I have been advised by a prospective Portfolio Management Service salesperson of a reputed fund/broking house to switch to Franklin Flexicap from my sizeable holding of Franklin Bluechip. The reason cited was that Flexicap would henceforth be Franklin Templeton's Flagship fund and managed by two fund managers, and also Bluechip fund of late has been underperforming. I have been holding Bluechip for over 10 years now (since its inception) and am perfectly happy with the returns. What is your opinion on the PMS rep's advise to switch to Flexicap?
-Ananth
Before making a decision, first understand the difference between the two funds. While Bluechip is predominantly a large-cap fund, Flexicap, on the other hand, has the flexibility to invest across different market capitalization.
Thus, with Bluechip your portfolio will remain biased towards large-cap stocks, while with Flexicap, it can vary from time to time.
The fund comes from a highly respected fund house, to be managed by the fund managers boasting of the most enviable performance records. As you would have seen over the last decade, many ups and downs get evened out over the long-term.
It will be better to see the performance of Flexicap for a few months before making a decision. The portfolio of Flexicap for the initial months may also bring out certain differences in the management style of the two funds. Also, remember that Flexicap might become skewed towards mid-caps and small-caps at times, thus contributing to some added volatility. If that proves to be a problem, then you would be better off opting for an appropriate combination of the two funds, rather than a complete switch.
In general, one should not go in for an untried fund. Being a 'flagship' fund, whatever that means, and having two fund managers are questionable grounds for switching out of a fund from which you have had satisfactory returns over a decade.
This article was originally published on May 20, 2005.
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