I have been investing Rs 3,000 per month via SIP in HDFC Small Cap Fund. However, the scheme has not been performing great. Should I exit this scheme and invest in SBI Banking & Financial Services Fund?
Gaurav Monga, Director, PxG Consultants, responds:
You are investing in a small cap fund which invests a minimum of 65 per cent of the corpus in stocks of smaller size companies. Due to the portfolio composition, this category of funds is volatile and risky. However, these funds also have the potential to deliver high returns, provided the holding period is between 7-10 years. HDFC Small Cap fund is one of the good funds in its category, and SBI Banking & Financial Services Fund is a sectoral fund investing in financial space. Investing in sectoral funds is not advisable as they are riskier than diversified funds and their performance is linked to a particular sector which tends to be cyclical in nature.