Please advice on my funds

Mr. S Reddy wrote ::::

Hi Srikanth,

I came to know about you from moneycontrol.com and thereafter through your blog goodfundadvisor. Thanks for maintaining such a blog. You are doing a great job by helping people make money the right way!

I need your help to plan my investments. The background....

I am 24 and I started investing regularly since last year. I invested through
SIP on a monthly basis. The SIPs started last year got expired in May

this year. My portfolio (2.5 Lakhs) break-up resultant of my investments for
the past 1 year and other Lump sum investments (LS) made before start
of SIP looks as follows:

DSPML Technology.com (SIP) (G) - 5.6%

DSPML Tax Saver (LS) (G) - 4%
Franklin India Tax Shield (LS) (G) - 4%
ICICI Pru Infrastructure (SIP) (G) - 11%
JM Basic (SIP) (G) - 5.6%
Principal Tax Savings (SIP) (Div) - 12%
Reliance Div. Power (SIP) (G) - 12%

Reliance Growth (LS) (G) - 4%
SBI Infrastructure (LS) (G) - 12%
Magnum Contra (SIP) (G) - 5.6%
Magnum Global (LS) (G) - 4%
Magnum Tax Gain (LS) (Div Reinvest) - 12%
Sundaram Capex Oppourtunities (SIP) (G) - 8 %

Sundaram Energy Oppourtunities (LS) (G) - 4 %

Additionally, I'm having a 30000 P.A ULIP with Aviva and 10000 P.A
Pure insurance.

My portfolio is down 11% as on today from 35% up in Jan. From my previous investments and the current Bear rally I understood that my portfolio is kind of too agressive and lacks proper diversification, which is very well evident from the 11% negative returns


I plan to invest Rs 10000 every month through SIP from Aug. Through this I plan to bring diversity that would hold my portfolio retuns from falling more than beanchmark during the fall.

The planned breakup looks as follows:

Templeton India Equity Income (2000) - Mainly for International
Diversification
Reliance Banking (2000) - To take advantage of Banking sector Growth
Sundaram Tax Saver (3000) - To take advantage of Tax exemption & good

diversification
Sundaram Select Focus (2000) - To take advantage of growth in Largecaps
DSPML World Gold Fund (1000) - For Diversification

Whatever I am investing since last year is for long term (5-10 Years

Horizon). That is the reason why I took little risk of investing in
sector funds - which I feel give very good returns over long term (Esp
Power, Infra - Huge investments in which started to flow since last
year and to get the returns out of these huge investments it taken

approx 4-5 years).

Please advise of any restructuring needed in my existing portfolio.
Also please advise on my plan to invest 10000 every month through SIP.
Is the fund selection and allocation good ? Please advise of any

changes required in fund selection / allocation for SIP to start next
month. From the current bear rally I'm maily looking to invest in
stable diversified funds without compromising too much on growth so
that the portfolio doesnt go too much into Red during a bear rally at

the same time it beats the benchmark with good returns during Bull
run. If required I can invest additional 2-3000 (May be JM Moving
Sector Fund ? Because of excellent track record of star fund manager
Sandip Sabharwal and advantage of sector + Diversification). Please

advise.

Thanks a lot in advance.

Sincerely,
S Reddy

SRIKANTH SHANKAR MATRUBAI' s Reply ::::


Dear S Reddy,
First of all, I must thank you for your kind words. They are a great fillip to me. Thank you once again.

There is no need to worry about your investment being down by 11%. It is natural to have a loss in a Bear Market especially when you have invested during the end of the Bull Period and also the fact that you have too many sector funds.

Regarding your investments, it is shocking to note that you have more than 30% in one Single Fund House, SBI Mutual Fund. Do reduce the same by following what I have advised.
DSPML Technology Fund : Even at a loss, I recommend a switch to DSPML Equity Fund, a more diversified fund. I know that you are willing to stick with the fund for another 5/6 years, but still it is in your benefit to switch out at the earliest.

DSPML Tax Saver Fund ::: A good performance in its history. Continue.

Franklin Tax Shield Fund :::: Has been an underperformer. Infact, the whole universe of funds from the Franklin stable has been underperforming. Take a call as soon as your lock-in period in the fund ends.

JM Basic Fund ::: Continue your hold. You can expect the fund to outperform the markets in the medium to long term.

Principal Tax Savings :::: Continue and take a call when your lock-in period ends.

Reliance Diversified Power Sector Fund ::::: I am never in favour of Sector Funds. And with your exposure of 12%, it is a definite a Switch Call from me. Atleast, switch 50% of your holdings immediately to Reliance Growth Fund. Either way, Reliance Growth Fund will hold stocks that Reliance Diversified Power Fund holds. You can just check the portfolio of both the funds.

Reliance Growth Fund ::::: One of the most consistent performers in the Indian Mutual Fund industry. continue and can add the switch from Reliance Diversified power Sector Fund.

SBI Infrastructure Fund ::::: A close ended fund. Take a call when the fund becomes open ended.

SBI Magnum Contra ::::: A more of Diversified than a Contra Fund now. Continue to hold the same.

SBI Global fund ::::: Switch to better performer like SBI Magnum Balanced Fund. Will also bring some stablility to your fund.

Sundaram Capex Fund ::::: A good fund. But as already hold Infrastructure Fund like SBI Infra and proxy Infra like Reliance Diversified Power Fund, a switch is recommended to Sundaram Select Focus Fund.

Sundaram Energy Opportunities Fund ::::: A close ended fund. Take a call when the fund becomes open ended.

You have age on your side, so you can afford to make mistakes. But please ensure that you avoid as much as possible your investments in Sector funds.
You are planning to invest in
Templeton India Equity Income (2000) - Mainly for International
Diversification
Reliance Banking (2000) - To take advantage of Banking sector Growth
Sundaram Tax Saver (3000) - To take advantage of Tax exemption & good
diversification
Sundaram Select Focus (2000) - To take advantage of growth in Largecaps
DSPML World Gold Fund (1000) - For Diversification

Here, I would like you to make some modifications. Reduce your exposure to funds like Reliance, Sundaram, SBI, as you already have high exposure to them. Also, you have already too many sector funds, so please avoid investing in Reliance Banking Fund.

Your exposure to Large Caps is very little, inspite of switch from Sundaram Capex to Sundaram Select Focus. So, my recommendations would be:
Templeton India Equity Income fund :: 2000
Sundaram Tax Saver :: 1500
DWS Tax Saving Fund :: 1500 (Fund has had a great performance. Free Life Insurance is an added bonus)
DSPML World Gold Fund :: 1000
Birla Sunlife Equity Fund :: 2000 (This too had a terrific past and a promising future. Free Life Insurance is an added bonus)
Fidelity Equity Fund ::::: 1000 (A Go-Anywhere Fund. Stable performer)
HDFC Top 200 Fund ::::: 1000 ( A Large Cap Fund with a great past and stable performance)

Final word, you can go for JM Multi Strategy Fund through Sip.

Regards,
Best of luck,
Srikanth Shankar Matrubai