I have been investing in Franklin India Prima. Its 5-star rating has dropped to 3 stars. Must I switch to another 5-star rated fund or wait?
As is evident from its ranking, Franklin India Prima has not been a consistent performer. This mid and small cap heavy fund has had a 3-star ranking for eight months now. From being the best performing equity fund in 2003, it has fallen sharply and has been in the bottom quartile of the category rankings for two years. One of the reasons for its poor performance in 2007 is the low exposure to top performing themes like energy and financial services. If you have significant portfolio exposure to this fund, start reducing it gradually and shift to funds that have proved their worth over the long run.
You can invest systematically in other mid cap funds with a consistent track record like Sundaram Select Mid Cap and Reliance Growth. Both funds have a 5- star rating and have always managed to be a part of top performing funds in the mid cap space.