The recent few years haven’t been kind to the infrastructure sector or the funds in the space. This sector directly mirrors the state of the Indian economy, and given the latter’s weaknesses (especially troubled by lack of fresh investments) in the recent past, its performance has been poor. This has caused infrastructure funds to underperform.
You have been investing over the last 15 months, but if you go further back, you will find that the last three years have not been kind to this sector. Infrastructure funds, on average, have returned around 2% annually in this period. The two funds you hold are better schemes in the space. However, a recovery may come by slowly and needs a strong market rally. What you do with these funds would depend on how much exposure they account for in your total portfolio. If it is less than 10%, you should hold and wait for a revival. But that may not happen any time soon. If it accounts for more or if you can’t wait longer, reduce exposure and move to multi-cap and mid-cap funds.
I want to invest ₹1 lakh for my child’s education over four to five years. Please advise.
—Name withheld on request
An investment for five years cannot assume too much market risk since for such a time frame, there would be a distinct probability of losing money in the market. So, one would have to take a hybrid approach to investing—with a significant amount (say, 50%) going to relatively safer segments of the debt market. If you do so, you will need to moderate your returns expectations to account for that (debt investments, at best, return a bit more than your bank fixed deposits, albeit with better tax treatment considering your investment time frame). So, if we assume a portfolio return of 10% per annum over this period, your investment will become ₹1.6 lakh in five years. If the markets do well in this period, you could get 12% returns per year, and that would mean a growth to ₹1.76 lakh in five years. You can choose two equity funds such as Mirae Asset Large Cap fund and Invesco India Growth Opportunities fund. For the debt allocation, you can go with safe options in the space such as SBI Short Term Debt fund and Kotak Savings fund.