Should I invest in "Franklin India Small Companies Fund"

[harjitsinghubhi]

Is it a good idea to invest in "Franklin India Small Companies Fund" .
Since the locking period is around 5 years. What kind of returns I can expect?

 

[RajK]

Is it a good idea to invest in "Franklin India Small Companies Fund" .
Since the locking period is around 5 years. What kind of returns I can expect?

Here is some info I have that could help you make your decision!

What separates Franklin India Smaller Companies Fund from the rest is its close-ended nature. The combination of a close-ended fund investing in mid/small cap stocks makes FISCF an interesting investment proposition.

Small/mid sized companies are likely to be under-researched thereby providing an investment opportunity that is yet to be identified by the market. Often such companies offer higher growth potential and therefore an opportunity to benefit from higher than average returns in the long-term.

On the flipside, since small/mid sized companies are often under researched, there is a fair chance that some 'reasons not to buy' might be overlooked while making an investment decision. The chance of manipulation or fraud in such companies is higher as risk control measures and corporate governance tend to be neglected. Similarly, the stocks could remain illiquid even at the end of the investment horizon which can be an unviable proposition for the fund manager.

It is this unique nature of small/mid sized companies which makes mid cap funds high risk - high return investment propositions. Investors with a commensurate risk appetite can consider adding FISCF to their portfolios. From an asset allocation perspective, investors should consider allocating that part of their equity portfolio which has been reserved for long-term (considering the fund's close-ended nature) investments. Also investors would do well to appreciate that while a fund like FISCF can provide much-needed impetus to their portfolios, conventional diversified equity funds should form the core of their portfolios.

Investments can thus be considered in Franklin India Small Companies Fund. It is a close-ended fund, meaning you can invest in it only during the public offer. In contrast to Morgan Stanley Growth Fund, this fund will not be listed, and you will not get to buy the units at a discount to the NAV at a later date. The fund also offers liquidity in the form of redemptions every six months at a discount of about 4 per cent in the initial years. The discount narrows in later years. This means the fund strikes a reasonable and attractive compromise between liquidity and stability in funds under management that can enhance returns.

The fund is already open for subscription and closes on December 16.

 

[harjitsinghubhi]

Thanks Rajk for the time taken to explain me FISCF.

Lets assume I invest it FISCF scheme, after 6 months if I see the NAV is getting dropped due to the market condition and in panic If I want to sell the units, can I do that? what would be the exit load?

Or if the NAV increases to a peak level and I have a dirty feeling that the NAV is going to drop, can I sell it at that moment, how long it takes to sell a MF or some units?

I might sound stupid, please bare with with for some days till the time I get a good hang of stocks and mutual funds in basic terms.

 

[RajK]

Thanks Rajk for the time taken to explain me FISCF.

Lets assume I invest it FISCF scheme, after 6 months if I see the NAV is getting dropped due to the market condition and in panic If I want to sell the units, can I do that? what would be the exit load?

Or if the NAV increases to a peak level and I have a dirty feeling that the NAV is going to drop, can I sell it at that moment, how long it takes to sell a MF or some units?

I might sound stupid, please bare with with for some days till the time I get a good hang of stocks and mutual funds in basic terms.

The fund only offers liquidity in the form of redemptions every six months at a discount of about 4 per cent in the initial years.