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Grow Your Investments & Limit Downside Risk

| 11/2/2012 9:00 PM Friday

I had subscribed to Tata Infra-Dividend Yield and Reliance Vision Fund in September 2009 for SIP amounts of Rs 2000 per month, but stopped investing in these in February 2012 due to their poor performance. Please suggest whether I should redeem or hold or invest in either or both again. Besides these funds, I have also invested in the funds as listed below. Please suggest necessary measures for me to create better wealth in the coming five years.

- Suma Reddy

Based on the frequency of SIPs and the inception dates of your investments, your current allocation appears to be similar to the one shown in the pie chart. I have assumed that you invest in SIPs after the first week of every month. I would classify your portfolio as ‘aggressive’, as you have about 80 per cent invested in equities and the remainder in gold.

Currently, 20 per cent of your portfolio is invested in gold. If you want gold in your portfolio for diversification or as a hedge against inflation, you can now stop your SIP in Reliance Gold Fund. On the other hand, if you plan to accumulate physical gold, you could continue investing in the fund till you reach your target allocation.

The majority of your equity investments comprise large-cap funds (HDFC Top 200 and ICICI Prudential Focused Bluechip). These funds generally invest in the shares of companies with strong fundamentals. You should continue investing in these two funds, as they are among the top performers in their category.

ICICI Pru Focused Bluechip invests the majority of its corpus in about 25-30 large-cap stocks. In contrast, HDFC Top 200 has a broader universe – the BSE 200 index. Based on the risk-adjusted returns, ICICI Pru Focused Bluechip has consistently been in the top quartile (100 per cent) on a three-year basis and HDFC Top 200 has been in the top quartile 67 per cent of the time. This is probably because the latter had a relatively higher exposure to PSU banks. The shares of PSU banks have struggled recently until the reforms were announced on 14th September, 2012.

On a long-term basis, both funds have outperformed the Sensex, as shown in the table.

FundAbsolute ReturnsCAGR
136913
MonthsYears
Scheme Performance Of Large-Cap Funds As On October 1, 2012
HDFC Top 200 Fund (G) 11.32 7.87 6.89 26.01 14.69 7.79
ICICI Pru Focused Blue Chip Equity Fund 8.68 8.55 8.28 21.56 16.63 10.58
BSE Sensex 8.00 8.00 8.16 21.8 14.32 3.18

 

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