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Should I liquidate my ICICI Prudential Nifty 50 Index SIP?

Ramalingam Kalirajan |8940 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jan 03, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jan 03, 2025Hindi

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I have invested in ICICI Prudential Nifty 50 index SIP. I have noticed that from past 6 months the fund is not performing. Should I keep this fund or liquidate and invest in in multi asset fund?

Ans: The ICICI Prudential Nifty 50 Index Fund replicates the Nifty 50 index. It is a passive fund that mirrors the index performance. The last six months have been volatile for the stock market, which has affected index funds. This is expected in short-term market conditions and does not reflect the long-term potential of index-based funds.

However, relying on index funds for wealth creation in volatile markets may not always be optimal. Active funds offer the flexibility of stock selection, better risk management, and potential for higher returns.

Why Active Funds May Be a Better Choice
Volatility Management: Active fund managers adjust the portfolio based on market trends. This flexibility helps during volatile times.

Higher Growth Potential: Actively managed funds can outperform index funds by investing in sectors and stocks with higher potential.

Diversification: Multi-asset funds allocate across equity, debt, and other asset classes. This reduces risk and provides stability.

Assessing Your Current Investment
Index Fund Performance: While the last six months may seem disappointing, index funds are designed for long-term investors.

Cost Factor: Index funds have lower expense ratios but lack active management during market fluctuations.

Active vs Passive: Actively managed funds are better during periods of market instability. They offer professional stock selection and sector rotation.

Benefits of Multi-Asset Funds
Balanced Portfolio: Multi-asset funds invest in equities, bonds, and gold, diversifying your investment.

Risk Mitigation: Allocation to multiple asset classes reduces portfolio volatility.

Stable Returns: These funds aim to provide consistent returns, even during volatile markets.

Suggested Action Plan
Reevaluate Goals: Align your investment decisions with your financial goals and risk tolerance.

Shift to Active Funds: Consider shifting from the Nifty 50 index fund to an actively managed multi-cap or multi-asset fund.

Monitor Performance: Choose funds with a strong track record and consistent performance across market cycles.

Consult a Certified Financial Planner: A planner can help you select the right actively managed funds and align your investments with your financial plan.

Final Insights
While index funds like ICICI Prudential Nifty 50 are suitable for passive investors, active funds offer an edge in volatile markets. Shifting to a multi-asset or actively managed fund may help you achieve better returns and stability.

Invest wisely, monitor regularly, and stay disciplined to maximise your wealth creation journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.