Hedge equity with some debt

I am 30 and want to start investing Rs 10,000 per month in mutual funds via a Systematic Investment Plan (SIP). My time horizon is three years. I have chosen the following for an SIP of Rs 2,000 each: HDFC Equity, Sundaram Capex, SBI Magnum Contra, Reliance Equity and BSL Top 100. Can you evaluate my selection and advise?

– Rohan

From your list, we would go with HDFC Equity and Magnum Contra. The objective of Magnum Contra is to primarily invest in undervalued scrips which could be out of favour at the time of investing but are likely to show attractive growth over the long term. Instead of BSL Top 100, a better option would be DSPBR Top 100 Equity.

Instead of Reliance Equity, consider Canara Robeco Equity Diversified or Quantum Long Term Equity. Sundaram Capex is a thematic fund; we suggest you avoid it.

We have assumed you have debt investments elsewhere and you are seeking advice solely on your equity portfolio. If not, do have some exposure to debt. In that case, drop a fund from the ‘Large & Mid-Cap’ category and pick a debt fund (Canara Robeco Income).

I have an SIP in Reliance Growth, HDFC Top 200, Sundaram Select Mid Cap and Benchmark CNX 500. I also have an SIP in Reliance Vision but I stopped my SIP in Reliance Equity. I was thinking of switching all the units in both these funds to Reliance Regular Savings Fund. What do you think?

– Venkat

You definitely have a penchant for schemes from Reliance MF. You already have three schemes from the fund house and want to add one more. A basic principle of portfolio management is exposing oneself to different stocks in various sectors via a credible set of MFs. Avoid a bias towards any single fund house, since it could lead to a style or fund management overlap.

Your investments are too tilted towards mid- and small-cap stocks, approximately 30-33 per cent.

You have stopped your investment in Reliance Equity, want to end it in Reliance Vision and transfer all units to Reliance Regular Savings Fund. This is a good move. Even then, your portfolio would have a strong mid-cap tilt. Do consider some exposure to a large-cap fund.

Let me know the best Monthly Investment Plans (MIPs). I have a one to three-year time frame. Is it advisable to invest in Gold ETFs?

– Dharamdev Saini

HDFC MIP Long Term, HSBC MIP Savings, Reliance MIP and Canara Robeco MIP are four good options to make your choice from.

Investors can diversify the risk of a portfolio by including various asset classes in it. If you want gold to be part of your portfolio, a Gold ETF (exchange traded fund) is the best avenue to explore. It’s the closest you can get to an investment in physical gold. You will need a demat account to invest in an ETF, since the units are listed on a stock exchange. The other gold funds (AIG World Gold Fund and DSPBR World Gold) invest in stocks of gold mining companies and are much more volatile.

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