I had invested in Franklin India Prima Fund-Dividend Payout Option through SIPs three years back when it was enjoying a 5-star status. I discontinued my SIPs when its ranking slipped below 4-stars two years ago. But I did not redeem the units. I find that it has been giving dividends of 60 per cent continuously for the last three years. Why should this happen? Is there any difference in performance of ‘Growth’ and ‘Dividend – Payout’ options? Shall I switch to another fund in the same category? If yes, please suggest a few good funds.
- Vinayak Hari Gadre
Franklin India Prima is past its best years. It has been a bottom of the quartile performer for the past three years, i.e. 2006 to 2008 on an annual basis. For the current year as well, the fund has been an average performer despite a portfolio heavy on mid-cap stocks which have otherwise been the out-performers in the current year. You should redeem your investments from this fund.
As far as its change in ratings is concerned, Value Research assigns star ranks to a fund on the basis of their past performance in their respective category. Ratings can be a good starting point in fund selection process, but all funds need to be reviewed periodically.
A fund pays dividends out of the distributable surplus which may come from gains of previous years. Moreover, the dividend is calculated as percentage of the unit face value.
Further, the performance of the growth and dividend payout options are same and determined by their common portfolio.
Franklin India Prima is a mid-cap oriented fund and Sundaram BNP Paribas Mid-cap, Reliance Growth or DWS Investment Opportunities can be good mid-cap replacements for it. However, if this is your core holding, then we suggest that you invest in any of the following large-cap diversified equity funds: DSPBR Top 100 Equity, HDFC Top 200, Magnum Contra, DWS Alpha Equity, Birla Sun Life Frontline Equity.