Hi Basu – thanks for your articles and suggestions. I have a basic question on long term investment practice and hope you can help. I completely get that horizon should be long term (10,15 year +). During this period when you are doing a SIP sometimes a fund may not be doing so well for a extended time period (ex: hdfc top 200 from last 2-3 years). Is it worth stop investing in such fund and keep them in your portfolio and start investing in better funds? This way you are not redeeming your bad fund immedietely and also using the same money in a better fund. Thanks
The basic idea of identifying the fund performing well or not is completely not depends on star ratings and peer comparison. Try to understand first your return expectation. If the fund is giving consistently that return, then why to switch? We often tempt to switch based on two things. One is drop in star rating and second is other funds of same category giving BEST returns but your fund is languishing.
But in my view, let us say my expectation from equity fund is 10% to 12%, then I never bother to switch. I switch only if the fund performing continuously for 2-3 yrs and not meeting my expectation. That too, we have to review of why the fund is not performing, whether it is due to fund manager or market. If the overall market is sluggish, then you can’t do anything. However, the fault is with fund, then you have to take a call.
Do remember that the fund you are investing today WILL never be 3,4 or 5 star rated fund forever.