The first quarter results have not been very heartening, with the Sensex EPS estimates declining by 2-3%. However, this was in line with the market expectations and, hence, there was no correction even after several bellwether companies came out with muted results. Now, analysts anticipate turbulence ahead and investors are advised to fasten their seat belts.
However, this may not be necessary for investors of the MONEY TODAY-Value Research Lifestage Portfolios. Even as volatility cuts across every asset class and the world economy tries to recover, all four model portfolios have performed reasonably well. The Money Builder portfolio, which is mandated to invest 65-70% of its corpus in equities, has delivered remarkably. With an absolute growth of 4.1%, its SIP returns have matched those from the Nifty, but at a significantly lower risk, because of the 29% debt and cash components in the portfolio. Clearly, you don't always have to take high risks to earn high returns.
Nearly 56% of stocks in the four balanced funds in Money Builder are large-caps. Mid-caps account for 31.5%, while small-caps make up just 10.7%. This large-cap skew lends stability to the portfolio. It is also very well-diversified, with the top five sectors accounting for 61.7% and the top 15 stocks making up 36.5% of the total portfolio. This diversification has worked very well for the portfolio. Wealth Maximiser, which has a bigger exposure to equities, has done even better, with 5.4% returns.
However this could easily reverse because some analysts expect the markets to correct by 10-15% in the coming weeks. If this happens, it should be seen as another opportunity to add units at lower prices. The SIP mode of investment that the fund manager has chosen for the three investment portfolios has helped tide over the volatility witnessed in the past few months. Volatility is here to stay and as this magazine has often reiterated, the SIP route is the best way to avoid it.
A reader, Priyank Luthra, has written in to say he is disappointed that good funds, such as HDFC Top 200, HDFC Taxsaver and Magnum Taxgain, have not been included in the model portfolios. Two of these are tax plans and could not be included because they come with a three-year lock-in period. The HDFC Top 200 fund didn't make it to the Wealth Maximiser because we wanted to limit the number of funds to 4-5. A bigger bouquet would have duplicated the holdings and made the portfolio unwieldy. For the same reason, a steady performer, such as Birla Sunlife MIP II Savings 5 Plan, has not been included in the Income Generator portfolio even though it is listed as the best MIP in our annual ranking of best mutual funds.
The conservative Stable Growth portfolio, with a small 30-40% exposure to equities, has not done too badly either. The five funds in the portfolio have combinedly earned an absolute return of 1.6%. We will be examining this portfolio in detail in our next issue. Meanwhile, the ultra-safe Income Generator has earned an absolute return of 1.1%. The portfolio suffered because the hike in interest rates by the RBI pulled down 85% of the corpus allocated to debt. However, the equity portion helped it get back on track.
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