I have invested in axis small cap, midcap and blue chip for the last 3 years. Seeing its performance, should I exit now?.

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: Hello and thanks for writing to me. The funds you invest in are good funds.

If you state your objectives and risk appetite, I may share other schemes based that may be suitable for you.

Ans: You've been consistently investing in Axis ELSS, Bluechip, and Midcap funds for the past 3-4 years. While these funds have a good track record, the recent underperformance of Axis funds compared to their peers has understandably raised concerns. Let's assess this situation and provide some guidance for your next steps.

1. Performance Review of Axis Funds
Short-term Underperformance: It is common for even well-managed funds to go through periods of underperformance. The Axis funds may have underperformed compared to peers in recent years, but this alone doesn’t always justify stopping your SIP.

Long-term Focus: The key aspect of mutual fund investing is to focus on the long-term horizon. Look at the 5-year or 7-year performance of the funds instead of just 1- or 2-year periods. This will give you a better understanding of their long-term consistency.

Axis ELSS Fund:
Lock-in Period: Since ELSS funds come with a 3-year lock-in period, any changes should be made with caution. You need to consider the post-lock-in performance before switching.
Axis Bluechip Fund:
Large-cap Funds: Bluechip or large-cap funds generally tend to underperform in bull markets compared to small-cap or mid-cap funds. However, they offer stability during market downturns.
Axis Midcap Fund:
Volatility: Midcap funds are known for volatility. While Axis Midcap may not have delivered as expected in recent years, midcap cycles typically show substantial gains in the long run.
2. Reasons to Stay Invested
SIP Strategy: SIPs are designed to help investors take advantage of market volatility. By continuing with your SIPs, you will benefit from rupee-cost averaging, buying more units when the market is down and fewer when it’s high.

Market Cycles: Markets move in cycles, and different sectors or styles of funds perform better at different times. The underperformance of your Axis funds could be temporary, and exiting now might cause you to miss future growth.

3. Should You Stop SIP in Axis Funds?
While switching funds could be an option, it’s important to evaluate the following factors before deciding:

When to Consider Stopping SIP:
Consistent Underperformance: If the Axis funds have consistently underperformed their category average over a long period (5+ years), you may consider moving to better-performing funds.

Poor Management: If the fund manager has changed, or there have been significant changes in the investment strategy of the fund, underperformance could persist.

When to Continue SIP:
Recovery Potential: If you believe the Axis funds are poised to recover based on market conditions, sticking with your SIPs can help you benefit from a rebound.

Diversification Benefits: If the Axis funds provide solid diversification within your overall portfolio, consider continuing SIPs to maintain balance.

4. Considerations for Switching to Other Funds
If you decide to move your SIPs to other funds, here’s what you should consider:

Consistency in Returns: Look for funds that have delivered consistent returns over different time periods. Don’t just focus on recent top performers, as they may not maintain their performance.

Actively Managed Funds: Switching to actively managed funds can give you an edge. Unlike index or passive funds, active funds offer the flexibility for managers to adjust their portfolios based on market conditions, which can lead to better returns over time.

Professional Guidance: Working with a Certified Financial Planner (CFP) can help you assess which funds align with your goals. The CFP can monitor performance and recommend changes if required, while ensuring that your portfolio remains balanced.

5. Risks of Moving Too Soon
Timing Risk: Exiting a fund during a temporary period of underperformance can result in missing future gains. Timing the market or trying to switch between funds frequently may hurt your returns in the long run.

Transaction Costs: Moving SIPs frequently might incur exit loads or taxes. ELSS funds, for instance, come with a 3-year lock-in, and selling them early will incur penalties.

6. Maintaining a Balanced Portfolio
Before making any decisions, ensure that your portfolio remains well-diversified across different asset classes and sectors. A balanced mix of large-cap, mid-cap, and ELSS funds can provide stability while offering growth potential.

Diversification across AMCs: Consider spreading your investments across different asset management companies (AMCs) to avoid concentration risk with one fund house.

Rebalancing Regularly: Review your portfolio annually or biannually to ensure it aligns with your goals and risk appetite.

Final Insights
While Axis funds may not have performed well in the recent past, it is essential to evaluate your decision based on long-term performance and market trends. It might not be wise to stop SIPs solely based on short-term underperformance. If you do decide to switch, ensure the new funds fit your investment goals and risk profile. A Certified Financial Planner can guide you in making the best choices for your financial future.

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

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