Query Corner: Mutual Funds

I am a 45-year-old salaried individual and intend to accumulate Rs 50 lakh in the next 10 years. Currently, I have invested in schemes like Religare PSU Equity, HDFC Equity Growth, HDFC Prudence, HDFC Top 200, Fidelity Equity and HSBC Equity through SIP mode (with monthly instalments ranging from Rs 1,000-2,000). Please advise.

Sanjay Agarwal

You have in your portfolio some of the better funds from various categories. For instance, HDFC Top 200 enjoys an ‘Elite’ qualitative rating from Morningstar, while Fidelity Equity enjoys a ‘Superior’ rating. Incidentally, qualitative ratings are forward looking in nature.

In terms of track record, HDFC Prudence, HDFC Equity and HSBC Equity enjoy a four-star rating from Morningstar over the three-year timeframe, signifying that they have delivered superior risk-adjusted returns vis-à-vis their peers. You can consider staying invested in these schemes via the systematic investment plan route. Given that you have mentioned an investment horizon of 10 years, it is important that you track the performance of chosen funds on an ongoing basis to ensure that you stay on course to achieve your investment objective of wealth accumulation.

I have invested in Birla Sun Life Special Situation Fund, HDFC Infrastructure, Sundram BNP Pribas Energy Opportunities, Reliance Mutual Fund - Natural Resources and JP Morgan India Smaller Companies Fund. Are these schemes good for the long term?

D Jitu

Most of the funds are of the thematic variety. Such funds typically fare well in shorter time periods when the underlying theme is in favour. On the other hand, conventional diversified equity funds are better equipped to deliver over longer timeframes.

Hence, you should consider incorporating some diversified equity funds in your portfolio. Also, given that at least two funds in your portfolio are of the close-ended variety, exiting them at this stage would entail bearing an exit load. Therefore, it would be advisable to wait until they turn open-ended before redeeming them.

My portfolio comprises funds like Birla Sun Life Floating Rate, HDFC Income, HDFC Short Term Plan and Kotak Flexi Debt. Please let me know how interest rate-sensitive my debt portfolio is.

Sujata Munagekar

Typically, portfolios with a higher average maturity tend to be more sensitive to changes in interest rates. Most funds in your portfolio are holding portfolios with a lower average maturity; hence they are theoretically equipped to deal with rising interest rates.

Following are some funds from the Ultrashort Bond category which have fared well across the risk and return parameters — Fortis Money Plus Fund-Regular Plan, DWS Ultra Short Term Fund and HDFC Cash Management Fund-Treasury Advantage Plan.

(The expert, Vicky Mehta, is senior research analyst, Morning Star India. For queries Email to etquerymf @indiatimes.com)