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Non-performing sector funds

Sector funds work only if the theme is compelling, or if your existing investments have no exposure to the sector

I invested ₹90,000 in DSPBR India T.I.G.E.R. (G) as 30 monthly SIPs. The last SIP was made in November 2011. The total value of my investment has gone down. I also invested in Reliance Infrastructure Regular Plan, in a lump sum of ₹40,000 which has reduced to ₹20,000. Should I hold these funds to recover the principal amount or withdraw my investments?
-Payal Sharma

Both the fund that you have invested in are sector funds. If these are the only funds you hold, you should withdraw and invest in diversified equity funds. Sector and thematic funds work only if the theme is compelling, or if your existing investments have no exposure to the sector.

Reliance Infrastructure Fund has merged into Reliance Diversified Power Sector Fund. After September 7, 2013 (the effective merger date), you will be allotted units of Reliance Diversified Power sector fund which is also a sector fund with a much narrow mandate. Power sector is a subset of Infrastructure sector. Your investments will continue to be concentrated in the same sector. It’s better you withdraw your money from the fund and invest in a diversified equity fund.

DSPBR T.I.G.E.R is a three-star rated infrastructure fund. A lot of the dismal performance of funds investing in this sector is to do with the sector itself, which has not found anything encouraging to attract investments. The fortunes of this sector depend a lot on government spending, which has not taken off. Moreover, in a changed economic environment of gloom and relatively higher interest rates, there is little to cheer for the funds investing in the theme. It would be wise to move out of the fund to cut losses.

By holding on to a non-performing fund, you are losing the opportunity to invest in other funds.



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