I had made investments in Franklin India Bluechip Fund (Dividend Option) at different levels. Now that the NAV has risen, I plan to book some profits and rebalance my portfolio. But I can't figure out which of the units will be redeemed. Will it be earlier investments or the later ones? Also I find it difficult to figure out the value of my investments after partial redemption. Please help!
Deepti Mukherjee, via e-mail
Your query reveals that booking profits is not an easy exercise at times. From the investment details you have supplied (see Deepti's Portfolio), we gather that you wish to redeem profits of Rs 6,505.65 (Rs 47,005.65 minus Rs 40,500) at the current NAV of 12.49.
You can achieve this objective by filling in a redemption request for this sum of Rs 6,505.65 and the fund would deduct the necessary number of units. But as an informed investor it is always good to be in command of one's investments. So here goes.
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In order to book profits of Rs 6,505.65 you will have to redeem a certain number of units. As the current NAV is Rs 12.49 per unit you will have to redeem 520.8687 units (redemption of one unit fetches Rs 12.49, so to get Rs 6,505.65, divide this sum by the current price per unit of Rs 12.49 per unit=520.8687 units). On the basis of the first-in, first-out principle, the first batch of units to be redeemed will be those purchased on February 8, 2002. This will, however, only supply 412.201 units. We still need another 108.668 units (520.8687 units minus 412.201 units). The second tranche of investments made on September 12, 2002 will then have to be redeemed. This will supply a further 90.09 units. With these two redemptions we can manage 502.291 units (412.201 from the first tranche and 90.09 from the second). In spite of these redemptions, we still face a shortfall of 18.577 units. These can be obtained from the third lot of investments made on September 19, 2002.
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Now for the second part of your question, what is the status of my remaining investments? Well, your first two investment lots have been fully redeemed so there is nothing to look at there. In the third lot made in September 19, 2002 you have 447.406 units left (initial units obtained on this date minus the 18.577 redeemed). At the NAV of Rs 12.49, the total value of your remaining investments (See Deepti's Remaining Investments) is Rs 40,500 just as you had wanted. Now that you know how your profits will be redeemed you are in a position to enjoy them.
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This article was originally published on July 15, 2003.
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