I am regularly investing via SIP in UTI flexicap since last 6 years. Now, I am seeing that, UTI FLEXICAP is underperforming relative to its peers. What should I do now? Should I stop SIP or continue?

Ans:

Multicap: Suitable options considering quality and value for money at present levels are UTI Equity Fund, Axis Multicap and Motilal Oswal Multicap 35

Midcap: Suitable options considering quality and value for money at present levels are Motilal Oswal Midcap 30, DSP Midcap and  Axis Midcap

Ans:

You may continue with the 5- & 4-star rated funds and for others you can consider these:

Aggressive Hybrid: Suitable options considering quality and value for money at present levels are Axis Equity Hybrid Fund and Tata Hybrid Equity Fund

Midcap: Suitable options considering quality and value for money at present levels are Motilal Oswal Midcap 30, DSP Midcap and Axis Midcap

Small cap: Suitable options considering quality and value for money at present levels are Kotak Small Cap and Axis Small Cap

Ans: I always feel that, be it any asset - real estate, gold , MF or shares, it is always better to diversify. In your case, since your SIP is under=performing, it is better to wait and then to diversify. The investment object of UTI Flexicap is capital appreciation, which would be possible in long term only. Always read the investment objective of the MF, before investing and check if the objective is aligning with your own investment objective.

Ans: You have consistently invested Rs 2,000 per month in a flexicap fund since 2014. With an XIRR of 13.6%, this SIP has delivered a strong, inflation-beating return over time. This consistency reflects disciplined investment behaviour. However, it is natural to compare returns with other funds offering better short-term performance.

Let us analyse the situation and guide your next steps.

Strengths of Your Current Investment
Long-Term Investing: Staying invested since 2014 has leveraged the power of compounding.

Steady Returns: The fund has provided a stable 13.6% XIRR over nine years.

Market Phases: The fund has weathered various market cycles, proving its resilience.

Should You Switch to a New Fund?
Switching funds requires careful consideration. A short-term performance comparison alone is not enough.

1. Check Consistency Over Time
Review the 10-year and 15-year performance of your current fund.
Consistent performers in all market cycles are more reliable.
2. Assess Fund's Risk and Style
A high return in another fund may come with higher volatility or risks.
Evaluate the investment style and portfolio diversification of alternatives.
3. Impact of Capital Gains Tax
Selling your current investments may trigger long-term capital gains (LTCG) tax.
LTCG above Rs 1.25 lakh is taxed at 12.5%. Factor this into your decision.
4. Transaction Costs
Consider exit loads or transaction charges if applicable.
Regular switching can erode returns through such costs.
Benefits of Staying Invested
1. Avoid Market Timing
Timing the market by chasing high-return funds can lead to losses.
Patience with a consistent performer usually pays off in the long term.
2. Power of Compounding
Long-term SIPs maximise compounding benefits.
Frequent fund changes interrupt this growth cycle.
When Should You Consider Switching?
If the fund consistently underperforms its benchmark and peers over 5-10 years.
If there are major changes in fund management or strategy.
Alternative Approach Instead of Switching
1. Diversify Across Funds
Start a SIP in another flexicap fund without stopping the existing one.
This ensures better diversification without disrupting current investments.
2. Review Portfolio Overlap
Avoid funds with overlapping portfolios to ensure diversification.
3. Seek Expert Guidance
Invest through an MFD with CFP credentials for personalised fund selection.
Active management ensures funds align with your financial goals.
Disadvantages of Direct Funds
Direct funds do not offer advisory support.
You may miss crucial rebalancing opportunities without professional guidance.
Investing through regular plans with an MFD ensures expert monitoring and timely actions.
Final Insights
Your existing SIP has delivered steady, long-term returns. Do not switch based on short-term fund performance alone. Evaluate long-term consistency and risk before making changes. Consider starting a new SIP in another fund to diversify instead of stopping your current SIP.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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