New investor, 30% returns now down to 15% - what should I do?

Ans: Never invest in equity schemes if the horizon is short. If not necessary, kindly do not redeem. All the funds are good, however, the markets are in correction mode.

Please follow these house rules for investing in MFs if your investment horizon is between:

• 1 and 3 years: Take short term debt funds
• 3 and 5 years: Hybrid Funds
• 5 years and above: Equity funds

Ans: Kindly continue; markets are in corrective mode therefore the returns presently may not look good, however the funds are decent.

For SIPs you may consider a couple of schemes from:

1. UTI flexi cap fund – Growth.     
2. Parag Parikh Flexi cap - Growth 
3. Samco Flexi Cap – Growth
4. Axis Esg Equity Fund  Growth
5. Hdfc Index Fund - Sensex Plan - Growth

Ans: Your mutual fund investments are currently losing value.

Understanding whether to exit or hold is crucial.

Let us assess the situation comprehensively.

Factors to Evaluate Before Exiting
Investment Time Horizon
Review your financial goals and investment duration.

Equity funds need at least 5–7 years to deliver results.

Fund Performance
Compare the performance of your funds to their benchmark index.

Check the 1-year, 3-year, and 5-year returns.

Poor short-term performance is not always a concern.

Market Conditions
Mutual fund performance depends on market cycles.

Temporary declines may reverse with market recovery.

Fund Category and Risk
PSU funds are sector-specific and carry higher risk.

Evaluate if the sector aligns with your goals.

Diversified equity funds are less volatile.

Reasons for Current Decline
Sector-Specific Risks
PSU and sector funds are impacted by policy changes or economic shifts.

These funds may recover when the sector performs well.

Broader Market Trends
Market corrections affect all equity mutual funds.

Short-term dips are common in volatile markets.

Fund-Specific Issues
Poor fund management can impact returns.

Check the fund manager’s track record and strategy.

Alternatives to Exiting
Hold and Reassess
Staying invested during market dips often helps in the long term.

Exit only if the fund consistently underperforms for 3–5 years.

Portfolio Diversification
Avoid overexposure to sector-specific funds.

Add diversified funds to reduce risk.

Switching Funds
Consider switching to better-performing funds.

Choose funds with consistent returns over time.

Tax Implications of Exiting
Equity Mutual Funds
Long-term gains above Rs. 1.25 lakh are taxed at 12.5%.

Short-term gains are taxed at 20%.

Exit Load
Exiting before the minimum holding period attracts exit loads.

Check your fund’s terms before redeeming.

Action Plan for Your Situation
Retain the Funds
Hold if the funds match your risk appetite and goals.

Monitor performance quarterly for any significant changes.

Reallocate Gradually
Shift a portion of funds to diversified equity funds.

Opt for actively managed funds for better risk management.

Regular Portfolio Review
Assess your portfolio with a Certified Financial Planner.

Review fund categories, performance, and alignment with goals.

Finally
Mutual funds require patience to yield returns.

Exit only after detailed evaluation of performance and goals.

Monitor your portfolio regularly and consult a Certified Financial Planner for guidance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Your commitment to investing is commendable. Let's evaluate your current mutual fund portfolio and provide guidance tailored to the current market conditions.

Current Market Overview

As of February 2025, the Indian equity market has experienced notable volatility. Benchmark indices like the Nifty 50 and S&P BSE Sensex have declined by approximately 10-11% from their peaks in September 2024. Mid-cap and small-cap segments have faced even sharper corrections, with the BSE Small Cap Index and BSE Mid Cap Index falling by 18.3% and 17.9%, respectively.
PERSONALFN.COM

Analysis of Your Portfolio Composition

Your portfolio includes investments in various mutual funds across different categories. Here's a breakdown:

Small-Cap Funds: A significant portion of your investments is allocated to small-cap funds. While these funds offer high growth potential, they also come with increased volatility, especially during market downturns.

Large-Cap Funds: You have exposure to large-cap funds, which are generally more stable and resilient during market fluctuations.

Thematic and Sectoral Funds: Your investment in thematic funds focuses on specific sectors, which can be cyclical and may experience periods of underperformance.

Recommendations

Review and Rebalance Your Portfolio

Assess Overlap: Evaluate the degree of overlap between your funds to ensure diversification. Tools like the mutual fund portfolio overlap tool can help identify common holdings.
PRIMEINVESTOR.IN

Adjust Allocations: Consider reducing exposure to small-cap funds if they constitute a large portion of your portfolio. Reallocating to large-cap or diversified equity funds can provide more stability.

Stay Invested with a Long-Term Perspective

Market Corrections Are Normal: Short-term volatility is inherent in equity markets. Historically, markets have rebounded over time, rewarding patient investors.

Avoid Panic Selling: Withdrawing investments during downturns can lock in losses. Maintaining your investments allows you to benefit from potential market recoveries.

Continue Systematic Investment Plans (SIPs)

Rupee Cost Averaging: Continuing SIPs during market lows allows you to purchase more units at lower prices, potentially enhancing long-term returns.

Discipline Over Timing: Regular investments mitigate the need to time the market, fostering a disciplined approach.

Consult a Certified Financial Planner

Personalized Advice: A Certified Financial Planner can provide guidance tailored to your financial goals, risk tolerance, and investment horizon.

Tax Efficiency: Professional advice can help optimize your portfolio for tax efficiency, especially with recent changes in capital gains taxation.

Final Insights

In the current market scenario, it's advisable to stay invested and avoid making hasty decisions based on short-term volatility. Rebalancing your portfolio to align with your risk tolerance and financial goals, while continuing with disciplined investment strategies like SIPs, can position you well for long-term wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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