2018 has been a bad year for midcap funds. Now, I see all midcap funds have gone up by around 3.5 per cent in the last one month. I am slowly increasing my investment into midcap funds accordingly. Is it the right thing to do? I am a long-term investor with a horizon of 10-15 years.
Also, BNP Paribas Midcap fund has a very low rating on your website. Apart from this I have HDFC Midcap Opportunities and Sundaram Midcap. Shall I sell off BNP Paribas and increase my investment in Sundaram and HDFC midcap?
- Sanjeev
I would say that having two midcap funds is good enough. Yes, in midcap funds one should definitely go by the past track record. But just a decline in rating may not be the best reason for you to sell a fund. Our rating reflects the relative performance on a risk adjusted basis. If a fund is far too volatile and is not giving you enough returns as compensation, it will have a low rating. Also, the ratings are related to the funds within the same category only. One should not compare the rating of a midcap fund with the fund of any other category.
So take your call. If the fund has consistently underperformed its category or other funds of the same kind, by all means take it out. In BNP Paribas Midcap fund, the fund manager changed around two to two and half years back. Since then there has been a relative decline in the performance or things may have not turned out that good after the departure of the previous fund manager. So, it might be worth considering.
Changing your strategy on the basis of one month performance is not a good strategy. 2018 which turned out to be a bad year was actually a great year if you were investing for 10-15 years as you would have bought low. Sticking to a plan and being disciplined about it, even in the difficult time is the core of being successful. So don't be guided by one month performance. We may have a completely different trend next month.
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