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Choose Equity Funds For Wealth Creation

For the purpose of long-term wealth creation, diversified equity funds are the best investment avenue

I have invested Rs 10,000 in September 2008 in BSL Monthly Income Plan II Savings 5 (G) but the fund has not delivered good returns. So I plan to transfer or switch to BSL Frontline Equity Plan A-G. Please suggest.
- Sanjay Kumar Sharma

BSL Monthly Income Plan II Savings 5 is a Monthly Income Plan (MIP) that seeks to generate regular income through its predominant exposure to debt and money market instruments. The fund may also take an exposure to equities up to 10 per cent. On the other hand, BSL Frontline Equity Fund is a diversified equity fund that invests a minimum of 75 per cent in equities. The two are different types of funds that serve different purposes. While the former is a debt fund that aims to provide regular income (that is not assured), the latter is an equity fund meant to provide capital appreciation over a long-term investment horizon.

Currently BSL Monthly Income Plan II Savings has a 5-star rating from Value Research. If we compare the fund's performance since your date of investment to date, i.e., from September 1, 2008 to March 20, 2010, the fund has outperformed its benchmark and delivered a return of 11.22 per cent, while the category average return over the same period was 10.45 per cent.

Overall it is a good fund. However, if you are looking for wealth creation over the long term, we suggest that you switch to BSL Frontline Equity Plan A-G Fund via Systematic Transfer Plan (STP). The investments will be made at all market levels. This will help insulate your equity investments from sudden market movements.

    Returns (%)  
Funds 2009 2008 2007
BSL Monthly Income Plan II Savings 5 1.57 28.55 8.86
Category Average (MIP) 14.37 -2.84 13.55
BSL Frontline Equity Plan A-G 90.45 -48.5 62.26
Equity: Large-cap and Mid-cap (Cat. Avg.) 80.19 -52.97 56.06

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