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Sep 05, 2012, 10.58 AM IST
If an investor is looking to accumulate a certain amount within a period of 5 years or so, he needs to diversify the portfolio with well performing funds from each category.
If an investor is looking to accumulate a certain amount within a period of 5 years or so, he needs to diversify the portfolio with well performing funds from each category, advises Harshvardhan Roongta of Roongta Securities.
Here is the edited transcript of the interview on CNBC-TV18.
Q: Investor can invest Rs 2,000 for 5 years. His goal is Rs 5-6 lakh. He has got a bunch of mutual funds. What’s your advice?
A: With the funds he has I would suggest him to spruce up his portfolio. Nevertheless, let's talk about his goals. He is looking to accumulate Rs 5 lakh in about 5 years time with just Rs 2,000. Obviously it is not going to be possible.
If I take a growth rate of about 12% for a five year period, the corpus he will accumulate would be Rs 160,000 and in case he needs to still go ahead and accumulate Rs 5 lakh he needs to increase his investment and invest about Rs 6,000 a month. He would probably need to take that call. The investments that he has in his portfolio can be spruced up to restrict it to about four well performing funds and that’s good enough for diversification.
What you could do is that whatever your monthly investment is, you choose to split it equally between the four funds which I am going to name. One is an HDFC Prudence Fund, the other is an SBI Magnum Emerging Businesses Fund and the third would be HDFC Top 200 and the DSP Blackrock Tax Saver Fund.
What will happen when you do this is that you will be having a concentrated well performing fund from each category and this will help you in administrative purposes. You don't really need to bother about tracking and keeping a note of everything that you are doing across about 10-15 funds. I guess that is what is going to be more advisable to you going over in the next five years.
Once DTC is implemented, you probably need to take a relook at the tax saver funds because tax benefits are not available for ELSS schemes under DTC.
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