I invested Rs 2.41 lakh across several funds in 2006; should I stay invested or redeem?
- Kapil Lakra
You invested a total of Rs 2.41 lakh, the market value (October 31, 2010) is now at over Rs 4 lakh. So your investments fortunately have worked out well. However, there are a few issues we would like to point out.
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Going by the nature and selection of your investments, it's clear that you don't have a focused investing mandate and are not a disciplined investor. What made you invest in two funds in 2006 and then not make any fresh investments till four years later? In July 2006, the Sensex was in the 10,344 to 11,000 range; much lower than what it is today. You were plain fortunate with the timing. Investing at one go puts you at a higher risk of losing money than going for it systematically. Moreover, why go with new fund offerings (NFOs) when there are ample tried and tested ones already around?
Your fund selection lacks clarity. With just four funds, why have you taken two from the same fund house? To add to it, Templeton India Equity Income and ICICI Prudential Discovery are both value funds. The former also invests in stocks overseas, is that what you want? Fidelity Special Situations looks to invest in undervalued companies that find themselves in “situations that are out-of-the-ordinary”. Were you aware of this when you invested in the fund?
Here are a few suggestions:
1.Your current portfolio has a distinct mid- and small-cap tilt. Almost half the portfolio is in such stocks while the large-cap allocation is at around 35 per cent. Are you comfortable with that? If not, we suggest you increase your large-cap exposure. To do so, start a Systematic Investment Plan (SIP) in either one: DSPBR Top 100, IDFC Imperial Equity or DWS Alpha Equity Regular.
2.Do not sell your units in ICICI Prudential Emerging STAR or ICICI Prudential Discovery till you complete a year of holding or else you will end up paying short-term capital gains tax.
3.If you want to sell the units of Fidelity Special Situations and Templeton India Equity Income, go ahead. But do so only if you need the money.
4.If you do not have money for a new SIP, you can start a Systematic Withdrawal Plan (SWP) in Fidelity Special Situations and Templeton India Equity Income and channelize the money into the fresh funds that you have selected.
This article was originally published on December 21, 2010.
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