Should I Sell My Declining Aditya Birla and SBI PSU Mutual Funds?

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: Hello;

If your time horizon for investment is long term (7 yr+) then you may ignore these notional losses and stay invested and continue your sips.

If your target is near or dip in investment value is affecting your health then you should exit and invest in other investments avenues.

Happy Investing;

Ans: Your commitment to investing is commendable. Let's evaluate your current mutual fund portfolio and provide guidance tailored to the current market conditions.

Current Market Overview

As of February 2025, the Indian equity market has experienced notable volatility. Benchmark indices like the Nifty 50 and S&P BSE Sensex have declined by approximately 10-11% from their peaks in September 2024. Mid-cap and small-cap segments have faced even sharper corrections, with the BSE Small Cap Index and BSE Mid Cap Index falling by 18.3% and 17.9%, respectively.
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Analysis of Your Portfolio Composition

Your portfolio includes investments in various mutual funds across different categories. Here's a breakdown:

Small-Cap Funds: A significant portion of your investments is allocated to small-cap funds. While these funds offer high growth potential, they also come with increased volatility, especially during market downturns.

Large-Cap Funds: You have exposure to large-cap funds, which are generally more stable and resilient during market fluctuations.

Thematic and Sectoral Funds: Your investment in thematic funds focuses on specific sectors, which can be cyclical and may experience periods of underperformance.

Recommendations

Review and Rebalance Your Portfolio

Assess Overlap: Evaluate the degree of overlap between your funds to ensure diversification. Tools like the mutual fund portfolio overlap tool can help identify common holdings.
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Adjust Allocations: Consider reducing exposure to small-cap funds if they constitute a large portion of your portfolio. Reallocating to large-cap or diversified equity funds can provide more stability.

Stay Invested with a Long-Term Perspective

Market Corrections Are Normal: Short-term volatility is inherent in equity markets. Historically, markets have rebounded over time, rewarding patient investors.

Avoid Panic Selling: Withdrawing investments during downturns can lock in losses. Maintaining your investments allows you to benefit from potential market recoveries.

Continue Systematic Investment Plans (SIPs)

Rupee Cost Averaging: Continuing SIPs during market lows allows you to purchase more units at lower prices, potentially enhancing long-term returns.

Discipline Over Timing: Regular investments mitigate the need to time the market, fostering a disciplined approach.

Consult a Certified Financial Planner

Personalized Advice: A Certified Financial Planner can provide guidance tailored to your financial goals, risk tolerance, and investment horizon.

Tax Efficiency: Professional advice can help optimize your portfolio for tax efficiency, especially with recent changes in capital gains taxation.

Final Insights

In the current market scenario, it's advisable to stay invested and avoid making hasty decisions based on short-term volatility. Rebalancing your portfolio to align with your risk tolerance and financial goals, while continuing with disciplined investment strategies like SIPs, can position you well for long-term wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

Ans: You’ve invested Rs. 50,000 in a PSU-focused equity mutual fund (direct growth) in August 2024. You are currently facing a notional loss of around Rs. 7,000.

Let’s evaluate your concern with a 360-degree analysis. We’ll consider fund nature, risk, tenure, emotional behaviour, tax impact, and expert support.

We truly appreciate your initiative in seeking proper guidance. It shows a responsible investment mindset.

Let’s assess this decision from all angles.

 

Nature of Investment Chosen
You invested in a sector-specific equity fund.

 

Sector funds are very high-risk and concentrated.

 

PSU theme is based on government-owned businesses.

 

These funds follow a very narrow investment style.

 

When sector underperforms, your entire fund gets affected.

 

Even good companies may fall if the sector is weak.

 

Sector and Volatility
PSU stocks are affected by government policy decisions.

 

Market may react to budget, reforms, or geopolitical news.

 

In short term, PSU funds can show deep falls.

 

This is part of the risk-reward structure in such funds.

 

Volatility is not a mistake; it is expected.

 

If you knew this before investing, you need not worry now.

 

Investment Duration
You invested just 8 months ago.

 

Equity mutual funds need more time.

 

Especially sector funds may take 3 to 5 years minimum.

 

Judging performance in 8 months is not meaningful.

 

Markets have up and down cycles.

 

Short-term dips are not real losses unless you redeem.

 

Long holding gives your investment time to recover.

 

Notional Loss vs. Actual Loss
Rs. 7,000 loss is not permanent unless you withdraw.

 

Current value is only a temporary figure.

 

If you sell now, you book this loss forever.

 

If you hold, there’s chance to recover and grow.

 

Investors often panic and redeem at wrong time.

 

That’s a behavioural mistake, not a market mistake.

 

Direct Funds and Investor Decisions
You chose a direct plan.

 

Direct plans lack expert guidance.

 

You are making decisions alone.

 

Without a Certified Financial Planner, mistakes can happen.

 

Many direct investors redeem early due to fear.

 

Regular plans offer support from CFP-certified professionals.

 

A CFP helps in review, correction, and long-term strategy.

 

That small extra cost brings big long-term value.

 

Emotional Bias in Investing
Losses create fear in most investors.

 

Fear may lead to bad decisions.

 

With equity, this emotional control is critical.

 

Long-term wealth is only possible with patience.

 

You must separate emotions from money choices.

 

Take help of a CFP who brings calmness and objectivity.

 

Tax Implication (As Per New Rules)
You invested in August 2024.

 

If you redeem before August 2025, gains (or losses) are short-term.

 

Short-term capital gains tax is 20%.

 

If there’s a loss, it can be carried forward for future tax benefit.

 

But we don’t advise redeeming now just to record this loss.

 

Let the investment complete its full cycle.

 

Investment Goal and Purpose
Was there a clear goal for this investment?

 

If yes, when is the goal coming up?

 

PSU funds are not suitable for short-term needs.

 

If you need money within 1 year, it’s not ideal.

 

If it’s a long-term goal, then hold tight.

 

Invest according to your time horizon, not just fund return.

 

Diversification Matters
PSU equity funds are too narrow.

 

You should avoid putting large sums in one sector.

 

Diversify across multiple sectors and styles.

 

Multi-cap, flexi-cap or large-cap funds give better balance.

 

Keep PSU exposure limited, not core holding.

 

A well-diversified portfolio reduces mental stress too.

 

Review and Restructure
Sit with a Certified Financial Planner.

 

Review your full portfolio, not just one fund.

 

Restructure based on goals and risk tolerance.

 

Build a mix of funds with different styles and caps.

 

Avoid repeating mistakes like overexposure to sectors.

 

Common Investor Mistakes to Avoid
Don’t react to short-term loss.

 

Don’t check NAVs every day or week.

 

Don’t follow social media fund tips.

 

Don’t chase highest return or lowest NAV.

 

Don’t switch between funds too often.

 

Stay steady and follow your plan.

 

What Should You Do Now?
Do not redeem now.

 

Let the investment complete minimum 3–5 years.

 

Meanwhile, avoid adding more in this one sector.

 

Start investing gradually in diversified equity funds.

 

Take help from a CFP to guide and monitor.

 

Do a portfolio review every year.

 

Continue investing with patience and discipline.

 

Key Takeaways from Your Situation
Loss in 8 months is not unusual.

 

Sector funds are volatile by nature.

 

Your decision should be based on goals, not returns.

 

Avoid emotional reactions like panic redemption.

 

You must work with a qualified CFP for guidance.

 

Shift from direct funds to regular plan with MFD-CFP support.

 

Always diversify and follow asset allocation.

 

Stick to your long-term strategy for real wealth creation.

 

Finally
Your concern is valid and understandable.

 

But early redemption will lock the loss permanently.

 

Sector fund performance takes time to show up.

 

Stay invested and consult a CFP for next steps.

 

Your journey to wealth is not a sprint, it’s a marathon.

 

Continue with patience, proper planning, and expert guidance.

 

Right investment decisions are not based on past returns.

 

They are based on goals, risk capacity, and time.

 

You have already taken the first right step—asking the right questions.

 

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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