Can I change the houses in my SIP after 5 months?

Ans: At 44 years of age, investing for the future is a smart decision. You're already on the right path by being consistent in your SIPs. It’s important to stay committed to long-term goals as mutual fund investments take time to grow.

You have currently invested in funds under a single house, HDFC Mutual Fund. While that’s not necessarily a bad choice, diversifying across different fund houses can provide some benefits, which we will discuss. Let’s also address your concern about whether changes can be made now.

Should You Diversify Across Different Fund Houses?
Your friends have advised you to invest across different fund houses, and there’s some merit to this. Different fund houses have different investment philosophies, risk management strategies, and fund managers. By investing across fund houses, you spread your risk and potentially enhance the performance of your portfolio.

Here are the key reasons why diversifying across fund houses could be beneficial:

Risk Mitigation: Each fund house has its own style of managing risks and opportunities. Spreading your investments helps balance those differences.

Managerial Expertise: Different fund houses have varied levels of expertise in handling specific market segments (like mid-cap, large-cap). If one fund house underperforms, another may compensate.

Performance Stability: Fund performance can vary across market cycles. Diversification ensures that you aren’t reliant on the performance of a single fund house.

Although you are invested with HDFC Mutual Fund across different caps, consider diversifying to balance performance.

Can You Change Fund Houses Now?
Yes, you can change fund houses even if you’ve been investing for five months. Changing does not mean starting over; it’s simply a process of moving or adding investments from one fund house to another.

Here’s what you can do:

Continue Existing SIPs or Redeem: You can either continue your SIPs in the current HDFC funds or redeem your existing investments. Redeeming means selling your units and reinvesting in funds from other houses.

Start New SIPs in Other Fund Houses: You don't need to stop your existing SIPs immediately. You can start SIPs with other fund houses alongside your current investments. This will diversify your portfolio without disrupting your current investments.

Steps to Change Fund Houses
If you decide to change or diversify your investments across fund houses, here’s how to proceed:

Evaluate New Fund Houses: Choose other reputable fund houses with a strong track record. Your Certified Financial Planner (CFP) can guide you in selecting the right fund house based on your goals.

Assess Fund Categories: Choose funds across large-cap, mid-cap, small-cap, and multi-cap categories, but from different houses. This ensures you’re diversified not only by fund type but also by fund management style.

Redeem and Reinvest: If you wish to stop your current SIPs and switch to other fund houses, you can redeem your HDFC mutual funds and reinvest in new schemes from other fund houses.

Seek Help from Your CFP: Your CFP can manage this process for you. They will help with paperwork, fund analysis, and rebalancing your portfolio to ensure it meets your goals.

Regular Funds vs Direct Funds
Some investors choose direct funds, thinking they save on commission. However, direct funds mean you take on the role of monitoring and managing your investments without any professional guidance.

Here’s why regular funds (through a Certified Financial Planner) may be better for you:

Ongoing Advice: Regular funds give you access to expert advice. Your Certified Financial Planner will guide you on fund selection, portfolio rebalancing, and switching when needed.

Stress-Free Investing: Direct funds need you to actively track the market and understand when to make changes. Most investors may not have the time or expertise for this. Regular funds give you peace of mind knowing your portfolio is in professional hands.

Portfolio Optimization: A CFP will review your portfolio regularly to ensure your investments are still aligned with your goals. Direct funds don’t offer this service.

Given that you are new to mutual fund investments, regular funds could be a more efficient choice.

Active Funds vs Index Funds
Your current portfolio is all actively managed funds, which is a good choice. Some investors may recommend index funds because they come with lower expense ratios. However, index funds simply track a stock market index and don’t aim to outperform it.

Here’s why actively managed funds might be a better choice for you:

Fund Manager Expertise: In an actively managed fund, professional fund managers select securities based on in-depth research and market trends. This can provide better returns, especially in volatile markets.

Potential to Beat the Market: Actively managed funds aim to outperform the benchmark index. In contrast, index funds will only match the market's performance, which may not always meet your investment goals.

Flexibility: Fund managers in active funds can adjust the portfolio based on market conditions, while index funds are rigidly tied to an index.

Key Points to Keep in Mind
Patience Is Key: Mutual fund investments need time to grow. Don’t be tempted to switch or redeem frequently. Stick to your SIPs for at least 3-5 years to see meaningful returns.

Review Regularly: Periodically review your portfolio, but avoid frequent changes. A good timeframe to assess performance is every 6-12 months.

Tax Implications: Redeeming your funds before 1 year in equity schemes will attract short-term capital gains tax. Holding funds for the long term (over 1 year) can reduce your tax liability.

Avoid Over-Diversification: While it’s important to diversify, too much diversification can dilute your returns. Aim for a balance.

Finally
You’re off to a great start with your SIP investments. Changing fund houses or diversifying is possible, but should be done with careful planning. Adding more fund houses could enhance your portfolio’s performance and reduce risk.

Keep an eye on your goals, diversify wisely, and seek regular advice from your Certified Financial Planner. Your financial journey should be built on long-term commitment and careful portfolio management.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment