I want to invest Rs 25,000 in equities for 10 years, but with minimum risk. I expect an annual return of 12 to 13 per cent on my investments. Is it right to invest in funds focused on public sector companies because of the disinvestment and other reforms expected in
PSUs in the coming years?
- Suhas
A. Generally speaking, one should avoid lump sum investment in equity. Investing regularly in equity funds through an SIP is easy, helps you average your cost of purchase and reduces anxiety.
Equities prove to be the best investment vehicle over the long term. And good equity funds have been able to build a compelling investment case for themselves over the past decade. As on March 3, 2010, the diversified fund category delivered an annualised return of nearly 15 per cent over the past 10 years.
Investing in PSU Funds should be avoided. Nothing prevents a diversified equity fund from investing in PSUs when opportune, while a PSU Fund will be constrained to invest in PSUs only. So even when PSUs do poorly or their outlook is bleak, these funds will be forced to invest in PSUs only. Besides this, there are two PSU Funds -- Religare PSU Equity and Sundaram BNP Paribas PSU Opportunities which are relatively new with limited history to evaluate.
Investing in a good diversified equity funds will serve you well. A few funds from our selection of good large & mid-cap funds include HDFC Top 200, Tata Pure Equity, Templeton India Growth, UTI Opportunities, ICICI Prudential Dynamic and Magnum Contra. Choose from them.
This article was originally published on April 14, 2010.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
