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Shun NFOs

New funds dont' have a history to rely upon, opt for well-established performers instead…

Two years ago I invested Rs 5,000 in Reliance Infrastructure NFO, however the value of my investment has always been less than what I had invested. What should I do now?
- Rishu Kumar Chourasia

This fund’s objective is to achieve long-term capital appreciation by investing in infrastructure companies and companies indirectly related the infrastructure sector. These include investments in construction, metals and minerals, power and power equipments, telecom, banks, ports, and other related areas in the segment. The fund can have 35 per cent of its assets in cash and fixed income investment.

Infrastructure as a theme has not been doing well and its impact is visible on the funds in this category. Moreover, this fund’s NFO was at a time when the infrastructure sector has not picked up as much as expected. It is for these reasons that the value of your holdings is less than what you had invested in. You can draw a lesson from this investment; never invest in thematic funds unless you are very clear of the risks; for everything else it is best to invest in a large-cap or multi-cap fund. Also, invest in an NFO only if there is a compelling idea in the offering; there are a few funds in the infrastructure space that you could have considered instead of this fund, they have a performance history and track record to consider.

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