Should I Stay Invested in Quant Small Cap MF or Switch?

Ans:

Ans: Your commitment to investing and seeking advice shows a strong desire to grow your wealth wisely. Let's review your current portfolio and determine the best course of action.

Current Portfolio Overview

You have invested in four mutual funds since January 2021:

Axis Bluechip Fund
Parag Parikh Flexi Cap Fund
Canara Robeco Blue Chip Equity Fund
Canara Robeco Equity Hybrid Fund
These funds cover large-cap, flexi-cap, and hybrid categories, providing a balanced approach to your investments.

Evaluating Existing Funds

Axis Bluechip Fund: This is a large-cap fund known for stability and steady returns. It's a good choice for conservative investors seeking lower volatility.

Parag Parikh Flexi Cap Fund: This fund invests across market capitalisations and sectors, offering diversification. It's suitable for those seeking moderate to high growth with managed risk.

Canara Robeco Blue Chip Equity Fund: Another large-cap fund, providing similar benefits to Axis Bluechip. It adds stability to your portfolio.

Canara Robeco Equity Hybrid Fund: This fund invests in both equity and debt, offering a balanced approach with reduced risk. It's ideal for those seeking consistent returns with some exposure to equity growth.

Performance Review and Assessment

Review the performance of each fund over the last three years. Compare them to their benchmarks and peer funds. Consider their consistency, risk-adjusted returns, and performance during market volatility.

Making Informed Decisions

Continuing with High Performers

If your funds have shown consistent performance and align with your risk tolerance, continue with them. Long-term investments benefit from compounding, especially if the funds are performing well.

Switching Underperformers

If any fund consistently underperforms its benchmark or peers, consider switching to better-performing funds. Ensure the new funds align with your investment goals and risk profile.

Adding Sectoral and Thematic Funds

Consider adding sectoral or thematic funds for additional growth. These funds can offer higher returns but come with increased risk. Allocate a smaller portion of your portfolio to them.

Regular Review and Rebalancing

Periodic Review

Regularly review your portfolio's performance. This ensures your investments stay aligned with your financial goals and market conditions. Regular reviews help optimise returns and manage risks.

Rebalancing

Rebalancing your portfolio ensures it stays diversified and aligned with your risk tolerance. Adjust your investments based on performance and changes in your financial situation.

Advantages of Actively Managed Funds

Professional Management

Actively managed funds offer professional management, adapting to market changes. This flexibility can result in higher returns compared to passive index funds, which simply track the market.

Market Adaptability

These funds can adjust to economic shifts and opportunities, providing better performance during various market cycles.

Disadvantages of Index Funds

Lack of Flexibility

Index funds merely track market indices and may not perform well during market downturns. They lack the adaptability of actively managed funds, limiting potential returns.

Lower Potential Returns

Since they only aim to match the index, they may miss out on opportunities for higher returns that actively managed funds can capture.

Benefits of Investing Through a Certified Financial Planner

Tailored Advice

A Certified Financial Planner provides tailored advice and professional oversight. This ensures your portfolio aligns with your financial goals and risk tolerance.

Disadvantages of Direct Funds

Lack of Professional Guidance

Direct funds have lower expense ratios but lack professional guidance. Investing through a certified planner ensures informed decision-making and portfolio management.

Creating a Comprehensive Financial Plan

Consider other financial aspects like emergency funds, insurance, and tax planning. A holistic financial plan ensures a secure and well-rounded approach to wealth creation.

Monitoring Market Trends

Stay informed about market trends and economic factors. This knowledge helps you make timely adjustments to your investments, maximising returns and mitigating risks.

Conclusion

Your disciplined investment strategy and diversified portfolio are commendable. With regular review and professional guidance, you can optimise your investments and achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hi Neeraj,

Mutual Funds are a good option for investment. The investment horizon/timeline is very important when you consider equity mutual funds, they need to be invested for the long period (7+ years).

You have only recently started in June 2024, so keeping patience with your investment is important. You can track the progress of your investment but don't get influenced by day to day fluctuation in its NAV. Decisions should be taken based on many factors but do consider 1-2 years duration to see if fund performance is steady, improving or below par compared to your expectation and its peers and the market.

Now coming to the funds you have provided - Quant Large and Midcap and Quant Flexicap are good funds and I think you should be patient. Note - both are actively managed funds and you can expected to see fluctuations in the short term. Stay invested in these 2 funds as they are well diversified and long term prospects look good.
Quant Infrastructure fund is a Sectoral fund and the fluctuations will be high. If your risk profile is very high, then you can continue. There will be a period of time when the sector loses favor in the market and thus the returns will be impacted and during good times it will provide good returns.
Alternately if you decide to exit then include a fund from another fund house which is well diversified and aligns to your risk profile. Some good options to consider - an Index fund based on Nifty 500 (passive) or a multicap fund (active) - to get a a well diversified exposure to Large-Mid-Small cap.
Note- Redemption at this time may attract exit load apart from tax implications for short term.

Regards
Janak Patel
Certified Financial Planner.