Getting your portfolio on track

By Morningstar |  11-01-19 | 
 

HDFC Prudence is now HDFC Advantage. It has fallen steeply compared to HDFC Hybrid. Should I retain or exit?

Anil

HDFC Balanced Advantage Fund is the erstwhile HDFC Prudence Fund. It is now a part of Balanced Advantage or Dynamic Asset Allocation category. Under this category, the funds have the liberty to move dynamically between equity and debt segments without any restrictions or limits. This fund in particular is an equity-oriented fund, which means it will largely maintain a minimum of 65% of assets in equities. Given the nature of this fund, it is apt for long-term investment horizon from growth perspective.

Read the analyst note here.

I am 30 years of age. I need Rs 60 lakhs to construct my home. My time horizon is up to 15 years. I have an aggressive risk appetite. This is my portfolio.

  • Canara Robeco Emerging Equities
  • Axis Focused
  • Invesco India Contra
  • UTI Nifty Next 50
  • Reliance Small Cap

For emergencies, Franklin ultra-short term bond SI of Rs 2 lakh.

Sivaprasad

To meet your goal of Rs 60 lakhs in 15 years, you would either need to invest a lumpsum amount of Rs 15 lakhs in equity funds today or start a SIP of Rs 15,000/month for the next 15 years in equity funds.

Since you have a long-term investment horizon and a higher risk-taking ability you can have a portfolio with greater allocation towards small and mid-cap stocks/funds.

Currently, the market-cap breakup of your portfolio (assuming equal allocation to the above funds) is as follows:

  • Large cap: 62.79%
  • Mid cap: 16:58%
  • Small cap: 11.15%
  • Cash: 9.48%

We recommend you could increase your small/mid cap exposure by an additional 10%. You can read about our top rated funds here.

Me and my wife are 35 years old.

Me (Aggressive):

  • Mirae Asset Emerging Bluechip: Rs 12,000
  • PPFAS: Rs 10,000
  • Aditya Birla Sun Life Tax 96: Rs 10,000
  • HDFC Small Cap: Rs 4,000
  • Aditya Birla Sun Life Digital: Rs 4,000

Wife (Conservative):

  • Axis Bluechip: Rs 8,000
  • Sundaram Large & Mid Cap: Rs 10,000
  • Motilal Oswal Multicap 35: Rs 8,000
  • Aditya Birla Sun Life Tax 96: Rs 10,000
  • HDFC Small Cap: Rs 4,000

Alok

You have a fairly focused portfolio of funds. Here is the current market cap breakup.

Husband:

  • Large cap: 55.46%
  • Mid cap: 31.44%
  • Small cap: 7.63%
  • Cash: 5.46%

Wife

  • Large cap: 61.80%
  • Mid cap: 23.75%
  • Small cap: 4.89%
  • Cash: 9.56%

We think the currently allocation is fairly consistent with your individual risk appetites. The funds you are invested in are fairly well managed strategies.  Do stay invested in your portfolio funds over a long term to truly reap the benefits of equity investing.

We notice you have a 10% allocation towards a Technology fund in your portfolio. Since you have an aggressive risk appetite, we don’t mind an allocation up to 10% in a sector fund. Do note that sector funds will be more volatile than diversified equity funds and will go through varying market cycles and thus timing entry and exit in these funds can lead to varying investor experiences. For instance, technology stocks have moved up quite sharply over the last one year after a fairly tepid last couple of years. Investors who came in looking at the past one year returns may have a very different return profile as compared to the investors who have been invested for a while.

My investment horizon is 5 to 7 years. I have a medium to high risk. My expected return is +/-15%. I have SIPs of Rs 1,000 each in:

  • DSP Natural Resources and New Energy
  • ICICI Prudential Bluechip
  • Principal Hybrid Equity
  • Sundaram Equity Hybrid
  • Sundaram Large and Midcap
  • Principal Multicap
  • HDFC Small Cap
  • Mirae Asset Emerging Bluechip
  • Canara Robeco Emerging Equity
  • SBI Banking & Financial Services
  • L&T Infrastructure
  • Axis Focussed 25
  • Invesco India Contra
  • Reliance Pharma

Krishna Kumar

We think you have over-diversified your portfolio and can do with reducing the number of funds. Also, your allocation towards thematic funds is quite high at 28.5%, and we recommend bring this down to 10% max. Since you have a 5 to 7 year horizon, we can allocate these proceeds to Large Cap Funds as the overall portfolio allocation towards Large Caps is on the lower side.

You can view some of the highly rated large-cap strategies here.

I have parked a large amount in Franklin India Ultra Short Sup. Inst Direct. This amount is for investment purpose and shall be utilised whenever there are good opportunities. It may take 1 to 2 year to utilise the above amount.

Is that safe? Do you suggest to another fund so as to distribute risk? Which is less risky among Ultra Short Fund and Liquid Fund? Or is there any other more safer? Please suggest with name.

Bhavesh

The Franklin Ultra Short Bond Fund is from the Ultra Short Duration category, while there is limited interest rate risk in the fund, there is an element of credit risk and the manager does take exposure to lower rated instruments to enhance yields. This increases the credit risk in the portfolio. You must be cognizant of this fact, that lower the rating, higher the probability of default.

If you prefer an Ultra Short Duration fund or Low Duration with limited credit risk, you could consider the following options:

ICICI Prudential Savings Fund

Reliance Low Duration

Kotak Savings Fund

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