Thank you letter

Mr.Nester Dias wrote back :

Thank you Srikant

Your input was an eye opener - I never did realise that so much of my exposure was into infrastructure. I think thats the difference between being a novice ( like me ) and someone more experienced

I agree with your reasoning - Also will do some more reasoning on the scrips that you mentioned.Thank you for your input and really appreciate .

Regards

Nester

I need your advise

Mr.Sunder requested for advise :
Hello Mr Srikanth,



I am planning to invest Rs 10000/- per month in Mutual Funds and was researching the various options when I came across your blog. Your specific and clear advice in your blog is very helpful and easy to understand.





I am 39 years old and am at present saving about Rs 20000/- per month. I have some insurance policies for about Rs 8 lacs but not much of savings otherwise. I had a housing loan which I prepaid and closed in May this year. Now I need to build up some savings for the long term.I request your advice regarding the correct portfolio for me.



Thank You and Best Regards



sunder


SRIKANTH SHANKAR MATRUBAI replied
Dear Sunder,
It feels great to know that you have already closed your housing loan. And your insurance of 8 lakhs is also enough for now. Maybe you need to take a Term Insurance of about 12 lakhs which will cover you for about 20 lakhs which is quite a substantial amount. This may set you back by just about 500 per month.
That leaves about 19500 per month of savings of which you can channelise 9500 through Mutual Funds for maximum returns.
Since you are only 39 and also not having any BIG expenses in the near foreseeable future, you are ideally placed to earn Good Returns through investment in mutual funds through Sips. I have prepared a shortlist of funds for you investment. Do consider investing in them.
1. Birla Sunlife Equity Fund 1000 * 1 sips per month (1000)
2. DSPML World Gold Fund 1000 * 1 (1000)
3. DWS Tax Saving Fund 500 * 1 (500) (Here you will get the added Bonus of Free Life Insurance cover of 5 times your Investment)
4. Fidelity Equity Fund 500 * 1 (500)
5. Franklin Templeton India Equity Income Fund 1000 * 1 (1000)
6. HDFC Prudence Fund 1000 * 1 (1000)
7. HDFC Top 200 Fund 1000 * 1 (1000)
8. HSBC Equity Fund 1000 * 1 (1000)
9. JM Contra Fund 1000 * 1 (1000)
10. Reliance Growth Fund 250 * 2 (500)
11. Reliance Natural Resources Fund 250 * 2 (500)
12. Sundaram Select Focus Fund 250 * 2 (500)

These funds are carefully selected after a through analysis and should help you build up a Substianal Savings Kitty in about 10 years time.
Do review your investment every year.
Best of luck,
Srikanth Shankar Matrubai.

Is Portfolio Balancing Necessary?

One reader of my blog Mr.Nester Dias wrote a brilliant letter and here it goes :

Hi ShareSher

I am 32 years old, newly married and would like to invest upto 40K per month on mutual funds ( SIP based ) . That is around 45% of my income post tax - I consider myself a safe investor and would like to make steady returns and not lose money . Basically I am a new entrant to Mutual Funds ( entering in phases since Feb 08 ) but am thinking that this present moment would be the rite time to a) learn more about mutual funds/stocks b) very importantly make money :) . I am looking at making money in the long run ( say 5 years + from now ) .

Been doing a lot of reading and have noticed that most of the fund do have the same stocks - this applies to contra funds also..So I am not very sure about how the financial experts evaluate funds . Anyway having said this can you lend me your expert opinion on my portfolio

Would appreciate your input and your reasoning why . Thanks

Reliance Diversified Power Sector - Dividend Plan	25000	One time
Principal PNB Long Term Equity Fund - Series 2	10000	One time
JM Contra Fund - Dividend Plan	10000	One time
DSP Merilly Lynch TIGER Fund - Dividend Regular	25000	One time
Kotak Global Emerging Market Fund	10000	One time
Birla Sun Life International Equity Fund- Plan B - Dividend	30000	One time
Tata Indo Global Infrastructure Fund - Dividend	30000	One time
Tata Pure Equity Fund - Dividend	2500	SIP for 1.5 years
Tata Equity Oppurtinity Fund - Dividend	2500	SIP for 1.5 years
DSP Merill Lynch Top 100 Equity Fund - Dividend	2500	SIP for 1.5 years
DSP Merill Lynch Tax Saver Fund - Dividend	2500	SIP for 1.5 years
Kotak Tax Saver - Dividend	2500	SIP for 1.5 years
DSP Merill Lynch Top 100 Equity Fund - Dividend	25000	One time
DSP Merill Lynch Top 100 Equity Fund - Dividend	2000	SIP for 1.5 years
HDFC Top 200 Fund - Dividend	2500	SIP for 1.5 years
DSP Merill Lynch TIGER Fund - Dividend	25000	One time
DSP Merill Lynch TIGER Fund	2500	SIP for 1.5 years
Sundaram BNP Opportunities CAPEX Opp Fund - Dividend	2500	SIP for 1.5 years
Kotak 30 - Dividend	25000	One time
Kotak 30	2500	SIP for 1.5 years
ICICI Prudential Infrastructure Fund (Dividend )	30000	One time
ICICI Prudential Infrastructure Fund	2500	SIP for 1.5 years
Century SIP - BIRLA SUNLLIFE Frontline Equity Fund ( Growth )	2500	SIP for 1.5 years
Reliance - Regular Saving Fund (Growth )	2500	SIP for 1.5 years

Regards

Dear Nester Dias,
You have a good exposure of your savings to Equities. But considering, that you call yourself a 'Safe" investor, it surprises me that you have more than 40% of your lumpsum investment into Infrastructure Funds and 25% of your sip investments going into again Infrastructure Funds. You need to reduce your exposure to Infrastructure Funds and add more of Diversified Equity Funds to add Stability to your portfolio. While Infrastructure as a Sector looks highly promising, its short and medium term outlook does not look all that rosy because of the slowdown in the economy and the high interest rate scenario. If you are willing to hold for more than 5 years or so, you can continue to stay invested in these funds.

I agree with you that most of the funds do have same set of stocks. But the key differenciator as to why some funds become outperformers and some laggards, is because of the percentage of the stocks they own. Suppose Fund A owns more Reliance and Fund B owns more L&T. And, if say, Reliance spikes up due to some news, then Fund A gains more thant Fund B and thus becomes a better performing fund.
Also, it also depends on Cash component held by fund at each stage of market. Fund A holding more cash in a Bearish Market will definitely gain and will be able to outperform others due to its ability to keep picking stocks at every fall.
Also, some funds perform better because of their Enter/Exit Strategy. Example, ICICI Fusion Fund II has bought Subhiksha (unlisted) at a very low low price, and once the scrip is listed, the Fund will see a Spike in its NAV.
These and some more factors are considered while evaluating funds and their future performance.
As far as your portfolio is considered, while you can continue to stay invested in most of your lumpsum investments for now, do take a call around April 2009 when the Full year's Annual Results are announced.
However, since you already have sufficient exposure in Infrastructure Fund, I recommend you stop/switch your sip in all the three Infrastructure funds, and consider investing in Diversified Equity Funds. So, stop sips in DSP Tiger, ICICI Infra and Sundaram Capex Funds.
Alternatively, you can consider investing in HDFC Prudence Fund, Sundaram Select Focus Fund and DWS Alpha Equity Fund.
Best of luck,
Srikanth Shankar Matrubai.

Too many Infra funds in Portfolio

Mr.Saurabh Bhatia wrote back :

Hello Sir, First of all, thanks for your comments to my previous mail. I began investing in November last year and as the situation is, have already lost a lot of unrealised value owing to the great market fall. I would like to know your thoughts on my current portfolio which I begin to feel is not very good and pretty polarised.

1. Tata Indo Global Fund - 15%
2. UTI Infrastructure Fund - 9%
3. Sundram Capex - 9%
4. Reliance Power Sector- 12%
5. JM Agro and Infra - 9%
6. UTI Infrastructure - 9%
7. JM Basic - 12%
8. Birla Sunlife Tas Saver - 10%

9. Principal Personal Tax Saver- 15%

Please advice about my decisions so far. I am a medium to long term investor with a time frame of more than 2 years. Please also tell as to which ones can be discontinued. I also hear commodity based funds tend to outshine others in difficult scenarios. Please provide your valueable comments. Thanks

SRIKANTH SHANKAR MATRUBAI replied :

Dear Saurabh Bhatia,
Yes, Mr.Saurabh, you are right, your portfolio is not showing a rosy picture, not just because of the Bearish Market but also some bad investments.
It is unbeliveable that 75% of your investments is in Infrastructure and Related Sectors!!!. A sure reciepe for Disaster. Your portfolio needs a makeover and a very urgent one at that.
To begin with, let me clarify, that I am not considering your ELSS investments as they have a lock-in period and both your ELSS funds are pretty good one at that.
The changes/switches you need to do is as follows:
Tata Indo-Global Fund - 15% (Retain 5%, and balance 10% , divide into 5% each and shift 5% to Tata Pure Equity fund and 5% into DSPML Top 100 Fund)
UTI Infrastructure Fund - 9%. (Sell in entirety and invest 5% in Birla sunlife Equity Fund and balance 4% invest in HDFC Prudence Fund)
Sundaram Capex Fund - 9% (Shift entire 9% into Sundaram Select Focus Fund)
Reliance Power Sector Fund - 12% (Shift 6% each into Reliance Growth Fund and 6% into Reliance Natural Resources Fund)
JM Agro and Infra Fund - 9% (This is a Close ended Fund and you will have pay High Exit Charges, if you switch out or exit now. So, with heavy heart, I have to say, you have no other option but to continue and stay invested)
UTI Infrastructure Fund - 9% (Obviously, this is UTI Infra Advantage Fund, which is again a Closed ended Fund and with the same reasons as above, continue)
JM Basic Fund - 12% (Sell and invest 4% each in Fidelity Equity Fund, HSBC Equity fund and DWS Investment Opportunity Fund)
Note, I would have recommended JM contra, but you already have a good exposure to JM Fund House, so it is better you diversify across Fund Houses also.
After the above switches and shifts, your portfolio would look something like this:
Sundaram Select Focus Fund - 9%
JM Agro and Infra Fund - 9%
UTI Infrastructure Fund - 9%
Reliance Growth fund - 6%
Reliance natural Resources Fund - 6%
Birla sunlife Equity Fund - 5%
DSPML Top 100 Fund - 5%
Tata Pure Equity Fund - 5%
Tata Indo Global fund - 5%
HDFC Prudence Fund - 4%
DWS Investment Opportunity Fund - 4%
Fidelity Equity Fund - 4%
HSBC Equity Fund - 4%
and of course your existing ELSS Funds
Birla Sunlife Tas Saver - 10%
Principal Personal Tax Saver- 15%


And, Mr.Saurabh Bhatia, you need to find a Good Mutual Fund Advisor immediately, so that the previous mistakes are not repeated.

Best of luck,
Srikanth Shankar Matrubai