I invested in the SBI PSU fund NFO. Is it a good fund to continue investing?
Radhika Kulkarni, Pune
This fund was launched in June 2010 with the objective to provide opportunities for long-term growth through an active management of investments in a diversified basket of equity stocks of domestic Public Sector Undertakings and in debt and money market instruments issued by PSUs and others. The fund is thematic as the investments are in companies run by the government of India undertaking, which makes the investments a tad risky. The performance of the fund has been erratic with 1-year returns being 23.07 and 3-year annualised returns being 8.31 per cent and 5-year annualised returns being 9.61 per cent. The upside with investing in such a fund is that you are sure that the companies that it invests in will not change the nature of business they are in, which means NTPC will remain a power generation company, and will not diversify into manufacturing cement or other such thing. Ideally, one should invest in a thematic fund only when the risks associated are understood and is clear about the flipside of such investments. Such investments should in no way be your only investments and should be considered once you have a well diversified portfolio of funds. Stay invested if your investment objective is being met, else you will be better off by investing in a diversified equity fund.