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Should I Exit My Axis Small Cap Mutual Fund With a 92% Profit?

Ramalingam Kalirajan |7367 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 23, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jul 15, 2024Hindi

I have axis small cap mutual fund from 3 years. currently I have 92% profit on lumpsum amount. now market is all time high so should I take profit and exit from that fund?

Ans: Current Situation
You have Axis Small Cap Mutual Fund.

You have a 92% profit on your lump sum investment.

The market is at an all-time high.

Evaluating Profit-Taking
Market Timing
The market is at a peak.

This might seem like a good time to take profits.

However, timing the market is challenging.

Future market movements are unpredictable.

Long-Term Investment Horizon
Consider your investment horizon.

If it's long-term, short-term market highs shouldn't affect your strategy.

Equity investments typically yield better returns over a longer period.

Rebalancing Your Portfolio
Portfolio Diversification
Evaluate your overall portfolio.

Small cap funds are higher risk and higher reward.

Consider balancing with large cap and mid cap funds.

Risk Management
Taking some profits can reduce your exposure to small caps.

Reinvesting in more stable funds can balance risk.

This ensures your portfolio remains aligned with your risk tolerance.

Tax Implications
Capital Gains Tax
Selling your investment will attract capital gains tax.

Short-term capital gains (if held for less than a year) are taxed at 15%.

Long-term capital gains (if held for more than a year) above Rs 1 lakh are taxed at 10%.

Tax Efficiency
Consider the tax implications of selling.

Evaluate if the profit after tax justifies the sale.

Professional Guidance
Certified Financial Planner
Consult a Certified Financial Planner.

They can assess your financial goals and portfolio.

They provide tailored advice on profit-taking and reinvestment.

Strategies for Profit-Taking
Partial Profit-Taking
Consider taking partial profits.

This allows you to lock in gains.

You can reinvest in more stable funds.

This maintains market exposure while reducing risk.

Systematic Withdrawal Plan
Implement a Systematic Withdrawal Plan (SWP).

This allows gradual withdrawal of profits.

It provides regular income while keeping the investment intact.

Final Insights
You have a significant profit in Axis Small Cap Mutual Fund.

Taking profits when the market is high can be tempting.

However, market timing is difficult.

Consider your long-term investment horizon.

Rebalance your portfolio for risk management.

Evaluate the tax implications of selling.

Consult a Certified Financial Planner for tailored advice.

Consider partial profit-taking or an SWP for a balanced approach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Asked on - Aug 06, 2024 | Answered on Aug 06, 2024

Thank you very much Sir for your valuable feedback.

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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