How to Eliminate Poor Performing Mutual Funds from your portfolio

POSTED BY cpdhutadmal ON February 16, 2012 3:11 pm COMMENTS (2)

Hi All,

I wanted to discuss this situation in mutual funds. Lets say, we invest in some good Mutual Fund which has good track record and which may be from any of the categories like ELSS, Diversified, Sectorial, etc. For instance HDFC TOP 200, Reliance Growth, Reliance Diversified power sector, etc.
If you have SIP in these funds, then

1) How will i know that it is time to exit the Mutual Funds because they are not performing well. How will i know they are not performing well ?

2) Lets say i have accumulated 5 Lacs in SIP in one MF for few years and now its time to exit, then what should be my strategy ? Should i sell all units from bad performing MF and invest the entire proceeds at one go in good MF at that point?

3) What is your current view on Reliance Diversified Power Fund ?

With Regards,
Chandrakant D

2 replies on this article “How to Eliminate Poor Performing Mutual Funds from your portfolio”

  1. BanyanFA says:

    Hi Chandrakant,
    Reliance Diversified Power sector fund is one of the most suffering fund as of now – for obvious reasons. However, saying that it doesn’t mean that it may be a bad fund.

    If you need to exit from a mutual fund, there are broadly three option:
    1. Lumpsome transaction in one go.
    2. SWP / STP – Systematic Withdrawal Plan / Systematic Transfer Plan. SWP is opposite of SIP whereby you withdraw funds from a MF on regular basis. STP allows for transferring funds from one scheme to another scheme of the same MF company on a regular basis.
    3. Lifestyling option – Allows for gradually shifting your investments from high risk sectors to relatively low risk sectors. Have a read of http://insight.banyanfa.com/?p=130 to understand more about Lifestyling.

    Regards
    BFA

  2. Dear Chandrakant, if you fund is not able to manage the return similar to at least the benchmark it tracks for a 15-18 months period continuously, it’s time to say good buy.

    Thanks

    Ashal

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