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What strategy to use when switching from a non-performing to a performing fund?

Dhirendra Kumar tells what factors to analyse while making a switch

While switching from a non-performing to a performing fund, how do I determine if I am purchasing the performing fund at a higher price? Also, it may happen that the non-performing fund will perform better, later, while the performing fund purchased at a higher price may not give expected return. Kindly suggest.
- Sanjay

The price of a mutual fund doesn't matter. It doesn't matter if the NAV of a fund is Rs 100 and the other is Rs 15, provided both funds are run as well, and they do just as well. Your Rs 100 will become Rs 200, and your Rs 15 will become Rs 30. In both cases, you will earn 100%.

The most material thing is how the underlying investments perform. When you evaluate a fund, the simple way to look at it is how it performs compared to the benchmark and other similar funds. You should look at this data for at least a one-and-a-half market cycle. It should have both phases - when the market is rising and when it is going down. If the fund is doing poorly throughout, get rid of it and move to a better-performing fund. However, don't go by the recent performance of the last six months or one year. Look for a longer period with a complete market cycle.

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