Navigating Your MF SIP in LT Emerging Business Fund: What's Next?
Words like 'SIP', 'investment horizon', and 'backed by a benchmark index' might leave you feeling a bit lost, especially when your returns aren't as expected. Let’s break it down and find the right path forward, shall we?
Reviewing the Benchmark Index
Firstly, understanding the performance of your LT Emerging Business Fund in relation to its benchmark index can be illuminating. A benchmark index, such as the Nifty Small Cap Index, gives us a performance gauge. If the fund consistently underperforms the index, it might indicate a need for a course correction. However, if the fund is doing well despite the broader market correction, it could still be a sound choice for your investment strategy.
Should You Keep or Quit?
The decision to continue or stop your SIP ultimately depends on your investment goals and risk tolerance. If you are investing for a timeframe that can support volatility—say, 2-3 years or more—internet and expert advice suggest staying the course. Eurocentrically, staying invested can often lead to better returns over time due to the inherent volatility of small-cap funds.
My friend Maulik Raja, for example, advises to keep your SIP active in such funds. He even notes that he continues his investment, reinforcing the idea that sometimes, the market corrections are temporary and rewarding.
Considering Alternative Fund Options
However, if you feel that one year is too short for this volatile fund, it might be time to consider your options. Multi-cap funds, for instance, offer a more diversified approach, balancing exposure to both large and small-cap stocks. This reduces risk and can provide more stability, especially if you are new to the investment game.
Another option would be to focus on balanced mutual funds, which include both equity and debt investments. They are generally less risky and might be a better fit if your time horizon is shorter.
Learning from Past Experiences
It's valuable to understand what went wrong. In the case of the LT Emerging Business Fund, it is indeed a high-risk, high-reward scenario, typical for small-cap funds. The corrections in February, driven by factors like the budget and global cues, disproportionately impacted the sector. Yet, this fund is in line with high-growth aspirations for the long term.
Another investment, UTI Transport and Logistics Fund, has been attracting attention recently due to its promising sector focus. The fund is part of a sector that is expected to boom with government initiatives, making it a viable alternative, even if it is a sector-specific fund.
Conclusion
Your decision to continue or change your investment strategy should strongly consider the context of your investment horizon and risk tolerance. While staying invested can often prove beneficial in the long term, it's essential to be proactively informed. Staying invested in a good fund with a long-term outlook might yield handsome returns, but continually reviewing and adapting to changing market conditions is also wise.
Take time to weigh your options and make informed decisions. After all, investing is a journey, not a race, and every mile counts.