In early 2008, I invested Rs 50,000 in HSBC Equity. The net asset value (NAV) then was 42.33. Should I hold this fund? I also bought 2,210 units of ICICI Prudential Infrastructure Fund at an NAV of 22.62. Both funds were dividend option. Should I sell?
-Dipak Chakraborty
You invested a lumpsum of Rs 1 lakh in just two funds. There you erred. If these are your only investments, it is not wise to have half your equity portfolio in a thematic fund (infrastructure).
HSBC Equity had a great run in 2003 and 2004. Since 2005, it has turned out to be an average player, barring 2008, when it was a top-quartile performer. Other better options are Canara Robeco Equity Diversified, HDFC Top 200 and IDFC Imperial Equity Plan A. The latter one is more of a large-cap fund, while the others have a large- and mid-cap tilt.
ICICI Prudential Infrastructure will fare according to the market response to that theme. Off late the theme has not been doing very well. But the scheme is one of the better options in the category. Its large-cap tilt is probably what is hindering higher returns. But if you believe in this theme, stick to it.
I plan to invest Rs 6,000 for 20 years via systematic investment plans (SIPs). What do you think of my fund selection: HDFC Top 200, HDFC Equity, BSL Frontline Equity, IDFC Premier Equity and Reliance Regular Savings Equity. How important is the scheme size? Does a big size hamper the performance of the scheme?
-Abhijit
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Good fund selection. But do you really need to invest Rs 6,000 in five schemes? Instead, consider investing Rs 1,500 in four schemes each. You have two schemes from HDFC Mutual Fund, drop HDFC Equity.
Size really does not matter in the case of a large-cap fund. However, in a mid- or small-cap fund, a smaller size is an advantage, since it gives the fund manager more flexibility to move in and out of smaller stocks. The actual size which would give the fund manager comfort is more a subjective issue.
I invested in ICICI Prudential Tax Growth Plan in 2006 at Rs 66 and the current NAV is Rs 130. Should I book profits in this unpredictable market? Though I do not need the money.
-Saurabh Jain
Do not sell the units if you don’t need the money. If you book profits, you will pay no long-term capital gains tax. But where would you put the money once you sold your units? It is pointless keeping money in a savings bank account. Once the three-year lock-in (mandatory for tax saving funds) is over, it functions like an open-ended, equity diversified fund.
However, since you are wary of the market and want to sell the units, you could consider channelising the money into a balanced fund (equity oriented hybrid fund). HDFC Prudence, Reliance Regular Savings Balanced, Tata balanced and DSPBR Balanced are some good options.