I have been investing Rs 5,000 via monthly SIP each in HDFC Equity, HDFC Top 200, IDFC Premier Equity and DSP BlackRock Top 100, since February 2011. However, performance of these funds has not been very good and my investment has hardly appreciated. You advice that one should review performance of funds every year. If a fund is not doing well, how should I get out of it? Should I continue investing in these funds or go for another fund?
You are investing in well rated equity funds. All these funds have a proven track record with hefty assets under management. Equity markets have remained range bound since 2011, and have not seen any boom, and so have your funds. Your fund selection is not wrong, but it’s the nature of equity to yield over long term. Since February 2011 to May 2013, Sensex has given returns only at 4 per cent.
If these investments are meant for long term goals, and if you can be patient, hold onto your investments and continue with these funds. But, if you are a risk-averse investor or you have an immediate need to fulfill then you can withdraw your investments and invest in safer debt options like short term funds or even fixed deposit if that takes away your worry.
In their respective categories, these funds have been in the top band in three-years and are best performing funds on a five-year basis.
If you decide to continue investing, an aspect to worry about is diversification in your portfolio. Of the four funds you hold, you can pull out of either of HDFC funds as both have a nearly 75 per cent overlap in the portfolio. Both funds are managed by the same fund manager. You should diversify your investments across fund houses to limit your risks.
You can withdraw your investments in either way- STP or lump sum, depending on how you intend to spend the money. If you want to reinvest in equity then you can redeem as lump sum and put the same in another fund. This is so because your investments have already seen the volatility of equity markets, and STP is suggested to negate market phases.