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
– Avnish
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.
This article was originally published on February 15, 2011.
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