When it comes to small-cap funds, you need to stay invested for more than seven-eight years for them to perform, advises Dhirendra Kumar
At present, I have no income with limited savings. I have an SIP in Franklin Smaller Companies Fund, which started a year ago but this is performing poorly now and I have already lost a huge sum of my savings in this fund. Should I continue with my SIP or exit this fund to stop further erosion of my savings?
- Raji Lakshmi
If you need this money, then take your money out. But if this money is not needed and it can remain invested for five-six years, then let it be. This is because right now, your losses are on paper but if you take it out, it will become permanent. Ideally, your investment in a small-cap fund cannot be your emergency fund. However, as you have said that you have no income and if you need this money in the near future, then you may reconcile with the losses and take your money out.
Small-cap funds turn out to be the best performing asset among equity funds only if you stay invested for seven-eight years or more and that too through regular investing. So, these are risky funds. You started investing at the most inappropriate time. Since then, a lot has happened, which could not have been anticipated. So, decide accordingly.