Risk-Analysis Of MF Portfolios
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I have been regularly investing in mutual funds and other instruments. I have chosen to take early retirement and this is my entire savings. With reference to the portfolio that I have shared with you, do you recommend any changes?
- Dr. C P, Bengaluru
After reviewing your portfolio, it is clear that you have built up an impressive list of funds, and quite a varied one too! Your present allocation is skewed towards equity with a 64 per cent allocation, which I would normally classify as a Moderate/Aggressive allocation. But the character of the equity allocation is rather aggressive, making this an Aggressive portfolio rather than a Moderate/Aggressive one. The risk is being added on account of the Small & Mid-Cap portion along with 19 per cent in various sector funds. Large-Cap, which should be the higher proportion, is actually the lowest. So, this is more of a cowboy portfolio.
| Portfolio Composition |
|---|
| Sub Category | % Allocations | Risk Grade |
|---|
| Large-Cap | 12.00 | Moderate |
| Small & Mid-Cap | 16.75 | High |
| Sector | 12.93 | High |
| Multi-Cap | 9.82 | High |
| International Equity | 1.29 | High |
| Balanced Fund | 8.18 | Moderate |
| Closed Ended Equity-ELSS | 3.24 | Moderate/High |
| Long Term/Income Fund | 0.97 | Low |
| Closed Ended Debt-FMP | 1.94 | Low |
| Debt/Bonds | 0.52 | Low |
The sector funds are pretty interesting given that the international agri exposure has contributed well to the returns, as has the banking fund. The risk in accumulating many sector funds is that one must have the ability to monitor the fortunes of the particular sector of industry and moderate their allocation in the portfolio accordingly. Of course, the less said about infra funds, the better, given their recent dismal performance. From being the darling of the market to the worst performers is a long ride. This is how sector funds can add risk without adding returns to the portfolio. There is some optimism that the government would move positively to promote investment again in the infra and industry sectors, which would eventually bode well for these funds. This is possibly the bottom for such funds.
Given a choice though, I would not include such funds in the portfolio of an investor who has retired. One look at the scheme performance table given below will tell you which Mid-Cap funds to keep and which to redeem.
The last one year’s performance analysis reveals that the banking funds and the gold-related funds have the highest calculated downside risk without commensurate addition to the returns, whereas the debt and the PE Ratio Fund have provided a good cushion to the downsides.
Scheme Performance
| Performance As On 20th July, 2012 |
|---|
| Scheme Name | Absolute | Compound Annualised |
|---|
| 3 Months | 6 Months | 1 Year | 3 Years | 5 Years |
|---|
| Large Cap Funds |
| BSE SENSEX | -1.24 | 2.51 | -7.24 | 4.14 | 1.97 |
| Franklin India Bluechip(G) | -0.58 | 4.79 | -1.58 | 10.03 | 6.82 |
| FT India Dynamic PE Ratio FOFs(G) | 0.67 | 4.85 | 3.20 | 7.90 | 8.74 |
| SBI Magnum Index(G) | -0.95 | 3.67 | -6.30 | 4.99 | 1.59 |
| Fidelity International Opp(G) | 1.05 | 4.69 | -1.40 | 11.25 | 4.68 |
| Small & Mid Cap Funds |
| BSE MIDCAP | -3.64 | 8.87 | -11.48 | 5.71 | -1.98 |
| Birla SL Midcap(G) | -1.79 | 9.51 | -7.51 | 9.51 | 4.73 |
| IDFC Premier Equity-A(G) | -2.63 | 8.10 | -1.03 | 17.86 | 13.33 |
| Sundaram-Select Thematic Funds-Rural India(G) | -4.23 | 6.11 | -8.14 | 9.50 | 2.02 |
| SBI Magnum Global 94(G) | -2.94 | 8.47 | -4.40 | 14.54 | 3.05 |
| SBI Magnum Comma(G) | -2.71 | -3.08 | -15.06 | 2.83 | 1.01 |
| DSPBR Small & Mid Cap-Reg(G) | -3.48 | 10.21 | -9.12 | 17.31 | 7.07 |
| Multi Cap Funds |
| BSE-500 | -2.20 | 4.49 | -8.34 | 4.94 | 1.62 |
| HDFC Equity(G) | -1.74 | 6.98 | -7.63 | 12.52 | 8.38 |
| JPMorgan India Equity(G) | -0.58 | 5.17 | -6.74 | 8.47 | 2.71 |
| SBI Magnum Contra(G) | -2.02 | 7.23 | -7.20 | 3.20 | 2.64 |
| SBI PSU(G) | -3.36 | -2.54 | -17.18 | NA | NA |
| Sector Funds |
| Birla SL CEF-Global Agri-Ret(G) | 2.04 | 6.95 | 4.16 | 8.54 | NA |
| DSPBR World Gold-Reg(G) | -6.19 | -12.23 | -13.39 | 8.80 | NA |
| DSPBR World Agriculture Fund - (G) | 4.22 | 9.99 | NA | NA | NA |
| SBI Infrastructure-I(G) | -1.56 | -1.04 | -15.85 | -6.00 | -5.75 |
| Reliance Banking(G) | 2.20 | 11.75 | -6.73 | 16.23 | 14.65 |
| DWS Global Agribusiness Offshore(G) | 3.30 | 15.33 | 14.44 | NA | NA |
| UTI Infrastructure(G) | -2.05 | 2.65 | -14.53 | -4.97 | -4.72 |
| Closed Ended Funds – Equity |
| BSE SENSEX | -1.24 | 2.51 | -7.24 | 4.14 | 1.97 |
| UTI LT Adv-I(G) | -0.52 | 5.97 | -6.39 | 4.68 | 0.51 |
| SBI Magnum TaxGain'93(G) | -0.07 | 9.42 | -0.76 | 7.38 | 3.06 |
| Balanced Funds |
| HDFC Prudence(G) | -1.51 | 7.37 | -1.75 | 15.29 | 10.60 |
| SBI Magnum Balanced(G) | 1.14 | 8.67 | -2.05 | 5.57 | 4.11 |
| Birla SL '95(G) | -0.06 | 4.64 | -1.79 | 10.08 | 8.12 |