Choosing well-rated funds

I want to invest Rs 3,000 in three mutual funds via SIPs (Rs 1,000 each). I have shortlisted a few funds: Sundaram BNP Paribas S.M.I.L.E. Reg, Reliance Regular Savings Equity, Magnum Contra, HDFC Top 200 & UTI Opportunities. Should I opt for the first three or do you suggest some other funds?

-Hemant

Sundaram BNP Paribas SMILE Reg and Reliance Regular Savings Equity are 5-star rated funds. They both invest heavily in mid-cap stocks. Having two aggressive funds would make your portfolio too risky. So, choose to invest in any one of these two funds.

Magnum Contra is a good 4-star rated fund. HDFC Top 200 and UTI Opportunities are 5-star rated funds, with an impressive track record. You may invest in any of these three.

I had invested in Magnum Taxgain in 2006. The three-year lock-in is over. Should I redeem or continue? I can stay invested, if needed.

-Shailesh Bhagat

Magnum Taxgain is a 4-star rated tax saving fund, with a portfolio similar to an equity diversified fund. If your portfolio has a sufficient number of equity diversified funds, then you may redeem this one and invest the proceeds in the remaining funds. You may even continue holding this fund for the long term if you wish to.
 

Fund	Return (%)
	1-Year	3-Year	5-Year
Magnum Taxgain	96.44	8.35	31.93
Category Average	94.29	8.18	21.95
As on January 18, 2010

I want to build a mutual fund portfolio with a time horizon of 10 years. I would like your opinion on my selection.
 

Funds	Amount (Rs.)
HDFC Top 200	3000
DSPBR Top 100 Equity	3000
Magnum Contra	2000
HDFC Prudence	2000
ICICI Prudential Infrastructure	2000
IDFC Premier Equity Fund	2000

-Yuvaraj Patil

Your selection is impressive; it has all 4/5-star rated funds. However, we suggest you reduce your portfolio to four funds.

If you go with HDFC Top 200 and DSPBR Top 100, this will give your portfolio a large-cap tilt. You can balance this with IDFC Premier Equity, which is more aggressive since it has an exposure to mid caps.

Instead of HDFC Prudence, a balanced fund, one that invests in both equity and debt, we suggest you go for a debt fund like Fortis Flexi Debt. Avoid ICICI Prudential Infrastructure, a thematic fund which invests at least 70-100 per cent in stocks of infrastructure development companies. As for Magnum Contra, it has evolved into being a good equity diversified fund, rather than a fund that takes contra bets. You don't need to invest in it if you go for the other three schemes.

So, this portfolio of four schemes will give you a large cap, mid cap and debt orientation. Since you plan to invest Rs.14,000, you can invest Rs. 3,500 per month in each of the suggested four schemes.

Value Research