I invested in the following JM funds - JM Basic , JM Contra, and JM Small & Mid-Cap Reg-G - in September 2007. They have been performing poorly since January 2008. I have lost almost 50 per cent on all the three funds put together. Does it make sense to hold on to them? Please advise.
- Lakshmi
JM Basic is a thematic fund that aims to invest in the energy and petrochemical sector. Currently it has a one-star rating from Value Research. This fund was performing well at the time when you invested in it. However, because of its aggressive bets it could not weather the downturn of 2008 well. From being the best-performing fund (in its peer group) in 2007 with a 111.44 per cent gain, it became the third-worst performer in 2008. However, in 2009 the fund recovered and delivered a return of 100.41 per cent.
When you had invested in JM Small & Mid-cap Reg and JM Contra, both were new offerings with no track records. These are aggressive funds that invest in stocks of mid- and small-cap companies. Both have performed badly in 2008 and 2009.
In our view, you may exit all these three funds and invest in funds that have provided consistent returns. Learn the following lessons from this episode. One, do not invest in new funds which lack a track record. Instead invest in funds with long track records and proven credentials. Second, do not chase funds based upon their short-term performances. Choose funds that are likely to give stable returns. And third, avoid investing at one go. Choose the SIP route instead.
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This article was originally published on July 09, 2010.
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