Which of the following funds should I sell, hold or switch: Reliance Long Term Equity, Reliance Equity Advantage, Reliance Long Term Equity (all under growth plans); HSBC Advantage India, HSBC Progressive Themes, HDFC Capital Builder, HDFC Growth, Sahara Banking & Financial Services, Franklin India Opportunities and Pru ICICI Equity and Derivative Fund – Income Optimiser (all under dividend options); UTI Infrastructure Advantage, UTI Infrastructure, JP Morgan India Equity (dividend), JP Morgan India Smaller Companies, Religare Agile, Tata Indo Global Infrastructure, Birla Sun Life International Equity (Plan B), Birla Sun Life Special Situations, Sundaram Energy Opportunities, Sundaram Capex Opportunities, Sundaram Growth and Principal Emerging Bluechip.
— Thangavelu
We have some observations on your portfolio construction. You hold an unwieldy portfolio. You have invested about Rs 1.7 lakh in 21 funds! Now, such diversification can well dilute portfolio returns. Besides, you have been investing in lump sums and not systematically. As a result, some of the investments made in market peaks have not returned well.
Further, you have invested in new fund offers. The risk of investing in new funds is that they have no track record of performance that you can rely upon to invest.
Portfolio rejig
For starters, as far as possible, invest in funds with some financial goal or time target in mind.
Now, moving to your portfolio, we will try to make it compact. This will involve exiting many funds. If you are game, you can use the proceeds of these to invest in the funds we will recommend, through the SIP (systematic investment plan) route.
The Reliance funds that you hold have all delivered single-digit returns of less than 8 per cent compounded annually from their respective dates of purchase. Reliance Equity Advantage is now Reliance Top 200. You can exit this as well as Reliance Long Term Equity, given their poor performance since your purchase. You can hold Reliance Regular Savings Equity only if you believe you can take the volatility. Otherwise exit that as well.
HSBC Advantage India is now HSBC Progressive themes. You seem to have accumulated it when its net asset value dipped. When a fund is not performing well, averaging it will not help improve returns. Exit this fund and the tax fund as both of them have underperformed peers.
Do not go for theme funds unless you can follow the sector and actively enter or exit them based on the sector's cycle. We suggest you move out of theme funds — UTI Infrastructure, Tata Indo Global Infrastructure and Sundaram Energy Opportunities. Hold Sundaram Capex Opportunities for one more year and see if the performance picks up. Exit Sahara Banking & Financial Services.
Hold both the HDFC funds. They have returned between 14-18 per cent annually over your holding period.
ICICI Pru Equity & Derivative fund uses arbitrage strategy to contain declines. It has delivered 7.5 per cent annually since your purchase in December 2006. Debt funds would have delivered more for lesser risk. Sell the fund. Hold JP Morgan India Equity. The fund has done reasonably well in the large-cap category. You can consider small SIPs in the fund. Cut your losses in JP Morgan India Smaller Companies.
Hold Principal Emerging Bluechip but avoid further exposure and monitor its performance. It is currently a middle-rung performer in the large-cap category. Switch from Religare AGILE to a mid-cap fund from the same fund house – Religare Midcap.
Exit both the Birla funds. Their performance has been mediocre. If you wish to hold an international fund, you can opt for Templeton India Equity Income. Sell Sundaram Growth as it has been underperforming for a few years now.
Use the entire sale proceeds to invest in HDFC Balanced, Quantum Long Term Equity and Canara Robeco Diversified Equity through SIPs for not less than three years.