Best portfolio for a young starter in sip

POSTED BY Rishabh Dubey ON July 6, 2011 4:53 pm COMMENTS (12)

I am a 22 year old software engineer and i have just started my career. I with my 5 of other friends want to start our sip of 5,000 bugs. After lot of reading and analysis we are going to invest in these funds-

HDFC Top 200–3,000
DSPBR Small and Mid Cap–2,000

We have chosen these as we want to be very aggressive and want very high returns.Our main motto is to get the very high return for our 5,000 bugs in 2-3 years with above average risk. Please suggest us that we should start with these or include any other.

Experts comment are most welcome as there are many others like us to start in this way.

12 replies on this article “Best portfolio for a young starter in sip”

  1. Rishabh Dubey says:

    please help me now i am planning to replace hdfc 200 by hdfc equity.should i replace it or not.

  2. Rishabh Dubey says:

    Thanks for your advices ramesh & manish——–I am investing in these 2 funds–

    HDFC Top 200
    HDFC Mid Cap Oppurtunities

  3. Rishabh Dubey says:

    please tell me about reliance pharma fund. How is this? My father is telling to invest in this only.

  4. Rishabh Dubey says:

    @manish and ramesh thanks for your advise again….

    I want to know more about IDFC Small & Midcap Equity (SME) Fund – Growth fund as all the sites are showing it a 5 star fund which has given very high return and risk is very low.My question is that how can a fund can give very high returns with very low risk.This is a 3 year old fund.And they are showing that it is more consistent and less volatile than some of the funds like hdfc top 200 and dspbr top 100.How can it be so?

    1. Ramesh says:

      It is a myth that returns are correlated with risk i.e high risk gives high returns while low risk gives low returns!
      Sectoral funds are not good for starters. And not at all good as a single fund. Your father is very mistaken in that sense.
      Equity portfolios should be diversified (across sectors / nations / time).

  5. @Rishabh

    DSP Blackrock and IDFC both are good option . You can choose any . You never know which one will outperform in next 6 months , 1 yrs or 2 yrs .

    Manish

  6. Rishabh Dubey says:

    @ramesh if i want to chose second option then which is the best one.(i am confused between DSP BlackRock Small and Midcap Fund – Growth and IDFC Small & Midcap Equity (SME) Fund – Growth)

    Please tell me about other options too.

  7. Rishabh Dubey says:

    @ramesh again i am very much thankful for your great attention and we all are so pleased with your knowledge in investment…..

    i like the first option as i can also make a long term portfolio around it if i get good returns after 2-3 year……but why are you saying both the funds from same fund house…i cant understand this logic…….as we want to invest in dspbr smc(the best in this type of fund) as its 1 year return is best in all categories and we have chosen hdfc top 200 (the best in this type of fund) as its 3 year return is best in all categories(though lots of other reasons too for selecting this fund). I want to make a point here that when comparing hdfc top 200 with dspbr eqity or dspbr top 100 (for 2-3 year returns) hdfc top 200 is a clear winner.

    Eagrly waiting for your much needed advice.

    Also we need more help from other experts like manish and jeetendra……..

    1. Ramesh says:

      Because you do not drive by looking at the rear-view mirror only. There are several things to look for besides the past 3 years performance, namely,
      1. The particular fund style
      2. ofc, the AMC. plus some others.

      Prospectively, we cannot predict which is going to be the best fund 3 years in future. So we can only choose one of the good funds. There is no “best”.

      Same fund house: So that you have to open only one account with the AMC (less hassles, thats all). You want to go ahead with HDFC, its fine. You can have HDFC Top 200 and HDFC Mid-cap opportunities. For that matter, you can also go with Franklin Templeton with their Blue-chip and Smaller companies funds. I cannot predict which of them is going to give you the “best” returns.
      My suggestion is more for the exclusive style of the fund with a reasonably good fund house.

      Same for Type 2. I dont know which one is better, as Manish said.

      On a business channel, I had heard about an expert saying that Indians invest 2% in equities (2 atrocious percent) and then expect that to perform miraculously with protection of capital and extraordinary returns. The total returns of the portfolio (equity+debt+others inc gold,etc) matters, not the particular return of an individual component.
      With 2 funds at the end of 3 years, it can be that 1 has given 20% compounded while the other 10%. Do you think either of them is bad? I would say, not necessarily. The same funds may give you a -20% and -10% return over the next 3 years (role reversal).

      Regarding your comparison, I would like to point out that SIP returns are similar (no evident statistical difference) for HDFC top200 (24.7%), DSP Equity (22.7) and DSP top 100 (20%). Quantum long term equity fund has (27%) over the same period (but that will charge you money, if you want to withdraw earlier for a longer period of time). Whatever statistics you use, whether it is actual performance or alpha or beta, etc, each of them is handicapped in the way that they are backward-looking and not forward looking.

      These are my views. Do what you / your friends feel like.
      Keep learning. Keep investing.
      Ramesh

  8. Rishabh Dubey says:

    @Ramesh first of all thanks for your advise

    1. What is the end-purpose of the money? You want it to fund something important like further education, etc ? Or you want it to just have whatever and depending upon the corpus give yourself a gift, etc?

    A- All my friends have their own idividual end-purpose.in my case I have no end pupose as of now and just want to make big money.

    2. You should understand a few things. You want to be very aggressive, above average risky and want very high returns. Looks good on paper. Can be tough in real life. How much downside can you digest?
    At 5,000 per month for 3 years (1.8 lakhs). Are you ok with getting “only” 1.8 lakhs after 3 years (0%) or 1 lakh (return of -50%)?

    A- I can digest any downside.I have no problem.Thats why we are so aggresive.

    1. Ramesh says:

      Ok.
      My suggestions are:
      Type 1.
      1. Take 2 liquid baskets in the form of entirely different forms of investment style funds. My reco are get the same fund house. open up a direct online account with the fund house. Specifically DSP Top 100 and DSP small and mid cap (excludes top 100) [or microcap (excludes top 300)].

      2. Each month put money in the lesser performing fund. Gauge performance over last 3/6 months for each fund. Say dsp smc has fallen 5% while top 100 has fallen 1%, then invest in the former. if there is no significant difference then invest in either/equally. In this way, you are trying to get more units with a little contrarian effect.

      Type 2.
      1. SIP in DSP Microcap / Mid-small cap. singly. nothing else.

      Just gauge the performance 6 months before completion of term (2-3 years, whatever). If there is enough corpus, get into debt option completely. If it is down, remain in equity.

      Caveats:
      1. You cannot predict markets. In short term (2-3 years is a short to medium term), equity returns are very volatile. So if there is good upside, you protect the gains, if it has been a good downside, you remain in it.
      2. Since you are ok with a good downside, equities are not bad for you. No other asset class (even gold) will help you with that upside.
      3. There can be different types of investment styles. Like foreign funds (check out Equity International tab). though since emerging markets have performed less recently, it is wise to go with emerging markets presently (India).
      4. Regarding your particular query, you should strive to make a longer term portfolio (but i understand the need for enjoyment of own money!).
      5. What should you not do. Trading requires a lot of luck and/or expertise. Individual stock selection is both an art and science and requires a lot of effort to understand and analyse, which also i would not recommend.

      Hope this helps you. Any other thoughts are also welcome.
      Ramesh

  9. Ramesh says:

    @ Rishabh
    1. What is the end-purpose of the money? You want it to fund something important like further education, etc ? Or you want it to just have whatever and depending upon the corpus give yourself a gift, etc?

    2. You should understand a few things. You want to be very aggressive, above average risky and want very high returns. Looks good on paper. Can be tough in real life. How much downside can you digest?
    At 5,000 per month for 3 years (1.8 lakhs). Are you ok with getting “only” 1.8 lakhs after 3 years (0%) or 1 lakh (return of -50%)?

    Answer these.

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