Investments in Gold Hybrid Funds

I had invested in Axis Triple Advantage Fund (Dividend) in October 2012, but till date, have not received any dividend. Should I stay invested in this fund or switch to some other? Kindly suggest alternatives.
-Sandip Sen

Axis Triple Advantage fund was launched in July 2010. The fund has declared two dividends in the September month of 2011 and 2012. You can contact the fund house for your dividend warrant.

Also, we would like to tell you that one shouldn't depend on mutual fund dividends for a regular income. Although some funds have a history of paying dividends regularly, no fund house is obliged to pay dividends by law. It is always subject to the availability of distributable surplus.

Axis Triple Advantage fund invests in a predefined percentage mix of debt (30-40), equity (30-40) and gold (20-30). This fund and others like this one are an outcome of the gold run. Earlier hybrid products included just two asset classes of debt and equity. These funds increased their asset mix by adding gold to the portfolio making the structure more complex. The recent downfall in gold has affected most funds with allocation to the asset. The complex nature of these funds makes it difficult to manage and position them in a portfolio. The fund manager has to be right in terms of asset allocation for the fund to perform.

We really don't know what kind of investment needs can be fulfilled by these funds. The funds in this category are not even comparable as each fund has a different asset allocation.

On the performance front, if we compare these funds with other hybrid funds, Equity-oriented and Debt-oriented conservative, the latter two categories have done better than these funds over the past one year. Equity-oriented funds have delivered returns at 10.68 per cent and debt-oriented conservative funds have delivered at 9.56 per cent while hybrid funds with gold gave just 6.71 per cent. Adding one more asset to the simple mix of debt and equity hasn't really helped these funds.

So you should keep your investments in simpler products. Define your goals or what you want to achieve and then invest according to your requirement.

This article was originally published on May 03, 2013.