I have an investment of around Rs 2 lakh in DSP Smallcap Fund which is now more than a year old. The fund is not performing well as compared to other smallcap funds. Should I redeem it and invest as a lumpsum in Canara Robeco or Reliance Smallcap fund. Also, should I split the amount equally between both or invest the whole amount in just one fund?
I think DSP Smallcap, which was earlier a microcap fund, is a wonderful fund. Also, I feel making such decisions for a smallcap fund on the basis of the performance of one year is not right. You should invest in any smallcap scheme with a definite tenure of at least 5 years. Smallcap funds would always be like that. They fall sharply whenever they do. Even the smallcap funds by Reliance and Canara Robeco could experience this.
If you are not comfortable with the inherent risk of high volatility in smallcap funds, then you should take your money out and invest in a different kind of fund. You should start with an aggressive hybrid (balanced) fund and invest in it for at least three years. Also, never invest a lumpsum in equity because investing a lumpsum at a market peak can permanently impair your investment.