I have invested in HSBC Equity and Kotak 30 funds. Their persistent below-average performance is disappointing. Should I exit these funds or wait?
-Sharad Gandhi
Both Kotak 30 and HSBC Equity are diversified equity funds and have been rated 3-star. Due to their large-cap tilt, they have transformed into conservative offerings. They might not be among the top performers in a rising market, but are likely to fare well in a fall. While both these funds lagged the category average in 2009, they fared well in 2008.
Kotak 30 has managed to beat its category average every year since 2005, barring 2009. On the other hand, HSBC has been an average player in the category. These funds are for investors who cannot take much risk. Such funds can be a good in the long run.
You may also look at funds like HDFC Top 200, DSPBR Top 100 Equity, Birla Sun Life Frontline Equity and Fidelity Equity, which havea consistent track record.
I have invested in the following new fund offers (NFOs): SBI Infrastructure (Rs 30,000), UTI Infrastructure (Rs 40,000), Reliance Equity Advantage (Rs 20,000), HDFC Mid Cap (Rs 20,000) and Magnum Contra (Rs 30,000). My investment horizon is 4-5 years. I want to invest in about three schemes via monthly systematic investment plans (SIPs) of Rs 1,000 each for six years. Does my portfolio require any adjustments? Please suggest some good diversified funds.
-Pawan
Avoided investing in NFOs, for they do not have track records. Your portfolio seems concentrated around thematic and aggressive funds, which calls for urgent attention.
While Magnum Contra is a good fund to stick to, you may consider reducing the exposure to other funds. With two infrastructure funds and one mid-cap fund, your portfolio may be volatile. Do not exceed 20 per cent exposure in such funds.
With a horizon of four to five years, you may comfortably invest in diversified equity funds. Some good options may be: Magnum Contra (already in your portfolio), HDFC Top 200, DSPBR Equity, Canara Robeco Equity Diversified or Fidelity Equity. You may use the same for SIPs as well.
I would like to invest Rs 50 crore for the short-term, around 90 days.
-Prakash Hegde
Consider ultra short-term funds, such as UTI MM Mutual Fund or Sahara Liquid Variable Pricing. They offer high liquidity and are good compared to bank deposits. But, there is no assured return or capital protection.
I have invested in Magnum TaxGain. Its lock-in is now getting over. It has not given good gains. Should I start an STP in Magnum TaxGain or other funds from SBI MF? I already have an SIP running in Magnum Contra Fund.
-Vijay Zanvar
You do not need a systematic transfer plan (STP) to transfer money from one equity fund to another. STP is more effective when you switch between different asset classes, i.e. debt to equity or vice versa.
Magnum TaxGain has a 4-star rating. Since 2003-2006, this fund has been the best performer in its category. In 2007, it broadened its portfolio and shifted focus from small-and mid-cap stocks to large-caps. These changes did not go in its favour, which got reflected in its performance. However, the fund managed to face the downturn well.
In our view, Magnum TaxGain is a well-diversified fund, which can be a part of your portfolio for the long term.
