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What to do with non-performing Mutual funds and re-invest into better funds

I have been investing in MFs since 10 years but now, I am facing a situation where one of my funds SBI Magnum Tax Gain Growth is not performing well since 3 years. Been patient enough for the fund to improve it's performance but to no avail. So, I am contemplating to redeem and re-invest in some other multicap/diversified equity fund. Please guide me to resolve my confusion. I have - 3 ELSS Funds (ABC'96, Axis LT Eq, Rel Tax Saver) - ongoing SIPs, Mirae Asset Emerging Bluechip Fund - ongoing SIP, SBI Magnum Tax Gain Growth - No SIP. All units can be redeemed. HDFC Tax Saver - No SIP, HDFC Top 200 - No SIP. SBI Magnum Tax Gain is not performing well since past 3 years. So, I want to redeem (all the corpus Rs. 6 lakhs) and subsequently invest in existing ELSS or buy new Multicap Fund. My questions are - 1. Should I invest in existing ELSS (ABC'96/Axis LT Eq) or a new Multicap fund? (Do you think that ELSS Funds, because of their 3 years lock-in, give additional freedom in comparison to other multicap funds for the fund manager to take long term calls eventually translating into better performance? Note - I do not need this money for next 7-10 years.) 2. Should I redeem in one go or in parts (say, 3 nos) from SBI Magnum Tax Gain and then re-invest that money? 3 As of now, SBI Magnum, though a diversified equity fund, has more (approx 70%) Large Cap exposure. If the ELSS or Multicap fund has more Mid-cap exposure. (eg. ABC'96 has approx 50% exposure), do you think it makes sense to invest via SIP (6-9 nos.) or should I invest lumpsum without worrying too much about Mid-cap exposure and volatility because I do not need this money for next 7-10 years?

Jun 16, 2018 by Satish,   |   Mutual Fund

Yes, you are right ! Once a marquee fund SBI Magnum Tax Gain failed in performing compared to its peers and therefore, your idea of redeeming from it and investing in some good performing funds is okay.

In your current portfolio, HDFC Tax Saver Fund and HDFC Top 100 Fund (erstwhile HDFC Top 200 Fund) are also not among good performing funds, therefore, you may want to review these investments too. Rest of the schemes in your portfolio are good.

You should always redeem the non-performers in one go instead of partially redeeming them.

Whether to invest in ELSS Funds or multi-cap funds? It depends whether you need to save taxes under Section 80C or not? If yes, then invest in ELSS funds else in multi-cap funds. No, I do not think, there is substantial data to prove that just because ELSS have 3 years lock-in they have edge over open ended funds.

Whether to invest in lump sum given market volatility? I suggest that you invest via STP over 12-15 months period even if your investment horizon is long. It will help you ride the volatility well while averaging the acquisition cost of the scheme/s you will be investing in. Read what is STP - https://www.advisorkhoj.com/dspbrmf...

Whether to invest in mid cap? Mid and small cap funds can give you the best returns in the long run, provided you can bear high risk.

To choose a good fund from any category, do refer this link on our website - https://www.advisorkhoj.com/mutual-funds-research...

Hope the above helps ! Wishing you good luck with your investments !!

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