The Mutual Fund Show: Key Investor Queries Answered After Stress Tests
The Mutual Fund Show: Key Investor Queries Answered After Stress Tests
Stress tests are faulty and activity mongering, according to Dhirendra Kumar, founder and chief executive officer of Value Research.
In the recent years, small-cap and mid-cap funds have garnered significant attention from investors. However, with the recent downturn in the broader markets, there is speculation about whether this trend will continue.
"The stress test scenario could potentially exacerbate the market decline," said Kumar, emphasising the importance of assessing the quality of small-cap portfolios and suggesting that moving forward, investors may need to closely consider the strategies employed by fund managers.
"Undoubtedly, we have found froth here, which is a very cyclical thing," he said. "A lot of risk is getting reduced by the investors' action, the way they invest and the diversification of the mutual fund."
However, Kumar said that thematic funds and PSU funds need to be relooked. According to him, the proportion of small caps in a portfolio, should be "30-40% if you prefer. But not more than 50% of your portfolio. If you look at the average exposure of flexi cap funs, it should not cross 10-12%."
SEBI's notice to AMCs regarding inflows into mid and small caps, Kumar said, will be reflected in their performance. "You will have to be ready for prolonged period of non-performance with them, (especially) if you have been used to the great performance of small caps."
Query 1: I have been investing through SIP in 4 different small cap mutual fund schemes for the past 5 years. I would like to continue the SIPs for another 5 years.
I booked some profits in 2021 and 2023, and I am still sitting at a profit of approximately 100% in all these schemes. My question is should I book partial profit? If yes, where to reinvest? Or should I continue my SIPs? These are the SIPs I am currently invested in:
HDFC Flexi Cap Fund = Rs 12,500
HDFC Small Cap Fund = Rs 3,000
ICICI Prudential Balanced Fund = Rs 12,500
ICICI Prudential Multi-asset Fund = Rs 5,000
SBI Small Cap Fund = Rs 5,000
— Name: Vikas | Age: 49 years
Hemant Rustagi, CEO, Wiseinvest: No need to panic, if allocation is lower than large caps. Investors have a horizon of 5-6 years.
Harshvardhan Roongta, CFP, Roongta Securities: If he is looking at profit-booking as his goal and looking for another category, he could book profits in the small-cap funds. He can increase the allocation to HDFC Flexi Cap Fund.
Query 2: I have equity holdings of Rs 2 lakh, Rs 12 lakh in LIC, and I have also invested in SBI Child Future Plan and Post Office Girl Child Scheme.
I am looking for a few mutual fund options that will help me have a good corpus for my three-year old child's education and to have a retirement corpus of minimum Rs 2 crore by the time I turn 55.
— Name: Prasad | Age: 36 Years
Hemant Rustagi, CEO, Wiseinvest: Investing in a flexi-cap fund, large and mid-cap funds, and a multi-cap fund are good options.
Harshvardhan Roongta, CFP, Roongta Securities: Look at equity as an asset over the long term. The new allocations need to go more towards equity from here on. The new allocations should be through SIPs, flexi-cap funds, large mid-cap and multi-caps.
Query 3: I've invested in ICICI Prudential small and large-cap funds, but I have a lump sum amount of Rs 3 lakh to invest for the next 5 years. Where should I put it?
— Name: Dhriti | Age: 29 years
Aditya Nain, Author, Professor & Creator: You should go for an STP (systematic transfer plan). Even SIPs are good options. Flexi-cap fund and multi-cap fund, or multi-asset allocation funds will be good options.
Query 4: Where can I start an SIP for this year? Will small-cap funds give returns this year?
— Name: Anuj | Age: 24 years
Shalini Dhawan, Director & Co-Founder, Plan Ahead Wealth Advisors: Monthly SIPs are important. Balanced advantage fund or a multi-asset fund or an index fund will also help in the investing experience.
