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When To Exit

A fund should be exited only when it consistently underperforms its benchmark & peers…

I am 28 and want to start investing Rs 20,000 every month for the next 20 years. Please suggest the best options to invest. Also, you mention the need to move from a fund that is not performing to a better performing fund, by exiting a non-performer, am I not losing money? The fund may underperform in the short term and then recover. After all, I would have given enough though before investing in a fund?
- Manni Kuthiala

When tracking the performance of a fund, the suggestion to exit a fund arises when it consistently underperforms to its benchmark as well its peer set. By holding on to a continuously underperforming fund, you are hoping for a miraculous turn around, which may happen over a span of 4-5 years or more. It is for you to consider the opportunity loss in this period that you suffer and if it is worth sticking to a fund hoping for turnaround at a later date?

As your investment horizon is for the long term; we are suggesting a growth oriented portfolio with 70 per cent equity exposure made up of five funds that are well diversified. You should have equal allocation to each of these funds and continue investing in these and monitor its progress for any course correction on the selected funds.

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BNP Paribas Bond Regular Debt: Income ***** NA NA
Fidelity Equity Large & Mid Cap **** 12.48 15.68
HDFC Top 200 Large & Mid Cap ***** 14.59 17.85
ICICI Prudential Dynamic Large & Mid Cap **** 11.95 15.45
Reliance Equity Opportunities Multi Cap **** 16.77 15.13
Returns as on May 27, 2011 Ratings as on May 30, 2011

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