Dear Sir, I have invested in the following MFs but these are not doing well, thus I plan to redeem. Mahindera Manulife Balance advantage ABSL Multicap DSP Dynamic Assest Allocation L&T Balance Advantage Sundram Div yield Bandhan Flexicap HDFC Focus 30 Please Advise Yours truly, A K Khosla

Ans: These are good funds, please continue

Ans: You may continue with 4 and 5 star rated funds; for 3 star ones you can consider these.

Top 2 Equity value funds are (4-Star rated)

• Tata Equity PE fund
• UTI value opportunity funds

ELSS:

1. Canara Robeco Equity Tax Saver Fund - Growth
2. Axis Long Term Equity Fund - Growth
3. Motilal Oswal Long Term Equity Fund – Growth

Ans: 3 rated schemes need to be reconsidered from the ones below.

Equity - Large Cap Fund:

• Mirae Asset Large Cap Fund – Growth
• Axis Bluechip Fund – Growth
• LIC Largecap Fund – Growth

Multicap: Suitable options considering quality and value for money at present levels are:

• UTI Equity Fund – Growth
• Motilal Oswal Multicap 35 – Growth
• Parag Parikh Long Term Equity Fund - Growth

Ans: Firstly, it's truly heartening to see your commitment to investing and the returns you've achieved reflect that dedication. You've navigated various market conditions, showcasing resilience and an ability to adapt, which is commendable.

Looking at your portfolio, you've embraced a mix of multi-cap, focused equity, small-cap, and blue-chip funds. Each has its unique characteristics and serves a purpose in a diversified portfolio.

As for your future actions, it's essential to reflect on your investment goals. Are you investing for a specific milestone or a long-term horizon? The returns you've achieved are commendable, but what's the story behind these numbers? Understanding the 'why' behind your investments can guide your future decisions.

For your existing funds, consider reviewing their performance against benchmarks and their alignment with your goals. For new investments, ponder on whether they align with your strategy or introduce a new dimension to your portfolio.

In this journey of financial growth, it's not just about numbers but also about aligning your investments with your aspirations and values. A Certified Financial Planner can provide a holistic perspective, ensuring your investments resonate with your life's broader narrative.

Ans: Your commitment to mutual funds since 2000 is impressive and shows your long-term vision.

When you hold funds for such a long period, it’s natural to evaluate whether they still serve your financial goals. Here’s a detailed analysis and guidance.

1. Review Fund Performance
Benchmark Comparison: Check if each fund has consistently outperformed its benchmark index. If not, it may be time to reassess its place in your portfolio.

Peer Comparison: Compare your funds with similar funds from other companies. A strong fund will usually perform well against peers.

Historical Returns: Evaluate the long-term returns of each fund. If a fund has consistently delivered below-average returns, consider switching to better-performing options.

2. Consider Portfolio Diversification
Check for Overlap: Holding multiple funds can sometimes lead to asset overlap, which reduces diversification benefits. Assess each fund’s holdings to ensure you’re adequately diversified.

Balanced Allocation: A well-balanced portfolio has a mix of large-cap, mid-cap, and small-cap funds. Ensure your funds provide this balance and are not overly concentrated in one sector.

Avoiding Sector Concentration: If your funds are concentrated in specific sectors, it might increase risks. Choose funds with diversified holdings to spread risk.

3. Active Funds vs. Index Funds
Benefits of Active Funds: Actively managed funds, like yours, are managed by experts who make changes based on market trends. They can provide higher returns than passively managed index funds.

Drawbacks of Index Funds: Index funds lack flexibility and merely mirror the market index. They can underperform during market downturns since they hold all stocks in the index without discretion.

Regular Funds with CFP Support: Opting for regular plans through an MFD with a Certified Financial Planner ensures tailored advice. They monitor your investments and make adjustments as needed, unlike direct plans where investors manage alone.

4. Assess Tax Implications
Equity Mutual Fund Taxation: On equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh attract a 12.5% tax rate. Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Fund Taxation: For debt funds, both LTCG and STCG are taxed as per your income tax slab. This may impact your decision to redeem or hold based on your current tax bracket.

Holding Period Benefits: Since you’ve held these funds for a long time, most of your gains qualify as LTCG, which is generally more tax-efficient than STCG.

5. Identifying Your Financial Goals
Align with Life Goals: Evaluate if these funds still align with your life goals. If they don’t, consider redirecting your investments into funds better suited to your objectives.

Future Needs and Goals: Identify future milestones, such as retirement or children’s education. Funds aligned with these goals should be reviewed to ensure they’re on track.

Emergency Requirements: If you need liquidity, assess which funds can be redeemed with minimal impact on your long-term goals. Aim to keep some funds in lower-risk assets for easy access.

6. Market Conditions and Timing
Current Market Valuation: Exiting during market highs can lock in profits. But if the market seems overvalued, consider a phased withdrawal to mitigate timing risks.

Phased Exit with STP: Use a Systematic Transfer Plan (STP) if you wish to move funds gradually. This reduces market timing risks and provides a smoother transition to other investments.

Avoid Hasty Decisions: Long-term investments are usually best held unless there is a strong reason to exit. Always weigh your options carefully and avoid impulsive decisions.

7. Consider Alternatives for Consistent Returns
Switch to High-Performing Funds: If any funds have consistently underperformed, consider switching to actively managed funds with better historical performance.

Hybrid and Debt Fund Options: Hybrid funds provide a balance of equity and debt. They’re suitable if you want to reduce market exposure without exiting completely.

Avoid Real Estate for Liquidity: Real estate lacks the flexibility and liquidity of mutual funds. Mutual funds provide easier access to funds in times of need.

8. Monitor and Rebalance Periodically
Annual Performance Review: Review your funds annually to ensure they align with your financial goals and risk profile.

Rebalancing Portfolio: Adjust your portfolio allocation based on changing market conditions and your goals. Rebalancing can help optimise returns and manage risks.

Professional Guidance: A Certified Financial Planner (CFP) can help identify underperforming funds and suggest suitable replacements, ensuring your portfolio remains healthy and aligned with your goals.

Final Insights
Your long-term investment journey is truly commendable. By reviewing fund performance, aligning with goals, and rebalancing as needed, you can ensure continued growth. Seek advice from a Certified Financial Planner to maximise your portfolio’s potential.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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