Mutual fund portfolio: When should I book profit and reinvest?

Stay invested in your existing equity funds and continue with your SIPs as long as they suit your risk appetite and financial goals.


My husband earns a salary of 1.2 lakh per month and I have a monthly salary of 80,000. We ahave about 50 lakh in mutual funds and I have started a new monthly SIP of 20,000 in equity mutual funds. Equity markets have sharply corrected over the last few months and likely to continue in the near term. Although we do not need the money invested in mutual funds, should I redeem a part of my existing equity MF portfolio to book some profits or top it up to take advantage of lower NAVs?

– Name withheld on request

(Query answered by Naveen Kukreja – CEO& Co-founder, Paisabazaar.com)

I would advise you against timing your investment and redemption decisions based on market directions. As predicting the peak and bottom of the equity markets is extremely difficult, redeeming equity mutual funds or pausing SIPs during bearish market phases may lead you to incur high opportunity cost. Instead, your redemption decisions should always be based on the maturity of your financial goals, changes in your risk appetite and/or continued under-performance of the funds you are already invested in.

Remember that steep market corrections and bearish market phases allow equity fund SIP investors to acquire quality equities at attractive valuations and thereby, average their purchase cost at much lower NAVs. Thus, stay invested in your existing equity funds and continue with your SIPs as long as they suit your risk appetite and financial goals.

However, you should review the performances of your existing mutual funds. Redeem the funds which have consistently underperformed its benchmark indices and peer funds. If any of your existing funds are underperforming, consider the direct plans of HDFC Index Sensex Fund, Mirae Asset Large Cap Fund, Axis Bluechip; Parag Parikh Flexi Cap Fund, PGIM India Flexi Cap Fund; Kotak Emerging Equity Fund, PGIM India Midcap Opportunities Fund; Kotak Small Cap Fund, Axis Small Cap Fund, as replacement funds for their respective fund categories. In case of tax saving funds, you can consider the direct plans of Mirae Asset Tax Saver Fund and Axis Long Term Equity Fund.

(Please send queries and views at mintmoney@livemint.com)

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