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Should I continue with L&T Emerging Businesses Fund?

Dhirendra Kumar says what's the best way to invest in a small-cap or mid-cap fund

I invested a lump sum of Rs 2 lakh in L&T Emerging Businesses Fund around six months back. It is down by around 12 percent. Should I exit or stay invested?
-Anil

It is a bad idea to invest a lump sum in a midcap or a smallcap fund. L&T Emerging Businesses is a good fund. But midcap and smallcap funds are like this only. They do well over a long period of time, and when they fall, they fall sharply. That is why lump sum investment is not recommended. You should always work on a methodical plan. Start investing with Rs 5,000 or Rs10,000 a month and accumulate your saving gradually. This fund will be very volatile. In a bad market it may fall more than the market average. Otherwise, it is a reasonably high quality fund. It has done well in the last phase of the rising market with a substantial margin. And I think the character of the portfolio remains the same. This phase is like bad weather but it may continue. That is why it is important to average your purchase through SIP and invest gradually.

If this is your first investment and you are getting very jittery about it, may be take your money out but I think if you don't need the money for many years, it's better you get used to it. Use this as a learning experience.

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