Tuesday 28 August 2018

Reliance Small Cap Is Under-Performing. What Should I Do?

This is one of the most common queries which is bothering many mutual fund investors from the past few months, and to such an extent that a large number of them are selling their units in panic mode. Reliance Small Cap Fund, a mutual fund scheme which used to give annual returns of 20%-25% is now giving returns in negative. So what to do now? Well, before getting to this question, let’s see why this scheme is underperforming.




Why Is Reliance Small Cap (G) Not Performing Well?

Most of us are aware of the downfall that equity market faced right after the announcement of the Union budget in February. Now what people don’t know is that small-caps and mid-caps were the market capitalization that got most affected by this volatility. This caused a slip in NAV of mid-cap and small-cap mutual funds. Reliance Small Cap Fund NAV as on Jan 01, 2018, was Rs 47.41, and right now (as on Aug 14, 2018) it is Rs 43.04, which means that in past 7 months, the unit price took a toll of around 9%. In simple terms, the investments made in January are now around 9% less, and past 6-months return of -7.96% (as on Aug 14, 2018) conveys the same. So now that we know the reason behind the fall, let’s see if you should stay invested or initiate a new investment in it or not.

What Should You Do?  

Mutual fund experts always say this, “If you want to enter the mutual fund market, then stay in it for a long-term, otherwise don’t,” and the reason behind that is the power of averaging that helps investors in making an exceptional profit in the long run, and the same is applicable with Reliance Small Cap Fund. Let’s see how.

As we discussed above the NAV of Reliance Small Cap in Jan was Rs 47.41, and now it is Rs 43.04. So, investing now means you will be buying more units with the same amount that you used to invest regularly. For e.g., let’s say you have a monthly SIP of Rs 4000, which you started in January. Now in that month, the total units you bought for Rs 4000 are 84.37, and in August the total units you bought with the same amount are 92.93. So, investing now means you will be buying the units at much lower levels and as the NAV will start recovering, the profits you make will be exceptional.

So, the answer to the above question is- don’t panic and keep accumulating, and stay invested in this scheme for the next 3-5 years at least, to enjoy the maximum benefits of Reliance Small Cap Fund growth plan.

Now you know that what you have to do with your Reliance Small Cap Fund. This scheme has maintained a rating of 4 stars and above, and at a time has provided annual returns of more than 30%. However, before making the final decision, do consult your financial adviser. If you have any more query about this scheme or want to get latest recommendations on mutual fund investments, then feel free to contact our experts at MySIPonline.

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