i hold Axis blue chip MF 5700 UNITS since from Nov 2019 . I have noticed the fund is underperforming compare to other peers. Can you please suggest whether I want to hold this fund for some more time or now swift over to sone other funds. If so please advice with funds to Invest now. Thank You

Ans: This particular investment scheme primarily puts money into big company's stocks.

Over the past 3 to 5 years, this fund hasn't done as well as we'd like compared to a standard benchmark. However, if you are concerned about the fund's recent underperformance or if you need to access your money in the near term, you may consider exiting the fund.

The fund managers have been putting a lot of emphasis on specific stocks they believe in for the long term, but this approach hasn't worked out well since 2021 till date.

One of the reasons for the fund's underperformance is its heavy investments in sectors like automobiles and banks. Some specific stocks like Kotak Mahindra Bank and Bajaj FinServ didn't perform as expected.

Overall, this fund didn't provide a good balance of protection during market downturns and gains during market upswings.

If you are unsure about whether or not to continue or exit Axis Bluechip Fund, you may want to consult with a financial advisor. A financial advisor can help you assess your individual needs and goals and make a recommendation that is right for you.

Ans: Deciding whether to continue or exit mutual funds involves careful consideration of various factors. Let's delve into your options.

Axis Bluechip Fund and Axis ESG Fund are both reputable choices with distinct investment approaches. Axis Bluechip Fund focuses on large-cap stocks with a track record of consistent performance, while Axis ESG Fund integrates environmental, social, and governance (ESG) factors into its investment decisions, aligning with sustainable principles.

If you're contemplating exiting these funds, it's essential to reassess your investment objectives and risk tolerance. For conservative investors, you might explore alternatives like diversified equity funds with a history of stable returns, such as Mirae Asset Large Cap Fund or ICICI Prudential Bluechip Fund. These funds typically invest in established companies with lower volatility.

Additionally, debt funds can offer stability for conservative investors. Consider options like HDFC Corporate Bond Fund or SBI Magnum Ultra Short Duration Fund, which invest in high-quality debt instruments with relatively lower risk.

Before making any decisions, consult with a Certified Financial Planner to evaluate your portfolio holistically and ensure alignment with your financial goals. They can provide personalized recommendations based on your risk profile and investment horizon.

Remember, mutual fund investments are subject to market risks, so it's essential to diversify and regularly review your portfolio to maintain a balanced approach.

Ans: Investing in different categories, such as small cap, mid cap, and blue chip funds, offers diversification across risk levels and growth potential. Each category has unique strengths and responds differently to market cycles. Here’s an analysis to help you decide if you should continue or exit your investments.

Performance and Market Cycles
Equity funds, including small, mid, and blue-chip funds, typically perform differently in various market conditions.

Small cap funds often show high growth potential but can be volatile. Exiting during a temporary downturn may lead to missed long-term gains.

Mid cap funds provide a balance of growth and risk, as they represent companies beyond the initial growth phase but with room to expand.

Blue chip funds, representing large companies, generally offer stability and moderate returns, being less sensitive to market fluctuations. Exiting these funds could reduce the stability of your portfolio.

The Importance of Investment Tenure
Equity investments require a longer time horizon for optimal returns. Three years is relatively short, especially for small and mid cap categories.

Staying invested through market cycles typically allows these funds to realize their full growth potential. Exiting now could interrupt this compounding effect.

Key Factors for Evaluation
Assess the following before making any decisions:

Fund Consistency: Evaluate if each fund’s performance aligns with its historical and category average. Temporary downturns in small and mid cap funds can be normal.

Fund Manager’s Strategy: Assess if the fund manager has maintained a consistent and strategic approach in selecting stocks within the small, mid, and blue-chip spaces. A strong management approach may be a reason to remain invested.

Market Outlook: Look into current market conditions and projected economic trends. Small and mid cap funds often experience volatility based on market sentiment but recover during favorable market conditions.

Disadvantages of Direct Funds
Self-Management Complexity: Direct funds lack the benefit of a Certified Financial Planner’s ongoing guidance, which can be essential in understanding fund performance and adjusting strategies when needed.

Potential Missed Opportunities: With regular funds through a Certified Financial Planner, you gain access to periodic reviews and proactive recommendations. Direct funds leave this burden entirely on the investor.

Advantages of Actively Managed Funds Over Index Funds
If you’re considering index funds, it’s essential to note their limitations. Index funds follow a fixed market index without adapting to changing economic conditions, unlike actively managed funds. Here’s why actively managed funds might be better:

Dynamic Management: Actively managed funds adjust to market trends, whereas index funds cannot, which limits their potential returns in volatile markets.

Risk Management: Certified Financial Planners can strategically allocate assets based on real-time assessments. Index funds, by design, lack this flexibility.

Re-evaluate Based on Investment Goals
If your goals are long-term, continuing your investment in these funds may benefit from the compounding effect.

If your goals are short-term, reassessing your current allocation with a Certified Financial Planner may help adjust for risk management.

Final Insights
Making a decision based on a three-year performance period may not reveal the full potential of your investments, particularly in small and mid cap funds. Long-term wealth creation in equity often involves staying invested through market fluctuations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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