Query Corner: Mutual Funds

INFRASTRUCTURE FUND

I have a monthly SIP of .`2,000 in IDFC Infrastructure Fund since its NFO, but the fund’s performance has not been good. Should I continue investing in this fund? I also have monthly SIPs of .`1,000 each in DSPBR Top 100, HDFC Prudence, Reliance Regular Savings Balanced and IDFC Premier Equity. Is this a good portfolio?

TARPAN_K@INDIATIMES.COM

You have selected highly rated funds with proven performance history and track record. However, the portfolio is largely conservative with two balanced fund and a large-cap fund, which works well if you are not a risk taker. If you are averse to risks, you can consider continuing investments in these funds, but do exit the infrastructure fund, which is a thematic fund, wherein the theme, despite bright prospects, is not picking up. Instead of continuing your investments in IDFC Infrastructure, you should consider investing in a large- and mid-cap fund such as Fidelity India Growth or HDFC Top 200 to boost the returns from your investments.

20% ANNUALISED RETURNS

I invested in Sundaram Energy Opportunities Fund dividend option during its NFO and hold 80,000 units in it. The fund's performance has been bad and I have not received a single dividend. If I have to exit this fund, which fund should I choose for an annualised return of 20%?

KBWAJ77@HOTMAIL.COM

It is risky to invest in a sector or thematic fund because of the narrow investment mandate that these funds carry. Sundaram Energy Opportunities is a thematic fund that explores investment in the energy space, an investment window, which has not taken off as anticipated. Moreover, you invested in the NFO of this fund, which further adds to the risk quotient. New fund offerings are good to consider only if they have a new and compelling investment idea that is missing from your portfolio. The poor returns are reflected in the fund’s performance and, despite the emotional attachment, you should consider exiting this fund. Invest only in funds with a track record and performance history.

Also, you should build a portfolio with large-, and large- and mid-cap funds as the core holdings. Sector and thematic funds, besides multi-cap and midand small-cap funds, can be part of the satellite component of your portfolio. This way, your mutual fund portfolio will have the muchneeded stability as well as scope for higher returns. There is no fund that can guarantee 20% returns. However, by being regular at investing in diversified mutual funds and tracking their performance regularly, you can hope for good returns in the long run.

HIGH-RISK, HIGH-RETURN INVESTMENT

I am 23 and have savings of .`2.5 lakh, which I want to invest in some high-risk and high-return fund, since currently I have no financial responsibility.

VINAYPUROHIT87@GMAIL.COM

Since you are young, you should save regularly through systematic investment plans rather than doing lump sum investments. By investing a fixed amount at predetermined intervals, the trouble of figuring the best time to invest is eliminated, which offers an efficient way to ride market volatility. While you are willing to take risks with the hope of earning higher returns, you should also fix an investment time frame for which you plan this investment. You can consider investing in a multi-cap fund such as HDFC Equity or Quantum Long-term Equity as well as a mid- and small-cap fund such as IDFC Premier Equity or HDFC Mid-Cap Opportunities. All these funds are 5-star rated with a proven track record. A combination of these two categories of funds is also an option worth considering. But, make sure to track the progress on your investments to evaluate their performance at least once a year and alter the fund selection if need be.