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Is it the Right Level to Invest?

I have investments in Magnum Global, Magnum Contra, Magnum Emerging Business Fund and HDFC Premier Multi-Cap. Is it wise to invest further in Magnum Global at current levels? —Sparsh Bansal

I have investments in Magnum Global, Magnum Contra, Magnum Emerging Business Fund and HDFC Premier Multi-Cap. I am a long-term investor. Is investing further in Magnum Global at current levels still a sound investment? Also, I am thinking of pulling out of HDFC in the near future. Kindly advise.
—Sparsh Bansal

One of the common investment mistakes committed by the mutual fund investors is to look at the NAV of the fund before making the investment decision. We have said time and again that the NAV of a mutual fund is irrelevant while making an investment decision, unlike a share in which the current price level is crucial to base your investment decision. Therefore, whether you should invest in SBI Global or not should be governed by factors other than its current NAV. Though you have not mentioned how much you have invested in each of the mentioned funds, but we would suggest you to look at other funds as well before making your investment decision. The reason is that three of your funds- Magnum Global, Magnum Contra and Magnum Emerging Business Fund are skewed towards mid-caps. Mid-caps tend to be more volatile, and further investments in Magnum Global will make your portfolio even more biased towards mid-caps.

Secondly, Magnum Global and Magnum Emerging Business Fund have quite similar portfolios. As per their portfolios for the month of April, their top four sectors are same. Also three out of the top five holdings of their holdings are common. Further investment in Magnum Global will only make your portfolio more concentrated in these stocks and sectors.

Choosing some other good fund from a different house will also diversify your portfolio across fund houses, since three of your current holdings belong to SBI Mutual Fund.

Coming to your second question, you have not written why do you want to pull out of a fund with less than a month's performance record. If you are concerned about its NAV that had remained below 10 for few days, then please note that this is not a plausible reason to exit the fund. You are a long-term investor, as you have written, and therefore, fluctuations on such a short time horizon should not be of concern to you. In fact, there are other newly launched funds as well that have remained below par after launch. You should track your fund's performance at least for a few months before making a decision. Read the response to the following query sent by Shantanu Banerjee, who has similar concerns for his investments in Franklin India Flexi Cap Fund.

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