This makes it safer and less volatile. There are 214 stocks, in which eight funds you hold have investments in ONGC, Reliance Industries (RIL) and ICICI Bank as the top three honours. There is also a mid- and small-cap exposure adding to 28 per cent.
Problem areas
The biggest problem is the way you have been investing. You are not regular and have investments in some funds that are not ideal in a normal portfolio, especially irregular investors. You have lumpsum investments in funds that invest in new themes/sectors and carry huge risks. You have not bothered to review your investments and don't have clarity on investment goal.
Way out
Use this opportunity to figure out your goals. It makes sense if you have a tax planning fund to make most of tax breaks, earning returns. Then, you will be able to put a finger to what you want and set time lines for each of the goals like, save Rs 50 lakh for retirement.
Fund Star rating 1-yr return 3-yr return BNP Paribas Equity-G Equity:Large- and mid-cap 2 27.33 -4.01 DSPBR Tax Saver- G Equity:Tax Planning 5 39.62 8.29 DSPBR Top 100 Eqt Reg-G Equity:Large-cap 5 28.27 7.03 Magnum Contra-D Equity:Multi-cap 3 28.55 5.16 Magnum Taxgain-G Equity:Tax Planning 3 28.40 1.87 Reliance Diversified
Power Sector Retail-GEquity:Others Not Rated 20.99 5.66 Reliance Growth-G Equity:Mid- and small-cap 3 42.09 9.57 Reliance Natural
Resources Retail-GEquity:Others Not Rated 16.09 -
Portfolio makeover
Continue with your existing tax-saving funds and consider investing more to avail tax deductions before the Direct Taxes Code (DTC) is effective. Have a core and satellite approach to your portfolio, wherein the core of the portfolio (60 per cent or more) is in less volatile and stable funds. You should have multi- and large-cap funds constituting this component. You can retain your investment in DSPBR Top 100, but exit BNP Paribas Equity gradually, into any other fund such as IDFC Imperial Equity Plan A or Reliance Equity Advantage. You should also look for funds such as HDFC Top 200 or HDFC Equity and Fidelity Equity. Also exit Magnum Contra, there are better funds available.
Your satellite fund selection should have those that are a bit risky, but add that necessary spike to your portfolio. Mid-cap and small-cap funds are in this category, with a few sector and thematic funds. You should consider Birla Sun Life Dividend Yield fund and continue with Reliance Growth. You should consider moving out of Reliance Natural Resources Retail-G and Reliance Diversified Power Sector Retail-G, as both are speciality funds and not faring as well as some other options available to you.
Though your portfolio, on an investment of Rs 5.2 lakh, has had an unrealised gain of Rs 1.97 lakh, it could have been a lot more had you made regular and systematic investments, with a clear investment objective. Considering the current state of the markets, it may be a good idea to redeem some of your investments in the funds you should exit. However, do not invest these in lump sum. You can park the cash you generate from redemption in a liquid fund, as you start to building on new investments in a systematic way. This way, you can utilise the monthly investment you have in mind, as well as make better allocation for a stable and better portfolio.
For long-term wealth creation, systematic investments are the key. Moreover, you should have an objective. We think you should track your investments at least once a year and review the progress of your investments to make necessary course correction and modify your holdings to be in line with your investment objective.