Track your fund's performance and exit when it starts dipping…
15-Feb-2011 •Research Desk
I started investing in Reliance Vision Mutual Fund in October 2005 through SIPs of Rs 10,000, which I continued till October 2008. During this time, the rating of the fund was 4-stars or 5-stars. At the moment, the fund rating is fluctuating between 2- and 3-stars. I am sitting with a reasonable gain of Rs 1 lakh on my investment. I was wondering if I should exit this fund or hold onto my investments. I will be re-investing the money I redeem as I do not need it for the next five years
Making gains from mutual fund investing is a sign of good fund selection in the first place. You are right in your observation about Reliance Vision going down on performance and losing stars. A steadily declining fund also loses stars regularly, offering an exit option at various points to an investor.
As you plan to redeploy the profits from this investment; you can consider investing in Birla Sun Life Frontline Equity Plan A, Fidelity India Growth or HDFC Top 200. All three funds fall within the large- and mid-cap fund space, similar to Reliance Vision. By exiting a poorly faring fund to the best performers in the category, you stand the chance to gain in the future. There is a lesson for you from this experience: track the performance of your fund investments periodically. If the selected fund’s performance starts to slip, it’s time for you to exit and invest elsewhere.