I am 35. I invested Rs 3.18 lakh in SREI NCDs, which are now worth Rs 1.55 lakh in the secondary market. SREI has not paid any interest since January. Should I sell these NCDs for whatever price I get or should I stay put? I don’t need the money for another three years.

Dev Ashish, Founder, StableInvestor and Sebi-registered investment advisor, replies: There are no assurances about future interest payments, there is also the threat of complete principal loss. If you do not have other savings, exit now by booking losses. If you have sufficient savings in other safe instruments, you could wait a bit. You might get the principal back eventually. Unlike FDs, NCDs are risky with poor liquidity. Even though NCDs might be secured, your interest payments and return of principal depends on the company’s financial health. The biggest risk is that of default. Also, credit ratings can change overnight. You might buy an AA-rated NCD, but it might be classified C or D in deteriorating scenarios (or adverse change in the company’s finances). In debt, return OF capital is more important than return ON capital. The negatives associated with NCDs far outweigh the positives. Small investors should give NCDs a miss. Stick to high-quality debt funds for your liquid, short-term fund parking requirements.

I am 28 and earn Rs 85,000 per month. I need to build a corpus of around Rs 2 crore in 15 years to buy a house. I have been investing Rs 20,000 every month in mutual funds. I invest Rs 2,000 each in Canara Robeco Blue Chip Equity, Mirae Asset Emerging Bluechip, Axis Midcap, Axis Small Cap and Quant Tax Plan; Rs 3,000 each in Mirae Asset Large Cap, Parag Parikh Flexi Cap and Canara Robeco Equity Hybrid Fund and Rs 1,000 in Aditya Birla Sun Life Low Duration Fund. Will my investments help me achieve the target I have set?

Vidya Bala, Co-Founder, PrimeInvestor.in, replies: We hope you have considered the rise in property prices in 15 years when you arrived at Rs 2 crore. You will need to in crease your investments by another Rs 25,000 in at least three years from now and possibly by a similar amount again in three to four years from then, if we assume 11% return on investments. Please note that returns will go down as stock markets mature. Keep expectations low. Your fund portfolio is equity heavy and can be very volatile in market falls. You might want to consider at least 20% in debt. The hybrid fund you hold is not debt. In equities, it looks like you have gone by the current crop of ‘top funds’. Suffice to hold one large-cap. Increase exposure to UTI Nifty Next 50 index instead. Skip the ELSS fund and increase in Parag Parikh Flexicap.

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