Need portfolio review

[nruharish]

Hi all,

I am planning to invest around 9k per month in equity mutual funds for a long haul (i have my debt component covered thru FD's and EPF)

Below is the list of funds i am planning to invest in along with reason:

1. Nifty Bees (2 k) - Low cost index
2. Fidelity Equity (2k) - Good equity diversified fund
3. HDFC Equity (2k) - Good equity diversified fund
4. Nify Bees Junior (1k) - Near mid-cap space
5. IDFC Premier Equity (2k) - Good Mid/Small cap fund (low expense ratio)

Let me know your thoughts on my selection of funds.

Thanks,
Nruharish

 

[yodlee99]

Some of the good performing funds are:
Fidelity equity or DSPBR Equity (2k) - Diversified fund
HDFC Equity or Top 200 (2k) - Diversified fund
Birla SL Frontline Equity A (2k) - Diversified fund
Reliance regular savings fund (2k) - Muticap fund
IDFC Premier equity A (1k) or Reliance growth or ICICI Discovery - mid+smallcap

In a growing economy like India, it makes more sense to invest in an actively managed fund (that has a fund manager) instead of a passively managed one (like index fund or ETFs). Its true that index funds have lower expenses but this can be offset by higher returns from actively managed well-diversified fund.

Thumb rules:
Have at least 20% of your portfolio as FDs in nationalized bank/post office.
Keep going on your SIP for 5+ years, even if the market goes down.
Increase SIP, if possible, and stick to within 4-5 funds at any point.
Review your portfolio once in a year.

Hope that helps. Good luck!

 

[nruharish]

Thank you yodlee99!!

The reason i chose the two ETF's:

I plan to put money into them for the next 20 years (ideally). Start pulling out only after that. I would like to accumulate about 3k per month in my saving account and only invest in the ETF's when the markets are a bit low (planning to use some relative PE approach). This way i can avoid selling (hence avoid any direct tax code hits) and also get a better price.

Let me know your thoughts.

Thanks,
nruharish

 

[yodlee99]

Sounds like you have thought through it. Now, let me know how do you know when the market is low? I am and many others would like to know when is the market going to go low and how low is considered as "low"?
This is when SIP is going to help ppl like us by rupee or cost averaging.

Using your own argument, invest in well-diversified equity based mutual funds that are actively managed by a fund manager, your returns will exceed that from ETFs or index funds. Hold on to them irrespective of prices going up or down for the 20-year time periods that you have mentioned here and you will benefit.

Let me tell you this: the main difficulty for me is to stay away from watching stock prices and think of buying them, after putting in all my SIPs. But now when I see a good price for a stock, I sit tight and pray that my fund manager had already purchased it at that price! Having some one take care of your funds every minute gives me a peace of mind so that I can concentrate on my job.
I forgot to mention that you should have all yours SIPs on different days of the month and further more, have weekly SIPs instead of monthly ones for even better time averaging.

Hope these helps .. Good luck !

 

[nruharish]

Hi yodlee99,

Thanks again. Yes, currently doing lots of research since the plan is for a very long term.

The ETF idea comes from the following link - http://www.tipblog.in/strategy/investing-strategy-for-niftybees-etf/

Thanks,
Nruharish

 

[yodlee99]

Sure, if you are ok with the returns, by all means go for it.
In many western markets where market returns ~4to 5% max, ETFs are a big hit. Mainly because its cheaper and you can ride the wave along with the index.

 

[palka]

In a growing economy like India, it makes more sense to invest in an actively managed fund (that has a fund manager) instead of a passively managed one (like index fund or ETFs).

It seems to be a good argument but does not hold much water. If you look at past 5 year return of diversified equity funds, only 61 funds out of 112 has managed to beat the Sensex.

It is impossible to tell which funds will be able to do so for the next 15-20 years is an impossibility. I agree some funds consistently do better. But some of these funds also fail to maintain this consistency. Also. this consistency only becomes apparent on hindsight.

So, the time has come to put a part of the equity portion into Index funds/ETFs.

happy investing

 

[yodlee99]

You are right on the dot there. Probably, because I don't know the exact number of funds that did well.
If you take a list of numbers, some would be above average, some near the average and some will be below the average. In a perfect normal distribution, 50% will be below average. Hence, one needs a good fund manager and not just some fund manager.
Valueresearchonline discussed about a proposal sitting with SEBI that makes it mandatory for a fund to mention how much of its fund manager's personal funds have been invested in that fund. Sure this might mean invasion of privacy of the fund manager, but would also mean how much confident is he/she in his/her own money management. However, this may never see the light at the end of the day... we are far from a perfect world. But, I am happy that SEBI is doing a more commendable job nowadays.

It seems to be a good argument but does not hold much water. If you look at past 5 year return of diversified equity funds, only 61 funds out of 112 has managed to beat the Sensex.