Confused About SIP in Quant Small & Midcap: Should I Continue or Stop?

Ans: These are good funds; please continue

Ans: Hello and thanks for writing to me.

Small cap funds are good choices if your time horizon is long & you are fine with bearing the risks of investing in small cap funds.

Both Kotak Small Cap Fund & Quant Small Cap Fund are finely managed funds with different fund management styles. You can consider evaluating the portfolios with other relevant documents of each scheme to understand which scheme suits you best.

Ans: what is your vision behind investing and how long are you going to invest?

Ans: First of all, commendations on your dedication to investing and planning for your financial future. Your efforts in consistently investing through SIPs are commendable. I understand your concern regarding the recent SEBI news about Quant Mutual Funds. Let’s address your queries and develop a comprehensive approach to your investment strategy.

Current SIP Investments
Your commitment to Rs 60,000 in SIPs over the last year is a strong start. SIPs offer the advantage of rupee cost averaging and can help in building a substantial corpus over time.

Evaluating Recent Investments
Given your recent start with Quant Mid Cap and Quant Large & Mid Cap funds, and the news about SEBI’s stance on Quant MF, your concerns are valid. Here’s a detailed analysis:

Market and Regulatory Sentiments: Regulatory actions can sometimes create uncertainty. However, it’s important to understand the specifics of SEBI's concerns and how they might impact the fund's performance and management.

Fund Performance: Before making any decisions, evaluate the historical performance of these funds. Look at their consistency, returns, and how they have managed risks.

Fund Management: Assess the expertise and track record of the fund managers. Effective management can often navigate through regulatory and market challenges.

Deciding on Continuation or Stopping SIPs
Continue Monitoring
Your decision to continue with the two existing funds while monitoring the situation is prudent. Here’s why:

Long-Term Perspective: Equity investments, especially in mutual funds, are meant for the long term. Short-term fluctuations or news should not drastically impact long-term strategies.

Performance Review: Regularly review the performance of these funds over the next 6-12 months. Evaluate them against their benchmarks and peer funds.

Adjust if Needed: If you notice consistent underperformance or if regulatory issues significantly impact the fund, consider reallocating to more stable funds.

New SIP in Quant ELSS
Considering the SEBI news, it’s understandable to be cautious about starting a new SIP in Quant ELSS. Here’s an alternative approach:

Diversification: Instead of putting all your SIPs in Quant funds, consider diversifying across different fund houses. This spreads your risk and can provide stability.

Evaluate Other ELSS Funds: Look for other ELSS funds with strong track records, good management, and consistent performance. ELSS not only offers tax benefits but also has the potential for good long-term returns.

Advantages of Actively Managed Funds
Actively managed funds are beneficial for several reasons:

Expertise: Fund managers actively make decisions to maximize returns and minimize risks.

Flexibility: These funds can adapt to changing market conditions, unlike index funds which replicate market performance.

Disadvantages of Direct Funds
While direct funds have lower expense ratios, there are notable disadvantages:

Lack of Professional Guidance: Without a Certified Financial Planner, managing direct funds can be challenging.

Time-Consuming: Monitoring and adjusting investments require significant time and expertise.

Recommended Strategy for Your SIPs
Diversified Portfolio
A well-diversified portfolio across different fund categories can enhance returns and reduce risks. Consider these steps:

Large Cap Funds: These funds invest in well-established companies with a stable growth trajectory.

Mid Cap Funds: They invest in medium-sized companies with potential for high growth.

Small Cap Funds: Suitable for aggressive investors, these funds can offer high returns but come with higher risks.

Balanced or Hybrid Funds: These funds offer a mix of equity and debt, providing stability and growth.

Regular Reviews
Schedule regular reviews with your Certified Financial Planner to ensure your portfolio remains aligned with your financial goals and market conditions. Adjustments may be necessary based on performance and market changes.

Building a Robust Investment Plan
Your goal should be to build a robust investment plan that can withstand market fluctuations and regulatory changes. Here’s how:

Emergency Fund
Maintain your emergency fund of Rs 15 lakhs. This provides a safety net for unexpected expenses and ensures you don’t have to dip into your investments prematurely.

Goal-Based Investments
Children’s Education: Continue investing through SIPs in diversified equity funds for long-term growth. This will help accumulate the required corpus for their education.

Retirement Planning: Invest in aggressive growth funds for your retirement goal. Starting early and maintaining consistency will leverage the power of compounding.

Importance of Staying Informed
Stay informed about market trends and regulatory changes. Knowledge empowers you to make informed decisions and adapt to changes effectively.

Role of a Certified Financial Planner
A Certified Financial Planner can provide invaluable guidance. They can:

Customise Portfolio: Tailor your investments based on your financial goals, risk tolerance, and market conditions.

Regular Monitoring: Continuously monitor your portfolio and make necessary adjustments.

Risk Management: Help you navigate market and regulatory risks effectively.

Final Insights
Your proactive approach to investing is commendable. Continuously monitoring and reviewing your investments is crucial. While the SEBI news about Quant MF is concerning, maintaining a long-term perspective is important. Diversify your portfolio to mitigate risks and ensure you are investing in well-managed funds.

Stay informed, regularly review your portfolio, and seek guidance from a Certified Financial Planner. This comprehensive approach will help you achieve your financial goals and secure your future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have started early in 2024, and you already built Rs 2.30 lakhs. This shows discipline. This shows patience. This gives you a good base for your future wealth.

Your XIRR looks low now. This is normal. You started only a few months back. SIPs show low return in the start. Markets move up and down. Early numbers look flat. They look small. They look discouraging. But they improve with time. They improve with longer SIP flow. So please stay calm. The start is always slow. The finish is always strong.

Your effort is strong. Your SIP list is wide. Your savings habit is good. You started at 43 years, but you still have good time to grow your wealth. Every disciplined month builds confidence. Your choices show that you want growth. You want stability. You want balance. This is a good sign.

» Current Portfolio Snapshot
You invest in many groups.

– You invest in Nifty 50.
– You invest in Nifty Next 50.
– You invest in a large cap fund.
– You invest in a midcap fund.
– You invest in a flexicap fund.
– You invest in a small cap fund.
– You invest in gold.
– You invest in a debt fund.
– You put lumpsum in a midcap and small cap fund.

This looks wide. But wide does not mean effective. You hold too many funds in similar areas. That gives duplication. That reduces clarity. That reduces control. You need sharper structure. You need cleaner lines.

» Why Your XIRR Is Low
Your XIRR is only 3.11%. This is normal. Here is why.

– SIP started in June 2024. Very new.
– SIP amount spread across many funds.
– Market volatility in 2024 made early returns look low.
– SIP returns always look weak in early days. They grow with time.

Low short-term return is not a sign of failure. It is not a sign to stop. It is only a sign of market timing. SIP is for long periods. Not for few months.

» Problem of Index Funds in Your Portfolio
You invest in Nifty 50 and Nifty Next 50. Both are index funds. Index funds follow a fixed rule. They copy the index. They do not use research. They do not use fund manager skill. They do not adjust during bad markets. They do not protect much in down cycles. They lock you into index ups and downs.

In India, active fund managers add value. They find better stocks. They exit weak stocks faster. They manage risk better. They use research teams. They use market cycles well. They often beat index returns over long periods.

Index funds look simple. But they lack decision power. They lack flexibility. They lack protection. They give average results. They track the market exactly. They cannot outperform it.

So index funds are not the best choice for your long-term goal. Active funds give more control and more upside over long years.

» Problem of Too Many Funds
You hold too many funds across the same categories. This creates overlap. Two different schemes may hold same stocks. You think you diversify. But you repeat exposure. This weakens your plan.

Too many funds also keep your attention scattered. It reduces discipline. You waste time comparing each fund. You feel lost. You feel uncertain.

Better to keep fewer funds but stronger funds.

» Problem of Direct Funds
If any of your funds are in direct plans, please take note. Direct plans look cheaper because they have lower expense ratio. But they do not give guidance. They do not give personalised strategy. They do not give support during market falls. They do not give behavioural guidance.

Many investors make wrong moves in market dips. They stop SIPs. They redeem at the wrong time. They switch funds too often. They chase returns. This reduces wealth.

Regular plans through a Certified Financial Planner keep you disciplined. They give structure. They give long-term guidance. They reduce errors. They reduce behaviour risk. This helps more than small cost savings.

Regular plans also offer better hand-holding for asset mix, review and goal clarity. This adds real value.

» Fund-by-Fund Assessment
Let me now look at each SIP.

Nifty 50 – This is an index fund. It is passive. It is rigid. Active large-cap funds do better in many years. You may stop this over time.

Nifty Next 50 – Another index fund. Very volatile. Very narrow. You may stop this too.

Nippon large cap – This is active. This is fine. It can stay.

HDFC midcap – This is active. Good long-term category. You can keep this.

Parag flexicap – Flexicap is versatile. Useful for long-term. You can keep this.

Tata small cap – Small caps can grow well. But they need patience. They also need limited allocation. You can keep, but maintain control.

Gold SIP – Small gold SIP is okay for safety.

HDFC debt fund – Debt brings stability. Small SIP is fine.

Lumpsum in midcap and small cap – Keep these invested. They will grow with cycles.

The two index funds are the most unnecessary parts of your plan. These can be stopped. These can be replaced with good active funds already in your system.

» Suggested Structure
You need a cleaner layout.

Keep one large cap active fund.

Keep one midcap active fund.

Keep one flexicap fund.

Keep one small cap fund.

Keep one debt fund.

Keep a small gold part.

This is enough. This gives balance. It gives clarity. It gives growth. It avoids overlap. It avoids confusion.

» SIP Continuation Guidance
Here is the simple view.

Continue your large cap SIP.

Continue your midcap SIP.

Continue your flexicap SIP.

Continue your small cap SIP.

Continue gold SIP.

Continue debt SIP in small proportion.

Stop the Nifty 50 SIP.

Stop the Nifty Next 50 SIP.

Move those two SIP amounts into your existing active funds. This gives you better long-term power.

» Behaviour and Patience
Your returns will not show big numbers for now. You need time. You need patience. You need consistency. SIP is not a race. SIP is a habit. SIP grows slowly. Then it grows big.

Do not judge your plan by the first few months. Judge it after many years. That is where SIP wins. That is where compounding works. That is where discipline shines.

» What Matters More Than Fund Names
The biggest cornerstones are:

Your discipline.

Your patience.

Your time in market.

Your stable SIP flow.

Your emotional stability.

These matter more than any fund selection. You are building them well.

» Asset Mix Guidance
Your mix of equity, debt and gold is good. But you should review this once a year. As you move closer to retirement, increase debt slowly. Reduce small cap slowly. This protects you. This stabilises your progress.

A Certified Financial Planner can help align your asset mix to your goals. This adds real value. This gives stronger structure.

» Taxation View
If you redeem equity funds in future, then keep the current rule in mind. Long-term capital gains above Rs 1.25 lakhs per year are taxed at 12.5%. Short-term gains are taxed at 20%. For debt funds, both gains are taxed as per your income slab.

This will matter only when you redeem. For now, your focus should be growth, not selling.

» Your Long-Term Wealth Path
You have good earnings years ahead. You have strong potential for growth. Your SIP habit is strong. You only need to clean your portfolio. You only need better structure. Then your money will grow well.

You can grow a meaningful corpus if you stay steady. You can even increase SIP when income grows. This gives faster results.

» Emotional Balance
Do not check returns every week. Do not check every month. Check once in six months. Check once in twelve months. SIP is a long game. Treat it like a long game.

Your small XIRR today does not decide your future. Your discipline decides it. You already have it.

» Step-by-Step Action Plan

Step 1: Stop Nifty 50 SIP.

Step 2: Stop Nifty Next 50 SIP.

Step 3: Keep all the remaining SIPs.

Step 4: Shift the stopped SIP amount into your existing large cap and flexicap funds.

Step 5: Continue gold and debt in small amounts.

Step 6: Review once a year with a Certified Financial Planner.

Step 7: Increase SIP amount slowly when income grows.

Step 8: Stay invested for long term.

Step 9: Do not judge returns too early.

Step 10: Keep your patience strong.

» Finally
Your foundation is strong. Your habit is disciplined. Your mix only needs refinement. Your returns will grow with time. Your portfolio will gain strength with consistency. Your path is steady. Your plan will reward you if you follow it with calm and clarity.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment