My Mutual Funds have grown by 30L. Should I withdraw the growth and buy Units of same or different fund for increasing my base? Is this a wise strategy?

Ans:

Ans: Hello and thanks for writing to me.

The funds you invest in are good funds and you can continue to invest in them.

If you state your objectives on what you wish to achieve, your time horizon, risk appetite etc, then I may recommend other schemes.

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