Should I redeem from Franklin India Focused Equity Fund?

I have been invested in Franklin India Focused Equity Fund since October 2014. The investment is worth about Rs 8.5 lakh at present. Considering that returns from the fund have not been great of late and the problems plaguing the fund house, should I continue with this fund or exit?

Rushabh Desai, AMFI registered mutual fund distributor replies: The issues being faced by Franklin Templeton India AMC have to do with fixed-income investments. The equity team is separate and is structurally different. The AMC has a very experienced and capable equity team and thus there is no need to panic. Franklin India Focused Equity Fund follows a blended strategy, more inclined towards value, and so this fund is bound to be a bit cyclical and will see pockets of underperformance. The fund has been a laggard for the past few years but is showing tremendous uptake ranking on a point-to-point basis for a year. The stocks held by the fund are of good quality but a bit undervalued. With quality names in the fund’s portfolio and its PE ratio much lower compared to its category average, there are high chances of a strong performance in the near future. I would urge you to stay invested in the fund for a year or two more and then take a call during market highs if it doesn’t show significant outperformance against its benchmark.

I am a 19-year-old student and want to invest via SIPs for my future. Please suggest some good mutual fund options with minimal risk. I want to save as much as I can from my pocket money and small savings.

Vidya Bala, Co-Founder, PrimeInvestor.in replies: We assume you have a long investing horizon of at least 5-10 years. There will be risks in investing in equity funds but you can minimise these by holding for a longer time frame and not getting worried if returns slip in the short term. If this is fine, go with some basic equity funds such as UTI Nifty 50 Index Fund and Motilal Oswal S&P 500 to the extent of 50% of your savings. Continue these for at least five years. Invest the rest in bank deposits. Bank interest rates are low now so lock in for a shorter period of say one year and then reinvest the money when rates go up.

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