Thursday, June 11, 2009

SBI Magnum Comma Fund - Not for the Light Hearted

High Risk-High Reward



Sushant asked :
Is it proper to average out or sell a non performing MF?
I have Magnum Comma fund which is underperformer. Is it advisable to sell it or average out by pumpimg some more money?




SRIKANTH SHANKAR MATRUBAI replied :

Dear sushant

You should avoid Averaging Underperforming Fund. There is no point in averaging a underperformer. SBI Magnum Comma Fund has been a underperformer for quite some time now and the future does not look very rosy.
SBI Magnam Comma fund is a Sector Fund which invests in the stocks of Companies engaged in Commodity Business. COMMA is an acronym for Commodities in Oil, Metals, Materials and Agriculture.
SBI Magnum Comma Fund's 1 year returns has been -6.5%, compared with the Nifty return of a Positive 4.62%.
Never fall in love with any fund. Keep searching for Funds which show promise and have been performing consistently. You should consider switch this underperfoming Fund to Better Performing Fund( say SBI CONTRA Fund). Then you can Continue Adding in this Fund by SIP or on Declines.

Sector Funds tend to be very cyclical. Commodities are expected to do well in any Economic upturn and SBI Magnum Comma fund should be able to take advantage of this uptick, if any. But volatility is expected and this Fund is for a High Risk taker. This Fund is thus for those who are willing to take on higher risk for higher rewards.
I feel you are better off investing in Good Diversified Funds like
Birla Sunlife Frontline Equity Fund
DSPBR Top 100 Fund
Fidelity Equity fund
HDFC Top 200 Fund
Sundaram Select Focus Fund

Preferably invest through SIPS.

Best of luck,
Srikanth Shankar Matrubai
Also visit http://equityadvise.blogspot.com for an indepth Equity Analysis

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