Get the combination right

I am 24, and since last month have started investing Rs 1,000 in HDFC Top 200. I am thinking of investing in Reliance Growth and HDFC Equity from next month. My investment time-frame is 10-20 years and I am looking at investing Rs 4,000-Rs 6,0000 a month through SIPs. I want a stable fund that would give high returns.

- Wilfred F

You have selected a good fund in HDFC Top 200. It is a large-and mid-cap oriented fund, with a proven track record and good performance history. On your decision for additional investment, you can increase it in HDFC Top 200. Alternately, look at investing in Reliance Growth; it is a fund that invests in the mid-cap and small-cap space. Though a risky fund compared to HDFC Top 200, the combination will give you the necessary exposure to large-, mid- and small cap stocks.

I am 23 and save around Rs 30,000 per month. I plan to invest Rs 5,000 every month in the funds listed below. As I don't have any short-term liabilities, I want to build a huge amount in 10-15 years. Please suggest whether the funds I have selected can meet my requirement?

- Prashant

 

Mutual funds	Amount (')
BSL Dividend Yield Plus	3,000
DSPBR Equity	3,000
Fidelity Tax Advantage	3,000
HDFC Mid-Cap Opportunities	3,000
HDFC MIP Long-term	3,000
ICICI Prudential Focused Bluechip Equity Retail	3,000
IDFC Premier Equity Plan A	2,000
Reliance Equity Opportunities	2,000
UTI Opportunities	3,000

Investing in diversified equity funds is the ideal way to accumulate desired wealth over time and you should be able to achieve this goal. You have a good selection of funds. However, you don't need to invest across nine funds to achieve this, especially when several of these have overlapping investment themes.

We suggest you go with a core and satellite approach, which will give your MF portfolio the necessary stability and growth for long-term wealth creation. We have listed five funds for you from your existing set of nine. You should look at investing 70-80 per cent in the core funds and the remaining in the satellite one. This way the core will take care of stability and the satellite helps your portfolio earn the necessary push to improve the overall performance.
 

Core funds
Scheme	Category
DSPBR Equity	Multi-Cap
UTI Opportunities	Large- and mid-cap
Fidelity Tax Advantage	Equity: Tax Planning
Satellite funds
BSL Dividend Yield Plus	Mid- and Small-Cap
IDFC Premier Equity Plan A	Mid-and small cap

I have sold one of my MF investments and have made a short-term capital gain of approximately Rs 1,200. I come under the 10 per cent income tax slab Do I need to report this on my income tax filing and what would be the capital gains tax?

- D Venkata Rajeev

You will have to disclose the short-term capital gains you made at the time of filing your tax returns. The short-term capital gains tax rate will depend on the kind of fund you have sold-equity or debt. Equity funds attract a 15 per cent short-term capital gains tax rate excluding surcharge and cess. In case of debt funds, the short-term capital gains are added to your income and taxed according to the tax slab.

I want to start investing in MFs; how do I start the process?

- Suneet Kumar

We suggest you start investing in a balanced fund such as DSPBR Balanced or HDFC Prudence. These are well-performing funds, and you can start an SIP in any of these. After six months, when you review the performance and experience, you are bound to increase your investment and may want to diversify. Then, look at a large-cap equity fund such as DSPBR Top 100 or HDFC Top 200.

Value Research