Diversify among fund houses

I invest in ICICI Prudential Dynamic, ICICI Prudential Discovery and ICICI Prudential Infrastructure funds through systematic investment plans (SIPs) of Rs 2,000 each. Will these funds give me good returns in the coming years?

-Abdur

You have selected good funds with track record, but these collectively do not offer diversification. ICICI Prudential Dynamic is a multi-cap fund and ICICI Prudential Discovery, a mid- and small-cap fund, along with an infrastructure fund.

Investing in funds from a single fund house does not help diversify. You will be better off selecting an aggressive portfolio from AIG World Growth fund, Birla Sun Life Dynamic Bond, DSPBR Micro Cap fund, Fidelity Equity, HDFC Equity and IDFC Premier Equity Plan A. Collectively, these funds invest 90 per cent in equity and 10 per cent in debt, offering the necessary diversification.

You could also consider a growth portfolio, which has 80 per cent equity with the balance in debt, made from BNP Paribas Bond, Fidelity Equity, HDFC Top 200, ICICI Pru Dynamic and Reliance Equity Opportunities.

I invested in tax-saving funds like SBI Magnum Taxgain and HDFC Taxsaver, three years ago. Now that the lock-in period is over, should I exit these and invest in other equity funds?

-Sreehari

One invests in a tax-saving fund for the benefits under Section 80 of the Income Act. As the three-year lock-in mandated for investments in these funds is over, you should definitely exit Magnum Taxgain as it has been going down on its performance. Tax planning funds are like diversified equity fund. You can stay invested in HDFC Taxsaver (five-star rated), if it is meets your investment expectations.

I had invested Rs 50,000 in Sundaram Energy Opportunity’s new fund offer (NFO). The current value of my investment is less than what I had invested. Should I stay invested or cut my loss and exit it?

-Murtuza

This fund aims to generate capital appreciation by investing in shares of energy and related companies. It was launched at the peak of the market rally (December 2007). You had invested when the markets were at a high, and this fund has not been able to absorb the correction post that.

The theme did not catch up either, affecting its performance. You will be better off cutting your losses and exiting. There is a lesson for you from this investment - invest in broad category funds such as large-cap ones. You can consider from - Franklin India Bluechip, ICICI Prudential Growth or IDFC Imperial Equity Plan A. Or, consider large- and mid-cap funds like Birla Sun Life Frontline Equity Plan A, Fidelity Equity or HDFC Top 200. You should also make regular investments in via systematic investment plans (SIPs) rather than lump sums. I had invested Rs 25,000 in JM Core 11 Series 1 Fund three years ago. It is a closed-end fund. It has not given good results. Should I stay invested?

–Arvind Reddy

This is a mid- and small-cap fund, which invests in a concentrated equity and related securities’ portfolio. This portfolio has not more than 11 stocks, with each being invested to the extent of 9.09 per cent of the scheme’s net asset value (NAV). Launched when the markets were tumbling (February 2008), the concentration bet went against it. Square your losses and invest elsewhere. Never invest in NFOs, but in funds with a proven track record. Buy NFOs only if they are compelling or if they offer something missing in your portfolio. Also, invest via SIPs for wealth creation.