It was another week of free fall for equities. Almost every equity fund fell during week. As of Friday close, investors ran for cover as the deadline for rolling settlement comes closer and ofcourse, the falling NASDAQ and profit warnings from the US tech majors. Infosys stock price nose-dived based on a severe profit warning from Nortel Networks on Friday, as Nortel is a fairly large customer for both Infosys and Wipro. Technology funds bore the brunt of the pain. For the week ending June 15, 2001, Technology funds lost an average 7% and even the BSE Sensex fell by 123 points (3.52%).
The top losers include - ING Growth Portfolio (-10.39%), Alliance New Millenium (-9.32%), UTI Software (-9.30%), IL&FS eCOM Fund (-8.85%), K Tech (-8.62%), Canequity-Tax Saver (-8.12%), Pru ICICI Technology (-7.04%), Canexpo (-6.65%), Alliance Tax Relief '96 (-6.20%), KP Infotech (-6.14%), and Magnum IT (-6.10%). And positive returns was difficult to find -- only 3 equity funds gained but with less than a single digit gain -- UTI Petro (0.97), Dhansamriddhi (0.5%) and Alliance Buy India (0.21%).
Equity funds and especially the technology fund are proving to be a test of patience for most investors. Majority of the equity funds hit their low last year in April. And they have not moved much anywhere from then. With growing anxiety, it is time to consider few issues before you jump on a sell decision.
There are several factors that make selling a fund appropriate - a fund's unsuitability to your portfolio, a deteriorating performance, a change in style or allocation of a fund, a change in management and inefficient service. All the above factors are not in order of their importance. But the most important reason for selling a fund is the same as the reason for buying it - your investment goal. You should buy or sell funds solely on the basis of how they contribute to your long-term financial goal. Is your fund helping you achieving it? Even the best performing fund can qualify for sell if it does not suit your requirement. Your changing needs and feelings can drive a sell decision. Someone approaching retirement may wish to sell aggressive funds and put the money into more conservative investments. Sometimes it's time to sell a fund simply because you need the cash.
What to do with tech now? It is a tough question. As most of us invested in technology funds without a plan. It was just to participate in the roaring tech boom. But at current values it is tough to sell. And it will remain so. And my take on when will it technology turnaround is -- years and surely not tomorrow. So, you may sell if you just can't take it anymore. As the point of investing is meeting financial goals, not developing ulcers. And if you do not have a stomach for the volatility, then by all means sell--as long as you'd never buy the fund back again.