Saturday, July 4, 2009

CREATION OF A PORTFOLIO FOR A NEW INVESTOR

Mr.Exterminate wrote :

"Dear Srikanth,
My younger brother wants to start investing into Mutual funds. He is single and 24yrs old with no liabilities so far. He is willing to invest 20-25k per month in SIP.
Kindly suggest me some good Diversified and Debt funds to invest in.
My suggestion was to invest in Sundaram BNP Paribas TaxSaver as an ELSS for tax savings purpose as he needed that too.
And either Canara Robeco Income and/or Birla SunLife Income fund as debt component.
In Diversified Equity below were the funds I shortlisted.
1. DSPBR Top 100 Equity
2. DSPBR Equity
3. Birla SunLife FrontLine Equity
4. DWS Alpha Equity
5. Sundaram Select Focus
6. HDFC Top 200 Fund
7. ICICI Pru Infra
8. IDFC Imperial Equity
9. IDFC Premium Equity
10. Franklin India Prima Plus

But there are so many good funds to shortlist from. And for investment of 20000K per month I guess 4-5 funds are enough. I request you to help me out in choosing the good funds for investment. Because to many funds and over-diversification also does not make sense.

Thanks in advance for the help.
Exterminate.


SRIKANTH SHANKAR MATRUBAI wrote :
Dear Exterminate,
Your brother is young and with no liability, he can afford to have a higher exposure towards Equities.
Of course, the first thing he has to do is get himself covered adequately with Term Insurance, as this is the cheapest form of Insurance. Beware of ULIPs, they are very attractively packaged and tempt you, but you are a loser in that investment avenue. Though some of the ULIPs are good, you better avoid them.
And, he would do well to also get himself a Health Insurance too. At his age, Health Insurance will be very cheap.

Then, of course, he should consider investing in Mutual Funds.
To add to Term Insurance, your brother can consider investing in DWS Tax Saving Fund, which gives you free insurance cover upto 5 x your investment subject to limit of maximum 5 lakhs. This would also take care of his ELSS investments.
I do not think he needs to consider any Debt Funds as of now. I would advice him to split his 20000 sip into 10 sips of 2000 each and invest in the following funds.

1. Birla Sunlife equity Fund
2. DSPBR Top 100 Fund
3. DWS Tax Saving Fund
4. Fidelity Equity Fund
5. HDFC Top 200 fund
6. HDFC Prudence Fund
7. ICICI Pru Dynamic Fund
8. Sundaram Select Focus Fund
9. Tata Pure Equity Fund (superior long term track record makes this a good fund to have in a LONG TERM portfolio)
10. UTI Wealth Builder Fund - Series II

Though the Portfolio may appear conservative for a 24 year old with little or no liability, I feel the Fund will be able to give superior and consitent returns.

Do write back about if you need any more clarification and your Final Choice of funds.
Regards,
Srikanth Shankar Matrubai

Also visit

http://equityadvise.blogspot.com

2 comments:

  1. Can you please classify Equity funds into Large Cap and Midcap from above list

    ReplyDelete
  2. Among the above list,
    DSPBR Top 100 Fund
    HDFC Top 200 Fund
    are Pure large cap funds.

    HDFC Prudence Fund is a Balanced Fund
    UTI Wealth Builder Fund- Series II is a hybrid fund which invests in gold and equity
    All the other are Diversified Funds, without any Sector or Market Cap bias.
    There are no Pure Mid cap fund in the Portfolio selected.
    REgards,
    Srikanth

    ReplyDelete

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