Q&A: Our expert guides you in matters relating to mutual funds

Investing in Power Sector

I had invested in Reliance Diversified Power Sector fund in 2008 and it is still showing a loss. Should I stay invested?

HMEHRACA@INDIATIMES.COM

Reliance Diversified Power is a thematic fund that invests in equity and equity-related or fixed income securities of power and other companies associated with the power sector. This fund has demonstrated the need for such a fund in the initial years of its launch.

However, over the past few years, this sector has been embroiled in several issues that are impacting the performance of the companies engaged in the sector as well as the performance of this fund. Moreover, you probably invested at the time when the markets were at their all-time high in January 2008.

Not just this fund, many other funds are yet to rescale the heights they achieved in that phase. You should understand the risks involved when investing in a sector and thematic fund because of their narrow investment mandate.

We feel such investments should be done at best to fill a gap in an existing equity portfolio or to emphasise a sector in your portfolio you are optimistic about. You should consider cutting your losses and exit this fund and invest in better performing diversified equity funds instead.

Regular Review Needed

Ihave been investing through monthly SIPs for Rs1,000 in HDFC Top 200, HDFC Growth, HDFC Premier Multi-Cap, Reliance Growth and Reliance Vision since February 2009. Should I continue?

ARUN_IYER_18@YAHOO.COM

You have built a diversified portfolio based on the core and satellite philosophy, with two large- and mid-cap funds forming the core and the remaining two multi-cap fund and a mid- and small-cap fund filling up the satellite component.

The lesson that you can learn from these investments is the need for regularly reviewing the performance of the funds that you invest in. It is imperative to identify a good performing fund to start investing and then regularly track its performance.

For instance, the performance of Reliance Growth and Reliance Vision has been consistently falling and these funds are best exited. Likewise, with one good multi-cap fund from HDFC AMC in your portfolio, there is little need for a second one from the same AMC. You should exit the funds not faring well and instead invest in better performing funds from the fund select feature on our website.