I have invested Rs 10,000 in September 2008 in BSL Monthly Income Plan II Savings 5 (G) but the fund has not delivered good returns. So, I plan to transfer or switch to BSL Frontline Equity Plan A-G. Please advise.
-Sanjay Kumar Sharma
BSL Monthly Income Plan II Savings 5 is a Monthly Income Plan (MIP) that seeks to generate regular income through its predominant exposure to debt and money market instruments. The fund may also take an exposure to equities up to 10 per cent. On the other hand, BSL Frontline Equity Fund is a diversified equity fund that invests a minimum of 75 per cent in equities. The two are different types of funds that serve different purposes. While the former is a debt fund that aims to provide regular income (that is not assured), the latter is an equity fund, meant to provide capital appreciation over a long-term investment horizon.
Currently, BSL Monthly Income Plan II Savings has a five-star rating from Value Research. If we compare the fund's performance since your date of investment to date, i.e., from September 1, 2008 to March 20, 2010, the fund has outperformed its benchmark and delivered a return of 11.22 per cent, while the category average return over the same period was 10.45 per cent.
Overall, it is a good fund. However, if you are looking for wealth creation over the long term, we suggest you switch to BSL Frontline Equity Plan A-G Fund via Systematic Transfer Plan (STP). The investments will be made at all market levels. This will help insulate your equity investments from sudden market movements. I invested in the following JM funds in September 2007. They have been performing poorly since the stock market crash in January 2008. I am holding on to these as I am waiting to break even before I exit. I have lost almost 50 per cent on all the three funds put together. Does it make sense to hold on to them? Please advise.
1. JM Basic
2. JM Contra
3. JM Small & Mid-Cap Reg-G
-Lakshmi
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JM Basic was performing well at the time you invested in it. When you had invested in JM Small & Mid-Cap Reg and JM Contra, both were new offerings with no track record (they were launched in April and August 2007, respectively). All three are aggressive schemes and have not been able to weather the 2008 fall.
In our view, you may exit all these three and invest in funds that have provided consistent returns. Also, do not get disheartened by their dismal performances and learn the following lessons from this episode. One, do not invest in new funds which lack a track record. Instead invest in funds with long track records and proven credentials. Second, do not chase funds based upon their short-term performances. Choose funds that are likely to give stable returns. Third, avoid investing at one go. Choose the SIP route instead.