Q1. Im a Non-resident Indian from Qatar, and intend to start SIPs (Systematic Investment Plans) in the following mutual fund schemes:

Name of Mutual Fund Scheme

HDFC Top-200 Fund

HDFC Equity Fund

Birla Sunlife Dividend Yield Plus Fund

UTI Dividend Yield Funds

I plan to make a monthly investment of2,000 (through the SIP route) for a period of 10 years. Can you please let me know whether my mutual fund scheme selection is fine, or do I require to make any changes?

Answer:Primarily let us apprise you that the mutual schemes selected by you are large cap oriented, wherein they follow the under-mentioned style of investing:

Name of mutual fund schemeStyle of investing

HDFC Top-200 FundBlend

HDFC Equity FundFlexi

Birla Sunlife Dividend Yield Plus FundValue

UTI Dividend Yield FundsValue

Being large cap oriented funds they would infuse in stability in your portfolio as their portfolio holdings constitute to be of large cap stocks (having a high market capitalisation), which would help you from being exposed to violent downside risk during turbulence of the equity markets. Moreover, another noteworthy point about them is that they enjoy an edge over their mid-sized peers due to the following reasons:

Being well established Stable earnings stream Well researched

Hence given the aforementioned attributes of large cap funds as well their performance track record (which has been quite appealing so far) we recommend you no change in the mutual fund schemes selected by you. Moreover, given the present turbulence of the Indian equity markets they would be a perfect fit for your portfolio, and your sum of2,000 invested per month for a period 10 years will yield you approximately4.64 lakh (assuming rate of return of 12% p.a.).

Q2. At present I have been investing in Reliance Growth Fund and Reliance Regular Savings Equity Fund through a monthly SIP route, but they arent performing too well since last 1 year. Hence in such a case, should I continue my SIP installments or discontinue further SIP installments?

Answer:Report cardScheme Name6-Mth(%)1-Yr(%)3-Yr(%)5-Yr(%)SI (%)Std. Dev(%)SharpeRatioPersonalFN Ranking

Reliance Growth-Ret (G)-2.9-2.513.019.327.09.120.11PFN - R2

Reliance Reg Savings-Equity (G)-2.30.816.122.220.09.760.14PFN - R4

BSE-100-1.91.19.212.7-9.560.08-

(NAV data is as on July 26, 2011. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)*Expressed as Compounded Average Growth Rate (CAGR)(Source: ACE MF, PersonalFN Research)Assessing the returns generating by the fund over the long-term, we do not see a reason as to why you should discontinue with your further SIP instalments in the aforementioned funds.

Over the 3-Yr and 5-Yr time frame the said funds have delivered luring returns (as revealed by the table above) thereby even outperforming their benchmark index BSE-100 by a considerable margin. Even the since inception returns have been quite starry and outstanding against their benchmark.

In fact as per our present (PersonalFNs) ranking process, the funds have obtained a hold status. Yes, we agree that the last 1-Yr returns certainly look dismaying, but you shouldnt get discouraged by that. It is noteworthy that while you invest in equity mutual fund schemes you need to have a long-term time horizon of at least 3 years. Moreover, since you have adopted the SIP route of investment in the said funds you need not worry about the turbulence of the equity markets, as this will be well managed due to the rupee-cost averaging benefit provided by SIPs along with the compounding benefit.

Q3. Recently I did my first investment in a mutual fund scheme namely HDFC Equity Fund (Growth Option). I think I invested rather in an aggressive manner by deploying a sum of50,000 through my bank. I intend holding the investment for a period of 1 Yr.

Can you please advise whether I have made a prudent decision and what documents can I demand from the bank in support of investments?

Answer:Well, your investment in HDFC Equity Fund (HEF) is certainly a prudent one (PersonalFNRanking => PFN-R1), as the fund is consistent performer across time frames, wherein it has sailed well even during turbulence of the Indian equity markets. Over a 3-Yr and 5-Yr time frame the fund has clocked a return of 22.4% CAGR and 19.9% respectively, thereby even outperforming its benchmark S&P CNX 500 (which has clocked a return of 9.3% CAGR and 12.3% CAGR during the respective frames).

Also when assessed on a risk-return basis, HEF is a low risk-high return investment proposition, thus making it an appropriate fit in a beginners portfolio. Moreover, since the fund follows flexi style of investing, it is well positioned to take the opportunities across market cap segments, which also is of help for accentuating its returns. A vital point is that HEF comes from a stable of a fund house which follows strong investment processes and systems.

But while your fund selection is good, we recommend that you elevate your time horizon, since investing in equity mutual funds requires a long-term time horizon (of at least 3 years).

As a supporting document to your investments made, you need to obtain an account statement from HDFC Mutual Fund, or from your bank (who may be corporate agents to HDFC Mutual Fund). The account statement will have your following details:

Your name Folio number Name of the fund invested in (along with the option) Name of the nominee Units allotted to you Price (i.e. NAV Net Asset Value) at which units were bought

Q4. While investing in mutual fund schemes is it possible to invest directly i.e. without involving any agent; or is it compulsory to route the transaction through an agent? Also, what are the documents required while investing in a mutual fund scheme.

Answer:While investing in a mutual fund scheme you can certainly approach the mutual fund house directly, and invest in the respective mutual fund scheme(s). You need not go through mutual fund agents who fill their pockets (with luring commissions) and mis-sell you mutual fund schemes.

But while you do invest directly in respective schemes mutual fund schemes, it is imperative to have aresearch oriented approach to select winning mutual fund schemes(for your portfolio) and also recognise the fact thatthere is more to selecting winning mutual funds than mere past performance.

In order to invest in a mutual fund scheme you need to provide following documents to the respective mutual fund house.

PAN Card copy (Self attested) Address proof (Self attested)

However, w.e.f January 2011 you need to fill in a Know Your Client (KYC) form by furnishing the aforementioned documents to CDSL Ventures, so that while investing in mutual funds you can simply attach a copy of the KYC certificate.

Q5. I have investments in SBI Magnum Tax Gain, and in January 2011 I requested for a change in option from growth to dividend (which is done!). But this fund has not been performing too well for quite some time now, thus can you please advise what should be done?

Answer:Yes, the performance of SBI Magnum Tax Gain (SMTG) had faltered in the last couple of years, but at present the satisfying performance displayed by it, gives it a hold status (PersonalFNRanking -> PFN-R4) as per our ranking process.

However, if you have completed 3 Yrs (which is the lock-in period in tax saving mutual funds) in the scheme, we recommend that you exit rather than receiving lagging performance by staying invested in it.

Q6. I have invested in the under-mentioned mutual fund schemes in the last 4 years in the following manner:

Report cardSr. No.Name of mutual fund schemeDate of investmentModeInvestment (in)

1.DSPBR T.I.G.E.R FundSeptember 2007Lump sum40,000

2.Tata Indo Global Infra FundOctober 2007Lump sum45,000

3.Sundaram Capex FundOctober 2007Lump sum45,000

4.ICICI Pru Infra FundJanuary 2008SIP5,000

5.Birla Sunlife MidcapJanuary 2008SIP5,000

6.Sundaram Select Focus FundMarch 2008SIP5,000

7.HDFC Top-200 FundJune 2010SIP5,000

8..Reliance Regular Saving (Debt) FundJuly 2010SIP5,000

Can you please advise whether should I continue to hold or sell the aforementioned schemes, and also should I make any fresh investments in any star rated funds?

Answer:In order to provide a view on your aforementioned mutual fund portfolio, we recommend that you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s) to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would help you assess the following:

Risk-Return Fund category [on the basis of type of schemes held by you (i.e. whether equity, debt or gold) as well as the style of investing followed by them (i.e. whether growth, value and blend) and the market cap bias followed i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.] Sector(s) you are exposed to Top-10 stock holdings of your total mutual fund portfolio

In our opinion while adding new and promising mutual funds may suit your portfolio, selecting mutual funds on the basis of star ratings, would not always be the right way, and to know as to why so, you must read our article "Twinkle twinkle little star, how I wonder what you are?". We believe if youselect your mutual funds in the right manner by taking into account the host of factors, you would get appealing returns on your investments.Q1. Im aged 50 years, presently a Government employee (State Government organisation) and would be retiring in another 10 years. I have my savings invested in the under-mentioned manner:

LIFE INSURANCE

Name of the PoliciesInsurance cover (in)

Bhima Sandesh Policy6,50,000

Pension Plan (Annuity)2,00,000

Postal life insurance1,00,000

MEDICLAIM

Name of the PoliciesPremium paid (in)

Apollo Health Munich Policy16,000

PUBLIC PROVIDENT FUND

Current balance of10 lakh + annual contribution of70,000

POSTAL SAVINGS SCHEMES

Name of the Policies(in)

National Savings Certificate3,00,000

MUTUAL FUNDS

Name of the Policies(in)

Fidelity Equity Fund (lump sum)40,000

Tata Infrastructure Fund (lump sum)10,000

Sundaram Midcap Fund (lump sum)20,000

Franklin India Flexi Cap Fund (lump sum)20,000

UTI Dividend Yield Fund (lump sum)65,000

UTI Dividend Yield Fund ( monthly SIP)3,000

Reliance Equity Opportunities Fund10,000

I request you to please suggest me if suitable modifications are required in the existing investments made by me?

Answer:The Bima Sandesh policy mentioned held by you has a return of premium option, where the premium paid by you is almost double than that under non-return of premium plans. A return of premium policy for term plans should not be opted for insuring your life, but considering your age we suggest that you may continue with the same. Commenting on pension plan will not be possible as details are not provided. But remember while indemnifying the risk to your life, you need to focus only on pure term insurance plans, thereby separating your insurance and investment risks. While taking care of your life insurance needs you need to assess your "Human Life Value" (HLV), whereby factors such as expenses, existing investments, future financial goals, liabilities and contingency fund amongst others are taken into account. Hence given that, ideally you need only a pure term insurance plan wherein for a reasonable premium youll get a substantial life cover (as per your HLV).Postal life insurance is extended to you by the virtue of you being a State Government employee, hence in that too you may stay invested in wherein youll enjoy a maximum risk cover of1 lakh.

As far as your health insurance is concerned, we suggest that you may continue with them as the policy offers attractive features.

We believe that since PPF and NSC mainly constitute essential investments of your tax saving portfolio, you need not modify them. However, you may not beat the increasing cost of living (i.e. inflation) with such investments if inflation continues to sail over the 8.00% mark.

In order to provide a view on your aforementioned mutual fund portfolio, we recommend that you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s) to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would help you assess the following:

Risk-Return Fund category [on the basis of type of schemes held by you (i.e. whether equity, debt or gold) as well as the style of investing followed by them (i.e. whether growth, value and blend) and the market cap bias followed- i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.] Sector(s) you are exposed to Top-10 stock holdings of your total mutual fund portfolio

Q2. I wish to create a retirement corpus for two granddaughters - aged 2 and 4. I have thought of investing4,000 to5,000 per month through Systematic Investment Plans (SIPs) offered by mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68.

Answer:We appreciate your idea of building a corpus for your two granddaughters. Yes, indeed for them investing in equity mutual funds through the SIP route would be appropriate. But while selecting suitable mutual fund schemes for them their age of 2 & 4 respectively need to be taken into account rather than yours; as wealth creation idea is envisioned for them. Considering their age, you can divide the SIP amount of5,000 as under:

Monthly SIP in equity mutual fund schemes (in)Following investment style asMarket cap orientation

2,000GrowthMid cap

2,000OpportunitiesMulti cap

1,000ValueLarge cap

While being invested in such funds you need to stay invested for a long-term(at least for 3 to 5 years)- whereby the intended corpus can be used for their higher education or marriage. While selecting appropriate mutual funds following the aforementioned style, it is imperative to have aresearch oriented approach to select winning mutual fund schemesand also recognise the fact thatthere is more to selecting winning mutual funds than mere past performance. Always remember to select a mutual fund scheme with a consistent track record and always prefer fund houses following strong investment processes and systems.

Q3. My daughter would like to invest a sum of70,000 in a suitable tax saving mutual fund scheme in order to obtain a tax benefit; and of course followed by capital appreciation in long run. Assessing the present meltdown of the Indian equity markets please reply:

Which funds are good? Whether to opt for SIP mode or invest the said amount in lump sum?

Answer:Even though the Indian equity markets have reacted rather sharply to the nervous global economic sentiments, the current levels of the Indian equity markets look attractive to buy. Since the last peak of the 21,004.96 (on the BSE Sensex) made on November 5, 2010, the markets have corrected by good -24.6%.

Yes markets are expected to display some turbulent times going forward but in order to manage this volatility, while investing into a tax saving mutual funds (also known as Equity Linked Saving Schemes or ELSS) intended to obtain a tax benefit (under section 80C of the Income-Tax Act, 1961) you may invest through the SIP route, which will provide you the benefit of rupee-cost averaging as well as compounding. But while you opt for the same, it should be noted that your every sum SIP amount will be locked-in for a period of 3-Yrs as mandated by the product per se. Hence even if you opt for lump sum investing, the 3-Yr lock- period in applies.

While selecting a winning ELSS for your portfolio it is vital that you consider mutual schemes with a consistent track record, and prefer fund houses following strong investment processes and systems.

Q4. I invested in Birla Sun Life Insurances Titanium Plan last year, and now would like to seek your opinion on whether it is prudent to stay invested in the same. Also, can you please suggest some mutual fund schemes which will help me build wealth in the long run considering my appetite for being medium?

Answer:The life insurance scheme held by you is a unit-linked one, which attempts to offer optimal participation in capital market growth while safeguarding your returns. Moreover, the plan promises to offer the highest of prevailing NAV or "guaranteed unit price at re-investment", at the time of maturity.

The plan offer several options such as - Income Advantage, Assure, Protector, Builder, Enhancer, Creator, Magnifier, Maximiser, Multiplier and Super 20; but since the details of the options are not provided in your query, evaluation would not be possible. We believe that it is imperative to keep your investment and insurance needs separate. In order to indemnify the risk to your life, you need to focus only on pure term insurance plans. While taking care of your life insurance needs you need to assess your "Human Life Value" (HLV), wherein you take into account factors such as expenses, existing investments, future financial goals, liabilities and contingency fund amongst others. Hence given that ideally you need only a pure term insurance plan where in for a reasonable premium youll get a substantial life cover (as per your HLV).

For investing in mutual funds, considering your appetite for risk being medium it would be wise that you invest in large cap oriented diversified equity funds, and also hold balanced funds in your portfolio. However, while winning mutual fund schemes for your portfolio it is vital that you consider schemes with a consistent track record, and prefer fund houses following strong investment processes and systems. Moreover, having selected them it is imperative that you have an investment horizon of at least 3 to 5 years.

Q5. I wish to invest in 3 mutual fund schemes through the SIP route. My present age is 38, and currently can contribute a sum of5,000 in total towards all the respective mutual fund schemes. I request you to please advise me by providing reasons.

Answer:Considering your age, you can divide the SIP amount of5,000 as under:

Monthly SIP in equity mutual fund schemes (in)Following investment style asMarket cap orientationReason

2,000GrowthMid capThis will help you entice returns on your portfolio, due to accelerating growth offered by robust mid cap cos, which hold good chances of emerging into tomorrows large caps

2,000ValueLarge capThis will safeguard your portfolio during turbulent times by taking a defensive stance by betting on large caps

1,000OpportunitiesMulti capThis will help you to take opportunities across market caps and sectors thus again fueling returns on your portfolio.

But having allocated your total SIP amount in the aforementioned manner, you need to select fund schemes (in the respective styles) which have a consistent track record and prefer funds from fund houses which follow strong investment processes and systems. Moreover, continue with your SIP investments for a longer time frame (until retirement), so that it will enable you to manage the volatility of the Indian equity markets better (through rupee-cost averaging) and also power your portfolio with the compounding. So say, you decide to retire at your age of 60 (i.e. 22 years from now), your monthly SIP amount will yield a sum of64.79 lakh (approx.) assuming a rate of return of 12% p.a. Remember, in order to create wealth always stay invested for the long-term as it results in effective power of compounding.Q1. Im at present 39 years of age and would like to invest a sum of10,000 in mutual funds through the SIP (Systematic Investment Plan) mode of investing, aiming to build a corpus for my retirement. I intend retiring at my age of 58, and have also opened a PPF account recently where I would invest a sum of70,000 annually.

My monthly expenses are20,000, and have no other liability. I have also insured myself for40,00,000 under a term insurance plan.

How should I invest monthly in various mutual fund schemes or investment instruments? Also please note that Im willing to increase my monthly SIP amount if required.

Answer:Well, enrolling for the SIP (Systematic Investment Plan) mode of investing in mutual funds is best way of creating a corpus over the long-term. It helps you to manage the volatility of the equity markets well (through rupee-cost averaging) and powers your portfolio with the benefit of compounding. In your case since youve not provided your monthly income, ascertaining the optimal monthly contribution would not be possible. But nonetheless going by the amount of10,000 you wish to allocate for SIP contribution (monthly), you would build a corpus of around87.53 lakh (assuming a rate of return of 12% p.a. on an average - conservatively). Hence if the equity markets amplify returns, the retirement corpus would also balloon.

Moreover, if you staunchly contribute a sum of70,000 annually towards PPF (Public Provident Fund) for the complete term of 15 years, you would get another11.08 lakh at your age of 54. Now considering that you are still 4 years away from your retirement, we suggest that you may also extend your PPF account for another 5 years (but contribute annually70,000 only for next 4 years), which would thereby yield you another2.85 lakh, thus making a corpus of around14.29 lakh from your PPF investments at your age of 59.

Thus now if you club the two i.e. corpus built through SIP investment + corpus built through PPF investment, you would yield a sum of98.61 lakh at age your age of 58 (or1.02 crore at your age of 59 i.e. if PPF term is extended by 5 years as explained above).

However it is noteworthy that, while selecting mutual funds, it is imperative to have a research oriented approach to select winning mutual fund schemes, select funds which have completed over 3 years of existence and also recognise the fact that there is more to selecting winning mutual funds than mere past performance. Always remember to select a mutual fund scheme with a consistent track record and always prefer fund houses following strong investment processes and systems. Given the present turbulence in the Indian equity markets (steered by global as well as domestic cues) it would be prudent to invest in the large cap funds (as a defensive consideration) and avoid mutual funds which have exposure to developed nations. From a style perspective, you may choose value style funds, as these corrected levels of the Indian equity markets may provide fund managers of such funds to value pick some good stocks.

Commenting on your insurance coverage, we like to appreciate that you have taken prudent decision of investing in pure term insurance plan. Always remember, it is vital to deal with your investment and insurance needs separately, as insurance is purely for indemnifying risk, while investments are for wealth creation and building a corpus for a specific purpose - like in your case retirement need. But its noteworthy that while taking care of your life insurance needs you need to assess your Human Life Value (HLV), whereby factors such as expenses, existing investments, future financial goals, liabilities and contingency fund amongst others are taken into account. The coverage in our opinion appears quite sufficing, but the factors mentioned herein need to be evaluated to obtain optimal life insurance coverage.

Q2. Im retired individual in receipt of pension, and I would like to invest in debt mutual funds for a period of 3 to 5 years. Can you please recommend me appropriate debt mutual funds?

Answer:While you would like to invest in debt mutual funds, let us apprise you that investments in debt mutual funds are sensitive to interest rates, inflation and fiscal deficit. Hence an investment in debt mutual funds cannot be construed to be safe.

Ascertaining the interest rates scenario, lets us acquaint you that in order to tame the inflation bug, the RBI has persistently increased interest rates right since March 2010. In the month gone by too as inflation continued to sail over the central banks comfort level (August 2011 WPI inflation at 9.78%), they increased policy rates - both on the repo rate as well as the repo rate by 25 basis points (bps), taking them to 8.25% and 7.25% respectively. Hence thus far since March 2010 the increase has been as under:

Policy rate trackerIncrease / (Decrease) since March 2010At present

Repo Rate350 bps8.25%

Reverse Repo Rate400 bps7.25%

Cash Reserve Ratio100 bps6.00%

Statutory Liquidity Ratio(100 bps)24.00%

Bank RateUnchanged6.00%

(Source: RBI website,PersonalFNResearch)

Given the fact petrol prices have been increased last month to correct the under-recoveries of oil marketing companies, we believe that chances of inflation ascending further are elevated. Also the recent depreciation in the Indian Rupee may also have adverse implications for inflation. Hence we believe that anti-inflationary stance maintained by the RBI would continue even in its 2nd quarter review of monetary policy 2011-12 (scheduled on October 25, 2011), where they may hike policy rates by another 25 bps. But going forward, with downbeat global economic sentiments shivering the Indian markets the RBI may preclude from raising interest rates thereafter.

Thus taking into account the fact that interest rates are at elevated levels and almost nearing their peak, we recommend that you gradually take exposure to pure income and short-term Government securities funds. Since longer tenor papers will become attractive, longer duration funds (preferably through dynamic bond / flexi-debt funds) can be considered, for an investment horizon of say 2 to 3 years. For over 2 to 3 years you may invest in longer duration funds, but in the near term you may be exposed to volatility, as there is always an interest rate risk associated with the longer maturity instruments. Also considering the fact that Bank FDs are offering good interest rates, you may also consider investing some money in FDs as well.

Q3. Im 38 years of age, and right now can allocate a sum of5,000 per month via SIPs in mutual funds. Can you please recommend me 3 good mutual funds for SIP investing, along with the reasons?

Answer:SIPs (Systematic Investment Plans) plans in mutual funds enable you to create wealth over the long-term as they infuse in regular savings habit. Moreover, even when the Indian equity markets turn turbulent they help you to manage the volatility of the equity markets well (through rupee-cost averaging) and power your portfolio with the benefit of compounding.

If you invest a sum of5,000 monthly vide the SIP route, until your retirement (assuming at 60 years of age); you would build a corpus of around64.79 lakh (assuming a rate of return of 12% p.a. on an average - conservatively). Hence if the equity markets amplify returns, the corpus would also balloon.

However it is noteworthy that, while selecting mutual funds, it is imperative to have aresearch oriented approach to select winning mutual fund schemes, select funds which have completed over 3 years of existence and also recognise the fact thatthere is more to selecting winning mutual funds than mere past performance. Always remember to select a mutual fund scheme with a consistent track record and always prefer fund houses following strong investment processes and systems. Given the present turbulence in the Indian equity markets (steered by global as well as domestic cues) it would be prudent to invest in the large cap funds (as a defensive consideration) and avoid mutual funds which have exposure to developed nations. From a style perspective, you may choose value style funds, as these corrected levels of the Indian equity markets may provide fund managers of such funds to value pick some good stocks.

Q4. Im 52 years of age, and over the year have invested in under-mentioned mutual fund schemes to build a retirement corpus.

Sr. No.Name of mutual fund schemeModeWhether SIP continuing or notSIP amount (in)Amount invested so far (in)

1.Fidelity Equity FundSIPStopped-1,55,000

2.Franklin India Flexi-cap FundSIPStopped-?

3.HDFC Equity FundSIPStopped-?

4.Kotak Opportunities FundSIPStopped-75,000

5.Reliance Growth FundSIPStopped-75,000

6.Sundaram Paribas Select FocusSIPStopped-75,000

7.Birla Frontline Equity FundSIPContinuing3,00077,000

8.Birla Mid Cap FundSIPContinuing3,00065,000

9.Fidility Spl Situations FundSIPContinuing3,00078,000

10.ICICI Pru Dynamic FundSIPContinuing3,00045,000

11.ICICI Infrastructure FundSIPContinuing3,00045,000

12.Reliance Diver Power Sector FundSIPContinuing3,00045,000

13.SBI Magnum Contra FundSIPContinuing3,00024,000

14.DSPBR Top-100SIPContinuing4,000158,000

15.IDFC Premier Equity-ASIPContinuing6,00050,000

Kindly suggest which of the above funds I should continue to hold, stop or switch to an appropriate mutual fund scheme, considering the overall portfolio.

Answer:In order to provide a view on your aforementioned mutual fund portfolio, we recommend that you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s) to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would help you assess the following:

Risk-Return Fund category [on the basis of type of schemes held by you (i.e. whether equity, debt or gold) as well as the style of investing followed by them (i.e. whether growth, value and blend) and the market cap bias followed- i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.] Sector(s) you are exposed to Top-10 stock holdings of your total mutual fund portfolioQ1. I had invested in the HDFC TaxSaver fund, but the value of the same is very low due to the market conditions. Hence, I was wondering whether I should redeem the same before the Direct Tax Code comes into effect from April 1, 2012.

Can you please guide me?

Answer:All tax saving mutual fund schemes (also known as Equity Linked Saving Schemes or ELSS) have generally a lock-in period of 3 years, which thus refrain you from exiting the schemes unless you have completed your holding period 3 years.

As far as HDFC TaxSaver is concerned the scheme has shown consistently good performance across time frames, by exposing its investors to low, thus resulting in it clocking superior risk-adjusted returns. Hence even if the DTC comes into effect from April 1, 2012, we believe that you can continue to stay invested in the said scheme.

Q2. Im curious to know what will be the effect on the Equity Linked Saving Schemes (ELSS) once the Direct Tax Code (DTC) comes into effect. Also can you recommend me some good ELSS funds?

Answer:At present investments in ELSS funds make an investor eligible for tax deduction as per the provisions of section 80C of the Income Tax Act, 1961. But whenever the DTC comes into effect, ELSS funds would cease to exist in the respective financial year (relevant to an Assessment Year). Despite the maximum deduction amount under the section being increased to Rs 3 lakh (as proposed) from the present Rs 1 lakh ELSS funds do not find a place to the tax saving instrument list.

However, if you invest prior to March 31, 2012 in an ELSS fund you will continue to enjoy tax benefits as per the current provisions. However,while investing ELSS funds care should be takento select those with a consistent performance track record, and one must also focus on the investment processes and systems followed by the respective fund(s). Fidelity Tax Advantage and HDFC TaxSaver are some of the good consistently performing ELSS funds.

Q3. Im 25 years of age, and working as an IT professional in a multinational company headquartered in the U.S. I draw a monthly salary of Rs 24,000 (post tax) and have my Systematic Investment Plans (SIPs) on-going every month in the following mutual fund schemes since the last one year.

Sr. No.Name of mutual fund schemeSIP Amount (in Rs )

1.Reliance Vision Fund2,000

2.HDFC Top 2002,000

TOTAL4,000

However, in the last one year both the aforementioned mutual fund schemes have not posted significant returns. Hence, I would like to seek your advice whether I should stop my SIP, and later withdraw my money when equity markets improve, or just continue with my SIPs and stay invested?

Answer:Primarily let us apprise you that while investing in equity mutual funds, one needs to have an investment horizon of 3 to 5 years. Hence, we think that you are judging the performance of the mutual fund schemes held by you too early.

But having said that, let us apprise you that our current ranking process reveals that Reliance Vision (which is a large cap bias diversified equity fund) can be held by you even though it is an average risk-average return investment proposition. Similarly, HDFC Top-200 Fund (which is a large cap bias diversified equity fund) too can be help by you as it has shown a consistently good performance across time frames, by clocking high returns at a low risk level.

Hence we recommend that you need not worry with the present volatility of the equity market with your present holding, as the SIP route adopted by you will enable in managing the volatility of the equity markets well (through rupee-cost averaging), and power your portfolio with the benefit of compounding.

Q4. At present I invest regularly in Public Provident Fund (PPF); which I believe is quite safe. On March 12, 2012 I will be completing the maximum term of 15 years term in PPF, and thereafter would like to invest the accumulated sum of Rs 1.75 lakh in a mutual fund scheme which carries no risk.

What would you recommend me a suitable mutual fund scheme for this purpose?

Answer:Well, primarily let us apprise you that mutual fund are not always safe as they carry with them market risk, due to their mark-to-market basis of valuation. If you are looking at absolutely no risk investment options you may invest the accumulated sum of money onyour PPF account, in a bank fixed deposit suiting your investment horizon, since at present the interest offered by them are quite luring and nearing the peak.

Alternatively if you are willing to take low to moderate risk, you may look at investing in debt mutual fund schemes which suit your investment horizon. Liquid funds can be considered for a horizon less than 3 months, liquid plus (also known as ultra-short-term funds) for 3 to 6 months, floating rate funds for to 12 months, Short Term Income funds for 1 to 1 years, and Long Term Income funds for 1 years and above.

But while investing in any of the aforementioned debt mutual fund category(s), please remember toselect debt mutual fund schemes with a consistent track recordand from a fund house which follows strong investment processes and systems to invest in debt papers.

Q5. At present I have being holding the following mutual fund schemes for the respective time horizons mentioned below:

Sr. No.Name of mutual fund schemeTime horizon completed in years

1.SBI Magnum Tax Gain3

2.SBI Magnum COMMA Fund2

3.Reliance Growth Fund3

4.Kotak Opportunities Fund3

5.Reliance Diversified Power Sector Fund3

6.Tata Infrastructure Fund3

Since these respective funds havent performing too well, can you please advise me what should be my line of action on the portfolio?

Answer:In order to provide a view on your aforementioned mutual fund portfolio, we recommend that you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s) to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would help you assess the following:

Risk-Return Fund category [on the basis of type of schemes held by you (i.e. whether equity, debt or gold) as well as the style of investingfollowed by them (i.e. whether growth, value and blend) and the market cap bias followed i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.] Sector(s) you are exposed to Top-10 stock holdings of your total mutual fund portfolio

Q1. Can you please suggest me some good mutual fund schemes under the diversified equity fund category, balanced funds and debt category; taking into my investment horizon of 5 to 10 years.

Im 46 years of age, and can invest Rs 1.2 lakh per month.

Answer:To advise you on investing your hard earned money in diversified equity funds, balanced funds and debt mutual funds; sharing information on your investment objective, along with your income, expenses and nearness tofinancial goalswould have been better to form an ideal allocation between various categories of mutual funds.

But considering your present age of 46, and assuming you are risk averse we recommend you to park a dominant portion of your money towards equitybalanced fundsfollowing strong investment processes and systems. One such fund is "DSP BlackRock Balanced Fund", which has delivered consistent performance across time frames by having robust underlying portfolio of equity and debt instruments. Moreover, the fund has delivered appealing risk-adjusted returns, thus rewarding its investors well for the risk taken. Similarly, you can select other such balanced funds, but prefer to select those which have a 3-Yr performance track record and which are from a fund house which follows strong investment processes and systems.

For investing diversified equity fund category, we recommend you to opt for the large cap funds and those which follow "value" style of investing, since large cap andvalue style fundsgenerally tend to be defensive, and dont plunge much as the mid cap ones during the turbulent phases of the Indian equity markets. Over here too you got to be careful, and select a mutual fund which follows strong investment processes and systems. "Franklin India Bluechip Fund" is one such fund which has delivered consistent performance across time frames by having robust underlying portfolio of equity instruments in the large cap domain. This in turn has also led to its investors get appealing risk-adjusted returns, thereby rewarding them well. You may also select other such large cap equity funds, but prefer to select those which have a 3-Yr performance track record and which are from a fund house which follows strong investment processes and systems.

While investing in equity mutual funds adopt theSIP (Systematic Investment Plan)mode of investing, as this will help you to even out the present volatility of equity markets (through rupee-cost averaging) and power your portfolio with compounding effect. So, say you invest a sum of Rs 1.2 lakh every month for a period of 10 years assuming a return on investment of 12% conservatively on an average, you will yield a sum of Rs 2.76 crore at your age of 56.

While investing in debt mutual funds you got to be aware of the interest rate scenario. Taking into account the fact that interest rates are likely to consolidate at these higher levels before they start going down, you can gradually take exposure to pure income and short-term Government securities funds.

Since longer tenor papers will become attractive, longer duration funds (preferably through dynamic bond / flexi-debt funds) can be also considered, if you have a longer investment horizon (of say 2 to 3 years). However, you may witness some volatility in the near term as there is always an interest rate risk associated with the longer maturity instruments.

With liquidity in the system being tight, yield on the short term instruments is expected to remain high thus making short-term papers attractive. Hence, if you have a short-term time horizon (of less than 3 months) you would be better-off investing in liquid funds for the next 1 month or liquid plus funds for next 3 to 6 months horizon. However if you have a medium term investment horizon (of over 6 months), then allocation towards floating rate funds can be made. Short term income funds should be held strictly with a 1 year time horizon.

Fixed Maturity Plans (FMPs) of 3 months to 1 year will yield appealing returns and can also be considered as an option to bank FDs only if you are willing to hold it till maturity, but you may not have a very attractive post tax benefit, as indexation benefit will not be available on FMPs maturing within 3 months. You can consider investing your money in Fixed Deposits (FDs) as well; at present 1 year FDs are offering interest in the range of 7.25% - 9.40% p.a.

Q2. I wish to create a corpus for my two granddaughters - aged 2 and 4. I have thought of investing Rs 4,000 to Rs 5,000 per month through Systematic Investment Plans (SIPs) offered by mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68.

Monthly SIP in equity mutual fund schemes (in Rs )Following investment style asMarket cap orientation

2,000GrowthMid cap

2,000OpportunitiesMulti cap

1,000ValueLarge cap

Answer:We appreciate your idea of building a corpus for your two granddaughters. Yes, indeed for them investing in equity mutual funds through the SIP route would be appropriate. But while selecting suitable mutual fund schemes for them, their age of 2 & 4 respectively need to be taken into account rather than yours; as wealth creation idea is envisioned for them. Considering their age, you can divide the SIP amount of Rs 5,000 as under:

Amongst the growth style funds, you may consider a mutual fund scheme such as "HDFC Mid-Cap Opportunities Fund". While for the opportunities and value style, scheme such as "DSP BlackRock Opportunities Fund" and "HDFC Capital Builder Fund" can be considered.

It is noteworthy that all these mutual fund schemes have been successful in clocking appealing risk-adjusted returns across time frames, and has thus rewarded its investors well. However, when you invest in such funds you need to stay invested for a long-term (at least for 3 to 5 years) - whereby the intended corpus can be used for their higher education or marriage.

You may also select any other mutual fund schemes following respective styles of fund management, but it is imperative for you to have aresearch oriented approach to select winning mutual fund schemesand also recognise the fact thatthere is more to selecting winning mutual funds than mere past performance. Always remember to select a mutual fund scheme with a consistent track record and always prefer fund houses following strong investment processes and systems.Q1. We (me and my wife) are investing a sum of Rs 20,000 every month through the Systematic Investment Plan (SIP) mode in the following mutual fund schemes:

Sr. No.Name of mutual fund schemeInvesting sinceSIP amount (in Rs)

1.UTI Mahilla Unit Scheme07 Sept, 20105,000

2.HDFC Prudence Fund25 July, 20102,500

3.ICICI Prudential Infrastructure Fund31 May, 20103,000

4.HDFC Top 20010 July, 20104,000

5.Reliance Diversified Power Sector Fund10 July, 20103,000

6.DSP BlackRock T.I.G.E.R.21 Aug, 20102,500

TOTAL20,000

Could you please guide us on which one to hold or sell?

Answer:Primarily let us apprise you, that by enrolling for the SIP mode of investing you have done the most appropriate thing, as it helps you tomanage the volatility of the markets well(through rupee-cost averaging) and also powers your portfolio with the benefit of compounding.

Having said that, the analysis of your holding reveals that the SIPs amounting to Rs 20,000 are held in the following category(s) of mutual funds:

Sr. No.Name of mutual fund schemeCategory of mutual fund

1.UTI Mahila Unit SchemeHybrid Debt Oriented

2.HDFC Prudence FundHybrid Equity Oriented

3.ICICI Prudential Infrastructure FundThematic (infrastructure) Equity Oriented

4.HDFC Top 200Large cap oriented diversified equity fund

5.Reliance Diversified Power Sector FundThematic (power & energy) Equity Oriented

6.DSP BlackRock T.I.G.E.R.Thematic (infrastructure) Equity Oriented

Thus it depicts that a dominant portion (i.e. 75%) of your portfolio is held towards equity oriented funds, while the rest i.e. 25% is held indebt oriented funds. Among the equity oriented funds too, 43% is held inthematic funds, which are rather risky and we recommend that you discontinue your SIP in them and redeem, since the returns so far delivered by them do not justify the risk taken by them. Please note the thematic funds, especially in theinfrastructureandpower & energysub-category have faltered due to:

Anti-inflationary monetarypolicy stance maintained by RBI(dampening mood in infrastructure sector); and Project execution delay and stricter environmental norms hindering power and energy sector

As far as HDFC Prudence fund is concerned you can continue your SIP in it and stay invested for the long-term. However, you ought to be ready for a slightly high risk as the equity portfolio of the saidbalanced fundA is largely skewed towards stocks in themid cap domain. Similarly, for HDFC Top 200 you may continue your SIP investment in it and stay invested for the long-term, as the fund has a predominant large cap portfolio, thus being defensive in times when equity markets undergo turbulence. Moreover, it is noteworthy that HDFC Mutual Fund as a fund house follows strong investment processes and systems, which we believe are very important, whileselecting winning mutual funds.

Q2. Im planning to invest in the following mutual fund schemes.

Sr. No.Name of mutual fund scheme

1.HDFC Top 200

2.HDFC Prudence Fund

3.Reliance Gold Fund

Could you please tell me about these funds?

Answer:The funds selected by you are worthy of investment, and follow the under mentioned style andmarket cap bias while investing.

Sr. No.Name of mutual fund schemeCategory & Investment style followedMarket cap bias

1.HDFC Top 200 FundDiversified equity BlendLarge cap

2.HDFC Prudence FundHybrid Balanced BlendMulti-cap

3.Reliance Gold FundGold Fund of FundInvests in units of Reliance Gold ETF

Thus from the table above youll have a well structure portfolio across equity and gold. However, while investing in HDFC Prudence fund you ought to be ready to assume slightly high risk as the equity portfolio of the said balanced fund is largely skewed towards stocks in the mid cap domain.

AddingReliance gold fundwould also do well to your portfolio, as it enables you to hedge your portfolio well during economic uncertainties. This is becausegold tends to get bold during turbulent times, as smart investors prefer to take refuge under the precious yellow metal.

However while investing in the aforementioned mutual fund schemes, we recommend that you adopt the SIP mode of investing, as this will enable you to manage the volatility of the markets well (through rupee-cost averaging) and also power your portfolio with the benefit of compounding.

Q3. I would like know about the taxation of Fixed Maturity Plans (FMPs) for the dividend reinvestment option for quarterly as well as yearly option. I have received dividend on FMP (quarterly option) in my account without TDS in December 2011. Would this be taxable?

Also would there be a capital gain tax for FMP investment?

Answer:As you may be aware that an FMP is a close-ended fund that invests in debt and money market instruments of similar maturity as the stated in the maturity of the plan. For example a 90 day FMP will invests in debt and money market instruments which mature in 90 days such as 3-month Certificate of Deposits (CDs), 3-month Commercial Papers (CPs) etc. An interesting point to be noted here is that unlike an FD where your maturity amount is fixed, in a FMP only the period or time horizon of the fund is fixed. As such a 90-day FMP will cease to exist on maturity.

Thetax implication on FMPsdepends on the investment option one chooses dividend or growth. In case of dividend option youll have to bear the Dividend Distribution Tax (DDT) of 13.84%.

In case of growth option, returns generated are treated as capital gains and taxed accordingly. Thus, in case of short-term capital gains (i.e. if investments are held for less than 365 days); the interest income is added to the investors income and is taxed at the marginal rate of tax. And where investments are held for more than 365 days (long-term capital gains) the tax liability is computed using two methods i.e. with indexation (charged at 20% plus surcharge and cess) and without indexation (charged at 10% plus surcharge and cess); the tax liability will be the lower of the two.Q1. I would like to obtain your views on "Axis Triple Advantage Fund (G)" and Birla Sun Life Dividend Yield Plus (G). Also would like to know, whether it would be right time to exit the two funds held by me, namely: "Reliance Growth Fund (G)" and "Reliance Vision Fund" (G)?

Answer:Primarily speaking about "Axis Triple Advantage Fund (G)" (ATAF), it is an open-ended hybrid fund (launched in August 23, 2010), which invests in 3 major asset classes - equity, debt and gold, byallocating the assetsin them as under:

InstrumentsAllocation Range (% to Total Assets)Risk Profile

MinimumMaximumHigh/Medium/Low

Equity and Equity Related Instruments (Including derivative instruments up to 80% of net assets)3040Medium to High

Debt and Money Market Instruments (Including securitised debt up to 40% of net assets)3040Low to Medium

Gold ETFs2030Medium to High

Thus it has an investment objective to "generate long term capital appreciation by investing in a diversified portfolio of equity and equity related instruments, fixed income instruments andgold Exchange Traded Funds". Hence positioned as a multi-asset diversification hybrid fund, ATAF is well placed to provide triple advantage by diversifying its investment portfolio across three major assets classes i.e. equity, debt and gold.

How has it fared?Scheme Name6-Mth (%)1-Yr (%)3-Yr (%)5-Yr (%)SinceInception (%)Std. Dev (%)Sharpe Ratio

Axis Triple Advt(G)3.68.4--6.82.080.01

Crisil Composite Bond Fund Index4.47.66.06.7-0.600.11

Gold-India9.536.823.1--4.490.30

S&P CNX Nifty3.3-9.718.56.4-7.630.20

(NAV data is as on March 29, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)(Source: ACE MF,PersonalFNResearch)

But thus far the performance exhibited above, has been quite dismal despite a 51.1% increases in prices of gold (since ATAFs inception) amid volatile equity markets. And interestingly, this dismal performance has been steered despite ATAF holding, a major portion of its assets in gold ETFs. Therefore given this, in our view we recommend that you avoid investing your hard earned money in ATAF as of now, and for prudent asset allocation consider your age, risk appetite, risk tolerance and your nearness to goals amongst others, before making appropriate allocation to equity, debt and gold. The allocation held by the fund manager may not necessarily be suitable for you as the above mentioned factors might not be considered by the fund manager while allocating his portfolio across asset classes.

As far as the other three mutual fund schemes are concerned, the table below reveals their traits.

Sr. No.Name of mutual fund schemeCategory of mutual fundSub-categoryInvestment style followed

1.Birla Sun Life Dividend Yield Plus(G)Diversified equity fundDividend YieldValue

2.Reliance Growth Fund(G)Diversified equity fundMid capGrowth

3.Reliance Vision Fund(G)Diversified equity fundLarge capGrowth

The performance evaluation of these funds (as depicted by the table below) reveals that, Birla Sun Life Dividend Yield Plus Fund (which follows a value style of investing), has been able to clock very luring returns over a 3-Yr, 5-Yr and even on a since inception basis. Moreover, the luring returns have been clocked by exposing its investors to low risk (as revealed by its Standard Deviation of 6.87%) thus making it a low risk-high return investment proposition in the category, and a worthwhile investment.

Report card6-Mth (%)1-Mth (%)3-Yr (%)5-Yr (%)Since Inception (%)Std. Dev (%)Sharpe Ratio

Birla SL Dividend Yield Plus(G)3.61.732.916.226.46.870.32

Reliance Growth(G)2.5-5.826.510.625.28.100.24

Reliance Vision(G)2.4-7.221.78.121.57.700.21

BSE-1002.7-9.620.76.5-8.040.20

S&P CNX 5002.5-9.320.75.8-8.100.19

(NAV data is as on March 29, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)(Source: ACE MF,PersonalFNResearch)

But as far as Reliance Growth Fund (RGF) and Reliance Vision Fund (RVF) is concerned despite a tempting performance per se, (as depicted above) making them an average risk-average return investment proposition (as revealed by their Sharpe Ratios); both these funds have shown inconsistent performance and have underperformed when compared to its peers and the average category return. Moreover, both of them have maintained a high composition in top-5 and top-10 stocks - making it risky, and have also indulged in aggressive portfolio churning in aim to create alpha returns. Hence given this evaluation we would not recommend you to invest your hard earned money or even stay invested in RGF as well as RVF.

Q2. Now that Fidelity has finally sold it mutual fund business to L&T Mutual Fund, could you please guide whether it would be worthwhile holding onto any investments made in schemes offered by Fidelity Mutual Fund?

Answer:We understand your concern about what should one do with the investment in schemes ofFidelity Mutual Fund, as they have decided sell their asset management business to L&T Finance (a subsidiary of L&T Finance Holdings Ltd. which is operatingL&T Mutual Fund), which is yet subject to regulatory approvals.

It is noteworthy that with this acquisition, L&T MF intends to become one of the top players in the 6,82,000 crore Indian mutual fund industry, and after the deal goes through L&T MF will become the 13th largest fund house with a market share of around 2%.

Is the deal for you investors?As a result of the deal while it is expected that the marketing and sales team of Fidelity Mutual Fund, may be absorbed by L&T MF; the part of the deal which is not in best interest of its investors is that, its equityfund management teamwill be retained by L&T MF only till the integration process is on - and not permanently. Fidelity which has worldwide asset management business is keen to retain its equity fund management team which is also engaged in research and fund management of Asia-Pacific region for its parent company.

As Fidelity MFs well experienced fund management team and strong investment systems and process has been the key to success of Fidelitys performance so far; the benefit of Fidelity MFs stringent fund management may not be available to its mutual fund investors in future.

Fidelity seems to have parted with its Indian mutual fund investors to get rid of its accumulated losses (to the tune of Rs 306.85 crore as per its annual report 2010-11) and has handed them over to a fund house that is yet to prove its worth for the investors and hasto stabilise on the performance front.

If you are among the investors who have invested in the brand Fidelity based on its past consistent track record and its promising ability to create wealth for its investors; then you may not appreciate this deal as you may not find the same flair in the new fund manager post integration. While this deal gives L&T an opportunity to become the 13th largest fund house with a market share of around 2%, only time will tell if this acquisition can bring turnaround in performance of L&T MF, as it does not have any lucrative track record to show. It would be a challenge for L&T MF to retain investors who are focused more towards investing in good funds managed by distinguished fund management. Also L&T MF will have to add new fund managers to its role and will have to efficiently manage the high cost of employees it procures from Fidelity MF.

What you should do right now?

First of all, with all the news around, you should not panic and may not rush to sell your investments in Fidelity schemes

With all the approvals yet to be taken, the integration process will take another 2 to 3 months time. Till then your schemes will be managed by the fund management team at Fidelity MF

If you are satisfied with the performance of your Fidelity MF schemes, then you can continue to hold on to your investments for some more time

But you may not commit any fresh investment in Fidelity MF schemes, i.e.you can discontinue your further investmentsthat you intend to make or are having throughSIP/ STP route

Rather choose an alternative scheme and re-invest in diversified equity schemes with a similar objective, having consistent performance track record and being managed by a fund house following strong investment systems and process

If you are not satisfied with this deal and are not looking for your money to be managed by L&T MF, then you can opt to exit your fund when SEBI offers you an exit window at the finalisation stage

This exit window is generally open for a 30 day period where you can opt for an exit from your investment without paying any exit load

However if you have invested in thetax saving fundof Fidelity, then you will not be able to exit until your statutory lock-in period of 3 years is complete

Also any capital gains that you make may be taxable as per the tax rules for mutual fund investments

For further analysis on what next for investors of Fidelity Mutual Fund Scheme pleaseclick here.

Disclaimer:Answers to the queries are based on facts provided andPersonalFNwould have no responsibility for the consequences of the outcome based on these solutions. For a detailed analysis of your mutual fund portfolio, please consult a mutual fund advisor.

Q1. I have been investing in the markets since the last 3 to 4 years, and have investments in the following mutual fund schemes:

Sr. No.Name of mutual fund scheme

1.Sundaram BNP Paribas Energy Opportunities (G)

2.SBI Infrastructure (G)

3.Reliance Diversified Power Sector (G)

4.HDFC Top 200 (G)

5.SBI Magnum Equity (G)

6.HSBC Equity Fund (G)

7.Franklin India Flexi Cap (G)

8.Franklin India Prima Plus (G)

9.SBI Contra (G)

However, the aforementioned funds have performed quite badly. Hence could you please advice as to what to do with these funds?

Answer:The analysis of your mutual fund portfolio reveals that your portfolio consists of all equity mutual fund schemes, categorised below and adopting the following style of management:

Sr. No.Name of mutual fund schemeCategory of mutual fund & Market cap biasInvestment style followed

1.Sundaram BNP Paribas Energy Oppor (G)Thematic (power & energy )Blend

2.SBI Infrastructure (G)Thematic (infrastructure)Blend

3.Reliance Div Power Sector (G)Thematic (power & energy )Blend

4.HDFC Top 200 (G)Diversified equity - Large cap orientedBlend

5.SBI Magnum Equity (G)Diversified equity - Large cap orientedBlend

6.HSBC Equity Fund (G)Diversified equity - Large cap orientedBlend

7.Franklin India Flexi Cap (G)Diversified equity - Flexi capBlend

8.Franklin India Prima Plus (G)Diversified equity - Large cap orientedGrowth

9.SBI Contra (G)Diversified equity - ContraValue

Thus you have an exposure to both thematic funds as well as diversified equity mutual fund schemes.

Performance of funds in your portfolioScheme Name6-Mth (%)1-Yr (%)3-Yr (%)5-Yr (%)Std. Dev (%)Sharpe Ratio

Diversified equity funds

HDFC Top 200 (G)9.00.832.813.17.580.28

Franklin India Flexi Cap (G)8.92.331.58.67.840.25

SBI Magnum Equity (G)8.43.530.38.97.590.25

Franklin India Prima Plus (G)8.45.628.79.56.940.25

SBI Magnum Contra (G)5.9-0.623.06.37.920.18

HSBC Equity (G)7.7-0.818.76.745.940.17

Thematic funds

Sundaram BNP Paribas Energy Oppor (G)0.61.219.7-8.700.14

SBI Infrastructure (G)-2.2-10.314.8-8.490.10

Reliance Diver Power Sector (G)1.4-15.214.29.58.930.10

BENCHMARK INDICES

BSE OIL & GAS4.5-10.811.45.38.260.07

BSE Power1.7-12.97.81.89.000.04

BSE-1009.6-1.126.36.08.140.20

BSE-2008.7-1.826.95.88.240.20

S&P CNX 5008.1-1.525.45.38.170.20

S&P CNX Nifty11.2-0.424.16.37.710.19

(NAV data is as on February 27, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period.Risk-free rate is assumed to be 6.37%)(Source: ACE MF, PersonalFN Research)

If we assess the performance of the funds held by you, thematic funds focusing onpower & energy sectorandinfrastructure sectorhavent been able to clock very luring returns. It is noteworthy that their lacklustre performance has occurred due to:

Anti-inflationary monetarypolicy stance maintained by RBI(dampening mood in infrastructure sector); and

Project execution delay and stricter environmental norms hindering power and energy sector

But having said that, thus far in the last three years these funds have exposed their investors to low risk (as revealed the Standard Deviation of below 10%), and hence the risk-adjusted returns (as revealed by the Sharpe Ratio) too clocked by them isnt very inspiring.

While interest rate sectors from hereon are expected to perform better, due to a descending trend in the interest rate scenario expected from the next fiscal year (i.e. 2012-13), we recommend that you redeem your investments in the aforementionedthematic fundsand invest in "diversified opportunities style funds", as they have the mandate of engulfing opportunities across themes and market capitalisations. Thus by doing so, youll not only benefit from only infrastructure sector (which is an interest sensitive sector), but also other interest sensitive sectors such as autos,banking, etc.

As far as your mutual fund holdings in diversified equity funds are concerned, they are fairly diversified across mutual fund houses, and are skewed towards funds following the value style of investing. Barring "SBI Magnum Contra" you may continue to hold all other diversified equity schemes as they have shown a consistent performance track record across bull and bear phases of the Indian equity markets. We recommend that you exit "SBI Magnum Contra", as the fund has lagged its peers in the "contrarian" style of investing.

In order to obtain a more comprehensive detail review of your aforementioned portfolio, we recommend that you avail of ourmutual fund portfolio review service, which can help you assess other vital details such as:

Risk-return Sector(s) you are exposed to Top-10 stock holdings of your total mutual fund portfolio Composition of your portfolio between thematic and diversified equity schemes

Q2. Can you please write to me about top-5 mutual fund schemes for a Systematic Investment Plan (SIP)?

Answer:Primarily let us tell you that there are no special mutual fund schemes for SIP investing. So, selecting an appropriate mutual fund scheme for your SIPs is very crucial. With host of mutual fund schemes available in the markets today, it is vital that you select winning mutual fund wisely, by taking into account the following points:

Performance:While assessing the performance of mutual fund scheme you need to analyse the same in light of:

Peer comparison study Time period Return Risk Risk-adjusted returns Portfolio characteristics Portfolio turnover

But while doing so it isvital to remember that past performance is not everything.

Fund management:This is one of the qualitative parameter, while selecting funds for wealth creation. The performance of a mutual fund is largely linked to the fund manager and his team. Hes the guy whos managing your money invested in mutual funds, so knowing his experience in fund management will be valuable.

Costs:Yes, it is vital to ascertain the costs associated with a mutual fund scheme as well. The two main costs are expense ratio and exit load.

While star ratings is popular and many investors pick funds on ratings, you got to be aware about the fact that these stars need not always shine, and thusinvesting in star rated schemes is not always a wise idea. While selecting winning mutual fund schemes for your portfolio it is also important that one knows his investment objective and appetite for risk as well, as that only canstructure your portfolio with appropriate mutual fund schemes.

Disclaimer:Answers to the queries are based on facts provided and PersonalFN would have no responsibility for the consequences of the outcome based on these solutions. For a detailed analysis of your mutual fund portfolio, please consult a mutual fund advisor.