I have invested Rs 7 lakh in Kotak Gilt Invest Regular (G) from April 2012 to Jan 2013 in installments. The performance of the scheme was excellent till 2nd January, 2013. Thereafter, the scheme has not given reasonable returns. Can you explain this change in fund's performance. What should I do with this investment, continue or switch? If so, suggest some good funds. I am a retired employee.
- P Kasiviswanadham
Gilt funds are not meant to be the core of any portfolio, but should be used opportunistically. Funds in this category are high risk high return propositions. Unlike corporate bonds, G-secs are frequently traded. These funds are hence highly sensitive to interest rate changes.
If the interest rate falls, these funds do well. However, they are also the first ones to get hit with a hike in interest rates. There is a possibility of losing gains in a short time. For instance, majority of funds in this category delivered their worst returns ranging between 7 and 11 per cent in the first month of 2009. The opposite is equally true as the best one month return has gone up to 20 per cent (ING Gilt).
You should exit this fund if it is the only fund in your portfolio and you depend on the fund to meet your daily expenses. Opt for a safe investment option like bank FD or senior citizen saving scheme to fulfill your needs. Senior Citizen Savings Scheme gives a guaranteed return of 9.3 per cent annually which is compounded quarterly.
Kotak Gilt Investment Regular is a four-star rated fund. It has a consistent track record of delivering category beating performance. In total 14 years of its existence the fund has underperformed its category just thrice. Last year, it was the second best fund in its category and this year also it has delivered better than category so far. Don't look at the day-to-day performance of the fund, take a slightly long-term view.This article was originally published on April 04, 2013.
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