Sunday, May 10, 2009

Shall I switch from Equity to Debt??

Equity or Debt????

Mr.NB asked : "I have around 20 lacs (original cost Rs. 34 lacs) in various equity mutual funds. Around 20 different funds. Given the current market conditions where equity funds are not doing well, would it make sense to cut losses and move the portfolio to bond or gilt funds?
This will be with an objective to at least grow the portfolio rather than leave it in equity funds and see further losses in future, as month over month we are seeing lower NAVs.
What is the community`s opinion on the same, even after considering that the switch will cost around 2.5% entry load.

My Holdings are in the following

Birla SL Frontline Equity
DSP ML Technology dot com
Franklin India Blue Chip
Franklin India Flexi Cap
Franklin India High Growth Cos
Franklin India Prima
HDFC Long Term Advantage
HSBC Dynamic
ICICI Pru Indo Asia Equity
ICICI Pru Infrastructure
ICICI Pru Services Ind
Reliance Equity Advantage
Reliance Banking
Reliance Growth
Reliance Natural Resource
Reliance Vision
SBI Magnum Tax Gain
Sundaram BNP Paribas Select Focus
Templeton India Growth

What do you suggest?



Dear NB,

By transferring all ur portfolio from Eq. to Debt or Gilt funds, u r making a costly mistake. Already ur portfolio is down by almost 40% & by transferring ur entire portfolio to debt & gilt funds, it `ll take several years to just return back to ur original portfolio size. Forget about making positive value.

So it`s advisable to prune down ur MF holdings from 20 to to a more respectable & manageable level of 10-12 funds.
You have lost Approx.12 Lacs by Investing in EQUITY Mutual Funds.

The BEST way to Recover the losses is to REMAIN Invested in Equity Mutual Funds.

However if you are Interested to Recover the LOSSES early & want to try to recover the LOSSES by Asset Allocation or TIMING the Market, you may go ahead with your PLAN VERY CAREFULLY & slowly.

It is Expected that Efficiently Managed Income/Bond Funds will give 15-20% Returns
in 2009.HOWEVER one should SWITCH OUT from
INCOME BOND FUNDS after or even before 1 year. BOND Funds can also INCURR LOSSES & are Dependent on Interest Rates.

Please study carefully all your EXISTING Investments in Equity Funds & also
proposed BOND / Income Funds.

SWITCH POOR PERFORMING EQUITY FUNDS to Better Performing Income Fnds one by one.

If Equity Markets go down substantially, again Switch back to Better Performing Equity Funds.

You need not give much Importance to ENTRY / EXIT Load.
Please Switch Following Funds to BOND Funds / Income Funds one by one & Start Monthly STP in Same Fund House Spread across 1 year.

Switch DSPML Technology dot com to DSPBR GSF Longer Duration & STP to DSPBR Top 100 Equity fund.

Switch Franklin India Flexicap & Franklin India PRIMA to Templeton IGSF Long Term & STP to Franklin PRIMA PLUS Equity fund.

Switch ICICI PRU Service Industries to ICICI PRU Income Fund & STP to ICICI PRU Focussed Equity Fund.

Switch Reliance VISION to Reliance INCOME Fund & STP to Reliance Regular Savings Fund - equity.

You may Retain other Funds & monitor the Performance Regularly.

In second Phase you may Switch Following Funds if Necessary

Franklin India High Growth Cos
HSBC Dynamic
ICICI Pru Indo Asia Equity
Reliance Banking
Reliance Growth
Reliance Natural Resource
Templeton India Growth

Best of luck,
Srikanth Shankar Matrubai

Also visit for an indepth Equity Analysis


  1. Great Analysis these information should be shared with investors so they can plan there investment. :)

  2. Hi,
    Your suggestion and all articles are informative.
    I have one question here
    I am planning to do SIP of total 10K in below funds:
    1. HDFC Top 200-G - 2500 Monthly
    2. HDFC Prudence(G) - 2000 Monthly
    TO have one MID cap fund in portfolio
    3. Sundaram BNP Paribas S.M.I.L.E. Reg-G *OR* Sundaram BNP Paribas Select Midcap Reg-G - 2000 Monthly

    Also, I would to invest into one Debt oriented MF to balance the portfolio.

    Can you please share your views on my fund seletion and could you please suggest some good debt oriented mutual fund.

    Another question.
    As per my knowledge, investment into Equity fund above 365 days OR 1 year is tax free. Now, in case if I want to switch any of my equity fund to some other debt fund before 365 days is it considered tax free or taxable? (please comment about SIP switching also)

    Thanks in anticipation

    Amol S


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