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Should I stop investing in Axis ELSS, Bluechip, and Midcap Funds?

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 10, 2024

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
santosh Question by santosh on May 30, 2024Hindi
Money

Hi Ram, I have been regularly investing (SIP) in Axis ELSS, bluechip and mid cap fund for past 3-4 of years. Considering the returns in Axis funds are relatively low compared to peers, should I stop my SIP in Axis and move to other funds for better returns?

Ans: You've been consistently investing in Axis ELSS, Bluechip, and Midcap funds for the past 3-4 years. While these funds have a good track record, the recent underperformance of Axis funds compared to their peers has understandably raised concerns. Let's assess this situation and provide some guidance for your next steps.

1. Performance Review of Axis Funds
Short-term Underperformance: It is common for even well-managed funds to go through periods of underperformance. The Axis funds may have underperformed compared to peers in recent years, but this alone doesn’t always justify stopping your SIP.

Long-term Focus: The key aspect of mutual fund investing is to focus on the long-term horizon. Look at the 5-year or 7-year performance of the funds instead of just 1- or 2-year periods. This will give you a better understanding of their long-term consistency.

Axis ELSS Fund:
Lock-in Period: Since ELSS funds come with a 3-year lock-in period, any changes should be made with caution. You need to consider the post-lock-in performance before switching.
Axis Bluechip Fund:
Large-cap Funds: Bluechip or large-cap funds generally tend to underperform in bull markets compared to small-cap or mid-cap funds. However, they offer stability during market downturns.
Axis Midcap Fund:
Volatility: Midcap funds are known for volatility. While Axis Midcap may not have delivered as expected in recent years, midcap cycles typically show substantial gains in the long run.
2. Reasons to Stay Invested
SIP Strategy: SIPs are designed to help investors take advantage of market volatility. By continuing with your SIPs, you will benefit from rupee-cost averaging, buying more units when the market is down and fewer when it’s high.

Market Cycles: Markets move in cycles, and different sectors or styles of funds perform better at different times. The underperformance of your Axis funds could be temporary, and exiting now might cause you to miss future growth.

3. Should You Stop SIP in Axis Funds?
While switching funds could be an option, it’s important to evaluate the following factors before deciding:

When to Consider Stopping SIP:
Consistent Underperformance: If the Axis funds have consistently underperformed their category average over a long period (5+ years), you may consider moving to better-performing funds.

Poor Management: If the fund manager has changed, or there have been significant changes in the investment strategy of the fund, underperformance could persist.

When to Continue SIP:
Recovery Potential: If you believe the Axis funds are poised to recover based on market conditions, sticking with your SIPs can help you benefit from a rebound.

Diversification Benefits: If the Axis funds provide solid diversification within your overall portfolio, consider continuing SIPs to maintain balance.

4. Considerations for Switching to Other Funds
If you decide to move your SIPs to other funds, here’s what you should consider:

Consistency in Returns: Look for funds that have delivered consistent returns over different time periods. Don’t just focus on recent top performers, as they may not maintain their performance.

Actively Managed Funds: Switching to actively managed funds can give you an edge. Unlike index or passive funds, active funds offer the flexibility for managers to adjust their portfolios based on market conditions, which can lead to better returns over time.

Professional Guidance: Working with a Certified Financial Planner (CFP) can help you assess which funds align with your goals. The CFP can monitor performance and recommend changes if required, while ensuring that your portfolio remains balanced.

5. Risks of Moving Too Soon
Timing Risk: Exiting a fund during a temporary period of underperformance can result in missing future gains. Timing the market or trying to switch between funds frequently may hurt your returns in the long run.

Transaction Costs: Moving SIPs frequently might incur exit loads or taxes. ELSS funds, for instance, come with a 3-year lock-in, and selling them early will incur penalties.

6. Maintaining a Balanced Portfolio
Before making any decisions, ensure that your portfolio remains well-diversified across different asset classes and sectors. A balanced mix of large-cap, mid-cap, and ELSS funds can provide stability while offering growth potential.

Diversification across AMCs: Consider spreading your investments across different asset management companies (AMCs) to avoid concentration risk with one fund house.

Rebalancing Regularly: Review your portfolio annually or biannually to ensure it aligns with your goals and risk appetite.

Final Insights
While Axis funds may not have performed well in the recent past, it is essential to evaluate your decision based on long-term performance and market trends. It might not be wise to stop SIPs solely based on short-term underperformance. If you do decide to switch, ensure the new funds fit your investment goals and risk profile. A Certified Financial Planner can guide you in making the best choices for your financial future.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
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.
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Hello Team, I am investing via SIP in axis Small cap 1000 pm, axis bluechip fund direct paln growth 1500pm, Mirae Asset aggreasive fund 1000pm, parag parikh flexi cap 1000pm, canara small cap 2000pm, quant small cap 2.5k pm, PGIM india midcap 1000pm. Please review my funds. Should i need any changes in my SIPs. My view is for 15 years. I am investing since 2019..
Ans: You've built a diversified portfolio covering different market segments, which is a good strategy for long-term growth. Here's a quick review:

Axis Small Cap & Canara Small Cap: You have exposure to small-cap funds which can offer higher growth potential but come with higher volatility. Given your 15-year horizon, these can be suitable, but be prepared for fluctuations.

Axis Bluechip & Mirae Asset Aggressive Fund: These funds provide stability with large-cap and well-diversified equity exposure. They can act as a counterbalance to the volatility of small and mid-cap funds.

Parag Parikh Flexi Cap: A flexible fund that invests across market caps and can provide consistent returns. It offers international diversification which can be beneficial.

Quant Small Cap & PGIM India Midcap: These funds further increase your exposure to mid and small-cap segments. Ensure you're comfortable with the higher risk associated with these categories.

Given your portfolio, it seems well-balanced for long-term growth. However, consider the following suggestions:

Review Fund Performance: Regularly check the performance of your funds against their benchmarks and peers.

Risk Assessment: Ensure you're comfortable with the risk levels, especially with higher allocations to small and mid-cap funds.

Asset Allocation: As you progress, you might want to rebalance your portfolio to maintain desired asset allocation.

New SIPs: Consider adding a large-cap or a diversified equity fund to further diversify your portfolio and reduce risk.

Remember, while these are general guidelines, personal financial planning should be tailored to your specific goals, risk tolerance, and financial situation. It's always advisable to consult with a financial advisor for a comprehensive review and advice tailored to your needs.

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Asked by Anonymous - Aug 26, 2024Hindi
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I am investing in Axis long term else since last 8 years. I have got decent returns over the years but I feel the returns are not good as compared to other funds. Please advise if I can stop the sip in axis else and start in another elss fund or continue the same. Please suggest good elss to start sip.
Ans: Assessing Your Current ELSS Investment
You have been investing in Axis Long Term Equity Fund for the past eight years. First, congratulations on your discipline in sticking to your investment plan. Over this period, you have seen decent returns, but you are concerned about the performance compared to other funds.

This is a valid concern, and it’s important to assess whether your money is working hard enough for you.

Performance Evaluation of Axis Long Term Equity Fund
While Axis Long Term Equity Fund has been a popular choice among investors, recent trends suggest that it might not be performing as well as some other ELSS funds. Market conditions, fund management changes, or shifts in the portfolio can impact returns. It’s crucial to evaluate whether the fund's performance aligns with your expectations and financial goals.

Understanding ELSS and Its Benefits
Equity Linked Savings Schemes (ELSS) are tax-saving mutual funds that invest primarily in equities. They come with a lock-in period of three years, making them a long-term investment. The primary advantage of ELSS is that it offers tax deductions under Section 80C of the Income Tax Act. However, beyond tax benefits, ELSS should provide solid returns over time.

Disadvantages of Index Funds
While some investors consider index funds, it’s essential to recognize that actively managed ELSS funds often outperform index funds. Index funds merely replicate the market, lacking the ability to capitalize on emerging opportunities or avoid underperforming sectors. Active fund managers can make strategic decisions that potentially enhance returns, especially in a dynamic market like India.

Direct Funds vs. Regular Funds
Investing in direct funds might seem attractive due to the lower expense ratio. However, direct funds lack the guidance of a Certified Financial Planner (CFP), which can be crucial for long-term success. Regular funds allow you to benefit from the expertise and advice of a CFP, ensuring your investments align with your goals and risk tolerance.

A CFP can help you choose the right funds, monitor your portfolio, and make adjustments as needed. The small additional cost of regular funds can be well worth the benefits of personalized advice and ongoing support.

Evaluating the Need to Switch Funds
If you feel that Axis Long Term Equity Fund is underperforming, it may be time to consider switching to a different ELSS fund. However, it’s essential to make this decision based on a thorough analysis. Here are a few steps to consider:

Check Consistency: Look at the fund’s performance over different time frames (1 year, 3 years, 5 years). Consistent underperformance across these periods may indicate a need for change.

Compare with Peers: Evaluate how the fund performs compared to other ELSS funds. This comparison should include returns, risk ratios, and fund manager strategies.

Review Fund Management: Changes in the fund management team or strategy can significantly impact performance. If there have been recent changes, it might be worth considering a switch.

Assess Your Goals: Ensure that your financial goals haven’t changed. If your risk tolerance or time horizon has shifted, your fund selection may need to be adjusted accordingly.

Suggested Strategy for Switching ELSS Funds
If you decide to switch from Axis Long Term Equity Fund, here are some strategies to consider:

Diversification: Instead of putting all your money into one ELSS fund, consider splitting it across two or three well-performing funds. This reduces risk and increases the chances of better returns.

Focus on Long-Term Performance: Choose funds that have shown consistent performance over the long term. Avoid chasing short-term gains, as they can be volatile and unpredictable.

Consider Fund House Reputation: Invest in ELSS funds from reputed fund houses with a proven track record of managing equity funds. This adds a layer of security to your investment.

Monitor Regularly: Even after switching, it’s essential to keep an eye on the performance of your new ELSS funds. Regular reviews with your CFP can help ensure that your investments remain on track.

Benefits of Working with a CFP
Partnering with a CFP can provide significant advantages. They can help you choose the best ELSS funds based on your financial goals, risk tolerance, and market conditions. A CFP can also guide you on when to switch funds, how to rebalance your portfolio, and how to optimize your tax savings.

Final Insights
Investing in ELSS is an excellent way to save tax and grow your wealth. While you’ve done well by staying invested in Axis Long Term Equity Fund, it’s wise to re-evaluate if it’s not meeting your expectations. By considering other well-performing ELSS funds and working with a CFP, you can enhance your returns and continue to achieve your financial goals.

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Chief Financial Planner,

www.holisticinvestment.in

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I am 38 years old and self-employed, earning an average of 1.8 to 2 lakhs per month. I have a home loan of 44 lakhs (EMI is 46,000, tenure 15 years). There is no other liabilities. My investments include 11 lakhs in mutual funds, 3 lakhs in fixed deposits, and 1.5 lakh in gold. Should I focus on prepaying the home loan given my irregular income, or keep my investments intact and continue with EMIs?
Ans: You are doing quite well, especially with your investments and controlled liabilities. Your financial discipline is truly appreciable.

You are 38, self-employed, with Rs.1.8 to 2 lakhs monthly income.
Your current home loan is Rs.44 lakhs with EMI of Rs.46,000 for 15 years.
You have Rs.11 lakhs in mutual funds, Rs.3 lakhs in FDs, and Rs.1.5 lakhs in gold.
Your income is irregular, but you have no other liabilities.

Let us now do a 360-degree evaluation of whether to prepay the loan or stay invested.

 

Step-by-Step Financial Assessment
1. Evaluate the Stability of Your Income First
You earn between Rs.1.8 to Rs.2 lakhs per month.

 

But income is irregular. That needs caution.

 

Loan EMI is Rs.46,000 — about 25% of your average income.

 

If income drops in any month, EMI pressure will increase.

 

So we must first ensure EMI is always affordable, without stress.

 

Hence, liquidity is more important for you right now than aggressive loan prepayment.

 

2. Evaluate Your Emergency Reserve
You have Rs.3 lakhs in FD and Rs.1.5 lakhs in gold.

 

That makes it Rs.4.5 lakhs total liquid safety.

 

Your EMI is Rs.46,000, and personal expenses will also be there.

 

Ideal emergency fund for you = 6 to 9 months of expenses + EMI.

 

That is around Rs.6 to Rs.8 lakhs minimum.

 

So current emergency fund is slightly lower than ideal.

 

Please don’t use this for loan prepayment now.

 

3. Assess the Role of Mutual Funds
You have Rs.11 lakhs in mutual funds. That’s a solid step.

Now let’s assess whether to redeem this and prepay loan.

 

Should You Redeem Mutual Funds to Prepay?
Mutual funds, over long term, give better post-tax return than loan savings.

 

Loan interest is 8% to 9%, whereas mutual funds can give 11–13% in long term.

 

Especially if funds are equity-oriented and held for 5+ years.

 

You will also get capital gains tax exemption on Rs.1.25 lakhs LTCG annually.

 

If you redeem funds, you lose growth potential and compounding.

 

That hurts long-term wealth building.

 

So, do not redeem the entire Rs.11 lakhs in mutual funds.

 

4. Disadvantage of Early Loan Prepayment in Your Case
Prepaying early will reduce interest over time, yes.

 

But you may run into cash flow stress in slow months.

 

Once money is used to prepay, it cannot be taken back easily.

 

Liquidity once lost = flexibility lost.

 

Also, income tax benefit under Section 24(b) gets reduced if loan balance drops.

 

So it’s better to maintain balance between repayment and investment.

 

5. Best Strategy for You – A Balanced Approach
Let’s now craft the best plan for you.

 

Maintain Strong Liquidity First
Keep FD and gold untouched.

 

Increase emergency fund to at least Rs.6–Rs.7 lakhs.

 

For that, set aside extra Rs.2.5–Rs.3 lakhs from savings over time.

 

This makes your EMI safe even in low-income months.

 

Continue Your Mutual Fund SIPs Without Stopping
SIPs give long-term growth and beat loan interest in most cases.

 

Don’t stop mutual fund investments to prepay loan.

 

Stay invested. Let wealth compound.

 

Start Small and Periodic Prepayments
Don’t do bulk prepayment now. Do systematic small prepayments.

 

For example, Rs.25,000 to Rs.50,000 extra every 3–4 months.

 

When income is higher, use that surplus to prepay in parts.

 

Target 1–2 bulk part-payments per year.

 

This reduces tenure and interest slowly, without affecting liquidity.

 

Track Your Loan Amortisation Every 6 Months
Use netbanking or get a fresh loan statement every 6 months.

 

Check how each prepayment is reducing principal.

 

Adjust your strategy accordingly.

 

Avoid One-Time Full Prepayment
That would kill your long-term investment compounding.

 

Also removes your income tax benefit under Section 24(b).

 

Stay flexible. You are self-employed.

 

You need cash buffers more than salaried people.

 

Final Insights
Do not do bulk home loan prepayment from mutual funds now.

 

Keep SIPs going and maintain your compounding.

 

Grow your emergency fund to Rs.6–7 lakhs minimum.

 

Use surplus months to make small part-payments towards home loan.

 

This protects your peace and builds wealth at the same time.

 

Reassess in 2–3 years. You may be able to prepay more later.

 

You are already in a good financial position. Your thoughtful approach is praiseworthy.

 

Best Regards,
 
K. Ramalingam, MBA, CFP,
 
Chief Financial Planner,
 
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

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i wish to purchase new car i10, should i purchase the same through own money or should i take a vehicle loan from bank and the money own by my to be kept as FDR or liquid mutual fund
Ans: It’s a good sign that you’re thinking before buying a car. You’re not rushing into it. That shows maturity and smart thinking.

We will now evaluate own money vs vehicle loan — from every angle.

 

Understanding the Nature of a Car Purchase
A car is not an investment.

 

It is a consumption asset, not a growth asset.

 

It depreciates every year. Its value goes down, not up.

 

So the cheaper the total cost, the better for your wealth.

 

Option 1: Use Own Money Fully
Pros

No interest cost. You save on total expenses.

 

You are free from monthly EMI pressure.

 

Car becomes fully yours from day one.

 

No need to deal with bank, forms, hypothecation etc.

 

Cons

Your liquid money reduces.

 

You may not have enough cash for emergencies.

 

Opportunity loss if you had invested that money.

 

Option 2: Take Vehicle Loan & Keep Own Money in FDR or Liquid Mutual Fund
Let’s evaluate this with care.

Vehicle Loan Pros

You can preserve your savings for emergencies.

 

EMI can be budgeted monthly, if income is stable.

 

Some banks offer competitive interest rates.

 

Vehicle Loan Cons

You will pay interest on a depreciating item.

 

Loan adds to your monthly obligations.

 

You must pay insurance, EMI, fuel, and service together.

 

FDR and Liquid Mutual Funds give lower returns than loan cost.

 

So you will likely lose more in interest than you gain.

 

Let's Compare: Interest Rate vs Investment Return
Vehicle loan interest is usually 9% to 11% per year.

 

FDR gives around 6% to 7% before tax.

 

Liquid mutual funds give 6% to 7.5% on average.

 

So you pay more to the bank than you earn from investment.

 

Tax on interest or gains reduces actual return further.

 

This means taking a car loan and investing your own money leads to net loss.

 

Best Option for You: Smart Compromise Approach
Let me share a wise solution.

 

Don’t use full own money. Don’t take full loan either.

 

Instead, pay 70–80% from own funds.

 

Take a small car loan for the remaining 20–30% only.

 

This keeps EMI low and retains some liquidity.

 

You reduce interest cost and also keep Rs.50,000–Rs.1 lakh aside.

 

Park that in liquid fund for any urgent need.

 

Repay this small loan fast in 1–2 years.

 

Only Take a Car Loan If:
Your job income is stable.

 

You already have 3–6 months emergency fund ready.

 

You don’t have big loans running now.

 

You can pay EMI without affecting savings.

 

You commit to close the loan early.

 

Avoid This Mistake:
Never buy a more expensive car because loan makes it “feel affordable.”

 

Loan should not expand your car budget.

 

Whether you buy with loan or cash, pick a simple car within limits.

 

i10 is a wise, middle-ground choice. Good thought.

 

Tax Angle (If Business Use)
If you are using the car for business, vehicle loan interest may be tax-deductible.

 

But for personal use, there is no tax benefit.

 

So do not take loan just for imagined tax saving.

 

Final Insights
A car is a need, not an investment.

 

Using your own money fully keeps things simple and cheap.

 

Taking a full car loan and investing the money gives net negative return.

 

Best option is a split approach — pay major part from own funds.

 

Take small loan only if needed and close it early.

 

Always keep emergency money aside before buying.

 

Avoid emotional buying or overbudget cars.

 

Your financially balanced approach is very appreciable.

 

Best Regards,
 
K. Ramalingam, MBA, CFP,
 
Chief Financial Planner,
 
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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