7 months too less to judge performance of hybrid fund
Equity-oriented hybrid funds are good when an investor has a holding period of 3 to 5 years or more
I had invested in a balanced fund seven months ago. However, the returns till now are only about 3%. Should I exit the fund?
Equity-oriented hybrid funds (funds that used to be called balanced funds) are those that invest 65% or more of their portfolio in the equity market and the rest in the debt market. These funds are good when an investor has a holding period of 3 to 5 years or more. So, at the outset, judging such a scheme’s performance in seven months is not the right thing to do. Also, these hybrid funds have had a particularly poor stretch recently due to two factors. One, the debt market has not been kind to their debt portfolios with rising rates. Two, the mid-cap downturn in the equity markets has also hit them hard considering that these funds tend to have sizeable exposure to that segment of the market. So, this particular stretch of market period has been very unkind to these funds, and judging them at this time would not be truly reflective of their potential or do justice to their track record. Regarding your particular fund, make sure that over the past 3, 5 and 10 years, it has beaten its benchmark and has remained in the top 2 quartiles with respect to the funds in its category. If that is the case, just hold on and allow the fund managers to correct their portfolios (reduce duration of their debt holdings and restore balance in their equity portfolios).
I have accumulated ₹50 lakh for my daughter’s wedding in April next year. I want to move this investment into a debt fund. Please suggest some options.
It is a good idea to move your accumulated corpus to safer investments such as debt funds as the date of utilisation draws closer, especially given that the markets in the next few months are expected to be volatile. I would recommend a mix of liquid funds, ultra short-term funds and short-term funds for your corpus at this time. These three are the safest debt funds, and for a period of six months, you cannot take too much risk. A portfolio with an allocation of 50% to liquid funds, 30% in ultra short bond funds and 20% in short-term funds would keep your money safe, but still make it grow at a slow pace.
Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com. Queries and views at firstname.lastname@example.org
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