Alternative choice of funds

POSTED BY Kuntal ON June 15, 2013 1:02 pm COMMENTS (9)

Hi to all. Around 10 days back I had decided on the following MF portfolio:

1> Franklin india bluechip, 2> Quantum long term equity, 3> HDFC midcap opportunities.

How does the alternate portfolio look like:

50:50 split between 1> Templeton india equity income & 2> Quantum long term equity.

The manager will not be restricted in any particular cap, and I will also be getting a bit of

international diversification.

Please come forward with your inputs. (Special request to Ramesh to comment- if I am not

                                                    mistaken, this is his preferred approach).

With regards,

Kuntal.

9 replies on this article “Alternative choice of funds”

  1. Kuntal says:

    Ya, I have got around 4 months expenditure as emergency funds.
    So for rebalancing with MFs every 1-1.5 years, what is required? Short term or ultra short-term or liquid fund? How many? Can anyone suggest a few? Also whether one should do SIP in debt funds or lumpsum better?
    Experts please help!!!

    1. Kuntal, One way out is to use EPF (if applicable) for max % of debt and just pay enough to keep your PPF alive. If 60% equity is the desired asset allocation, wait until equity component exceeds 65%. Then redeem the 5% and invest in PPF (until 5% = 1 lakh or so)

      Down the line use a balanced fund. This will have 65% equity. So you use this for adjusting the asset allocation.

      You can also use an arbitrage fund . This will be taxed like equity. the risk and returns is similar to a debt or ultra short fund. If the 5% equity threshold exceeds 1 lakh you can park some portion here until you can invest in PPF again. You can also shift to equity when needed.
      You can read more about arbitrage funds here:

      http://freefincal.wordpress.com/2013/06/03/can-you-think-of-a-risk-free-and-tax-free-financial-instrument/

      This is some loud thinking on my part You will have to sit and think about how to work this out. Personally I would like to avoid debt with volatile returns (income funds) if possible.

  2. Gotu says:

    Liquid fund from either Quantum or Franklin Templeton should be fine, along with partial amount in saving a/c with autosweep facility……
    By the way what about emergency fund?

    Regards Gotu

  3. Ramesh says:

    Correct.

    I prefer the 50:50 option. And go on investing in such a way so as to balance the two funds equally.
    eg. if after some months, the valuation of TIEI is 95k and of QLTE is 105k and you have 20k to invest, then invest 15 in TIEI to make it to 110k and rest 5k in QLTE. Do it as per your investment pattern.

    Both these funds have different styles but are not restricted in their caps.
    The PPFAS fund can also be used instead of TIEI, but the former does not have a long history to see their behavior.

    While in terms of QLTE, other options which you can consider are DSP Equity and HDFC Equity. Just giving the other alternatives. 🙂

    1. Kuntal says:

      Thanks Ramesh, I had hoped that u would concur. Infact the balancing part that u mentioned would be so much easier with only 2 funds.
      One mutual fund research that I respect a lot is “Morningstar Analyst Research”. I wonder why there is nothing about Quantum long term equity. Is it becase just like they dont pay any intermediary, they also dont pay any MF analysis site?

      1. Ramesh says:

        That reason cannot be ruled out. But another reason could be the small AUM of the fund.

        1. Kuntal says:

          I had another question. I am planning 65:35 = equity:debt. Most of my debt portion is in illiquid
          instruments such as PPF. So for rebalancing,I need a tax-efficient & relatively liquid debt instrument. So I am looking at debt funds, preferably that mature between 1-1.5 years. As I have practically no knowledge about the same; please suggest me the same. How many of the same are required? Will one suffice?

  4. The alternative portfolio offers you more diversification that the 1st option. Although there is nothing terribly wrong with that too.

    10 year returns of EVERY equity MF irrespective of caste creed and sect is way above inflation.

    So when it comes to equity investing choice of fund is secondary to patience and staying investing.

    1. Kuntal says:

      Thanks FFC. Yes I do admit that mentality & asset allocation are way above choice of funds.
      But in the process of choosing, one can learn a lot. For example, I learned the difference between collecting funds & proper diversification (through this forum), only because I had to choose some for myself. Btw, I hope the new funds I chose is not too mid-small cap biased for your liking.
      Would also love to hear about my choice from Ashal, The Zion View, Wealth U create, Jagadees and other pros.

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