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Think Long with Equities

Equity returns are disappointing right now, but it turns out to be the best asset class over a long period…

I am investing in HDFC Prudence, HDFC Equity, HDFC Top 200, Reliance Equity Opportunities and UTI Infrastructure. All of these funds have been going down in value. Should I exit them and invest in liquid funds, as you've been saying that liquid funds never go down in value and give 6-7 per cent returns?
- SPS Jain

Liquid funds certainly don't go down in value, and they've been giving returns of over 6-7 per cent over the past 2 years. However, over a long period of time, equity turns out to be the best performing asset class. But it is true that many regular investors have been disappointed with the way equity has performed in the past few years. Equity hasn't delivered any kind of meaningful returns and the high interest rates create a sense of opportunities lost. But we would suggest that you should keep investing in equities if your investment timeframe is long enough. At the same time, you need to reorganize your portfolio. There is a great amount of complementarity between HDFC Prudence, HDFC Equity and HDFC Top 200; you're not gaining anything meaningful by owning all three of them. Investing in just HDFC Equity would be good enough if your timeframe is 5-6 years. If you've a shorter timeframe, having just HDFC Prudence would be enough. You should stop investing in UTI Infrastructure, because a sectoral fund is undesirable. Hence, keep investing if you have a long-term horizon. But if you're likely to need your money in around 1 year, then gradually take your money out of equity and move it to debt funds.

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