Friday, September 5, 2008

Facing Loss in Sector Funds - What to do?

One boarder wrote :
I invested Rs.10,000/- each in DSP ML Tiger Fund (G), JM Basic Fund (D) and Reliance Diversified Power Sector Fund (D) in mid-Feb this year. I also invested Rs.15000/- in ICICI Pru Infra fund in Mid-Jan. My investment is showing approx 25% loss. Is my selection of funds OK? I can stay invested for another 2-3 years. Please advise!! Thanks Saumya.

Srikanth Shankar Matrubai replied :

Dear Saumya,
I am sorry to say, your choice of Funds is not right. I am not saying it is bad, but the point is all of your investments are into Sector or Theme Funds and these are the first ones to be hit hardest in these of Bearish Sentiments.

In hindsight, all your funds are very good but they should form only a part of overall portfolio and occupy a max of 20% of your investible amount and by themselves form the whole portfolio.
There is even duplicaiton of sectors in DSPML Tiger, JM Basic and ICICI Pru Infra. These funds hold almost similar portfolios varying only in %age of their holdings.
Even though, you can stay invested for 2-3 years, you are better off switching from at 3 of the above funds to Good Diversified Equity Funds which can give better returns.
Switch from JM Basic Fund to HSBC Equity Fund

Switch from Reliance Diversified Power Sector Fund to Reliance growth Fund

Switch from ICICI Infra Fund to HDFC Top 200 Fund. If you wan to remain in ICICI Fund House, then switch to ICICI Focussed Equity Fund.

In future, avoid Sector/Theme funds and go for Diversified Funds and try to invest through sips.

best of luck,

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