Choice of MF Selection

POSTED BY Sunnydoc ON April 30, 2011 12:23 am COMMENTS (17)

Hi all,

I’m 30 years old and this is the first time I’m ever investing in Mutual funds. I plan to do it in SIPs and the investments are for a 10-30 year long term horizon. I can put in about 12,500 each month.

Please let me know if my choice of funds and amount allocated to each is alright.

HDFC Top 200 – 3000

HDFC Equity – 2000

HDFC Prudence – 2000

IDFC Premier Equity A – 2000

DSP Blackrock Small and Midcap – 2000

DSP Blackrock Microcap – 1500

As the markets are high at this moment, would it be wise to wait maybe one or two months before starting to invest? I know it is wrong to time the markets, but just wanted to know if it would be ok to wait like that since it is my first investment. I heard that the first investment amount usually has to be Rs. 5000 or more. So if i could benefit of starting SIPs at a lower NAV wouldnt that be nice?

17 replies on this article “Choice of MF Selection”

  1. Sunnydoc says:

    Thank you so much Jagadees.. I’m learning a lot.. šŸ™‚

    Sunnydoc

  2. Jagadees says:

    @Sunnydoc
    Actually both the fund has the same mandate of investing in scalable midcap and smallcap which has potential to be large cap in future at attractive valuations. Both are run by the same fund manager Mr.Kenneth Andrade who is very astute stock picker who follows value investing to the core (one of my favorite fund manager too).Even the one year and two year returns are almost similar.

    1. The difference in returns in the 3-year period is due to the point of time the fund was started. IDFC small d midcap was started in feb 2008 when the stock market started to slide and hence the fund manager had the comfort to pick many midcaps at thrownaway prices. But the premier equity was started 5 years before, so it has to ride through the bumpy ride of stock crash and hence its 3 year return looks less when compared to the other one.
    2. Next, the lower risk grade assigned to IDFC small and midcap was because the fund invested only 80% in small d midcap and remaining 20% in largecap…..whereas IDFC premier invested 94% in small d midcaps andd remaining 6% only in large cap…so it was assigned bit higher risk grade…… this cap allocation will vary time to time based on the market valuations and availability of better stock bargains……

    So basically there is nothing much to read between the two and hence you can go with anyone of the fund which is comfortable for you……

    Happy investing
    Jagadees

  3. Sunnydoc says:

    Well i compared the returns of both funds over the last 3 years and IDFC small and midcap returns were higher. There was some fund report card on moneysights.com which showed that it was less riskier than premier equity A. So was the data on valueresearchonline.com So i thought maybe since it has a lower risk and a higher return than premier equity A, i could go for it?

    Please let me know what are your views on this..

    Thanks and regards
    Sunnydoc

  4. Jagadees says:

    @sunnydoc

    on what basis do you think that IDFC small and midcap equity performs better and gives stable returns than premier equity A?

    Regards
    Jagadees

  5. Jagadees says:

    @sunnydoc

    what makes do you think that IDFC small and midcap equity performs better and gives stable returns than premier equity A?

    Regards
    Jagadees

  6. Sunnydoc says:

    I’m planning to change a bit of my portfolio. I intend to replace the IDFC Premier Equity A with IDFC Small and Midcap Equity instead since the performance seems to be a bit better and more stable.

    Is that ok Jagadees?

  7. Sunnydoc says:

    Thanks Nilesh.. Will keep that in mind.. For now I will go ahead and make my first MF investment… Wish me luck…

  8. Nilesh K says:

    With regards to these funds, please watch on fund managers as well. I feel one should think again (whether to hold or exit) if there is a change in fund managers.

    IDFC Premier Equity A and DSP Blackrock Small and Midcap

  9. Sunnydoc says:

    Thank you

  10. Jagadees says:

    Minimum SIP amount for IDFC pr eq is 2000 rupees…..25k is for lumpsum investment….

  11. Sunnydoc says:

    Yes I guess the exit load should not concern me much as I plan to keep things long term. Does the initial investment amount of Rs. 25,000 apply even in SIPs for IDFC or is it just for lumpsum investment?

  12. Jagadees says:

    @Sunnydoc

    Portfolio: feel your portfolio is looking good….. Go ahead with the same….But remember couple things – Have periodic review of your portfolio atleast once in a year and dont stop ur SIPs in the market meltdown (actually tat is the time to allocate more to get advantage of low NAVs)…. Also increase your SIP amount with rise in your income level…..

    Exit load and SIP: quantum 4% exit load apply for fund withdrawn within 6 months…..if u withdraw the funds after 2 years there is no exit load….this is to encourage investors to think investment as long term one…..as u are planning to 10 years, there should not be any worry in this regard…..even IDFC premier equity has exit load of 1% for fund withdrawn within 1 year…. Actually redemption pressure makes fund managers to think in short term, so that to avoid that they levy exit load to discourage investors from exiting the fund…..
    Best way to go is to evaluate the long term performance of the fund and start investing in them if you are convinced about the performance….

    Regards
    Jagadees

    1. Sunnydoc says:

      Iā€™m planning to change a bit of my portfolio. I intend to replace the IDFC Premier Equity A with IDFC Small and Midcap Equity instead since the performance seems to be a bit better and more stable.

      Is that ok Jagadees?

  13. Sunnydoc says:

    I’m sorry but I had one more doubt. Do the minimum investment amounts also apply to SIPs? I saw that the minimum investment of IDFC Premier Equity was 25,000. Also the exit load of Quantum Long Term Equity (4%) was much higher compared to the rest. Please provide your valuable inputs on these.

  14. Sunnydoc says:

    Going by that, i have restructured my SIP plan as follows:

    HDFC Top 200 – 3500
    Quantum Long Term Equity – 3000
    HDFC Prudence – 2000
    IDFC Premier Equity A – 2000
    DSP Blackrock Small and Midcap – 2000

    Please let me know if I am heading in the right direction with my choice of MFs and SIP amounts. Please advise me with your views on this

  15. Sunnydoc says:

    Thank you Jagadees, very informative..

  16. Jagadees says:

    @sunnydoc

    Regarding Portfolio:
    I have 2 suggestions for ur portfolio:
    1. First three funds shows that your portfolio seems to be skewed towards one portfolio manager i.e. prashant jain…… No doubt that he is star fund manager for the past 10 years…. But my question is can he deliver the same out performance with large corpus and what will happen if he leaves the fund house like nilesh shah of ICICI/sandeep shabharbal of SBI? My suggestion to reduce the risk is to replace HDFC equity with other multicap like quantum long term equity or Templeton india growth fund.

    2. your portfolio seems to be more concenterated towards mid caps and small caps. (Dont forget that HDFC prudence at times will bet more on mid cap and small cap. currently it is 45%). So take one out of the last 3 funds, preferably microcap fund and redistribute the amount between large cap and multicap. (Note: these are my suggestions, do ur research and take final decision).

    Regarding SIP:
    There is no good time or bad time to start first SIPs…. Also no amount is small to start SIP…. Kindly start the SIP now and when the market corrects as per your prediction ur that month SIP will take care of buying units at low NAV…..If you wait for market correction, then u will precious time in the market and compounding advantage….. actually as per ur 10 year term goal this market level will have little significance to ur final corpus.
    So go ahead and start ur SIP as early as possible.

    Regards
    Jagadees

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