SBI Taxgain is generating yearly dividend, but the net asset value (NAV) value has become half of my investment. Why is that?
In a mutual fund (MF), a person should not get happy just because he/she is receiving dividends. It is possible that you are getting dividends that are basically the same money that you had invested. An investment made in March of 2008, when the market was ruling at its highest levels, would have fallen to half of its value.
To circumvent that, we generally recommend that an investor should invest via the SIP route.
The whole reason behind investing is to see money grow, it is not done to get dividend. Any MF that is older than one year and its NAV is more than Rs 10 has realized gains and therefore it can give dividends. This dividend is very meaningful for those who are in the investing world for a long time.
Since you have invested recently and you are already getting dividend. That means you are getting back the same money you had invested. However, this is not a matter of great concern. Without any tax implication, what you can do is to request the fund house to change your plan to reinvestment. Under this plan your dividend will not be sent back to you, rather it will be reinvested in the fund without any load.
I have invested Rs 4,000-to-Rs 6,000 in Reliance Natural Resources Fund Growth Option, SBI Magnum Taxgain, Kotak Opportunities Fund and DSP BlackRock Taxsaver Fund. Should I change my portfolio?
Two of the four funds are relatively new. Magnum Taxgain has been performing well, but Reliance Natural Resources is a thematic fund and is relatively new. You would have faced a decline already, but it is starting to do well now.
You can’t do much about your tax-savings investment anyway. You will be better off choosing other tax savings funds. Reliance Natural Resources is worth discontinuing, while Kotak Opportunities is a reasonable fund.
So, if you are investing for a period of more than three years, then Kotak Opportunities could prove rewarding. But in case of a decline it will fall more. If you are reconciled with that -- superior returns with high downside risk -- then it is a reasonable choice.