December 2, 2022
  • December 2, 2022

Mutual Fund Portfolio: When Should I Recognize Profits and Reinvest?

By on July 18, 2022 0

My husband earns a salary of 1.2 lakh per month and I have a monthly salary of 80,000. We have about 50 lakh in mutual funds and I started a new monthly SIP of 20,000 in equity mutual funds. Stock markets have corrected sharply in recent months and are expected to continue in the near term. While we don’t need the money invested in mutual funds, should I redeem part of my existing MF stock portfolio to record profits or supplement it to take advantage of lower net asset values?

– Name masked on request

(Query answered by Naveen Kukreja – CEO and Co-Founder,

I advise against timing your investment and redemption decisions based on market direction. Since it is extremely difficult to predict the peak and trough of stock markets, redeeming stock mutual funds or suspending SIPs during bear market phases can incur a 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 the continued underperformance of the funds in which you have already invested.

Remember that sharp market corrections and bear market phases allow investors in SIP equity funds to acquire quality stocks at attractive valuations and therefore average their cost of purchase at much lower NAVs. So, stay invested in your existing equity funds and pursue your SIPs as long as they suit your risk appetite and financial goals.

However, you should review the performance of your existing mutual funds. Buy back funds that have consistently underperformed its benchmarks and peers. 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 savings funds, you can consider the direct plans of Mirae Asset Tax Saver Fund and Axis Long Term Equity Fund.

(Please send your questions and views to [email protected])

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