There is no need to panic over the Securities and Exchange Board of India's directives to mutual funds to proactively protect investor interest amid "froth" building up in the broader end of the Indian equity market.However, it's time to reap the benefits of small and mid-cap allocation and rebalance, they said.Such directives primarily affect investors who are coming in without understanding the market, according to Harshvardhan Roongta, chief financial planner at Roongta Securities Pvt.If done right, portfolio allocation does not need to change just because there has been a directive from the market regulator, according to Mohit Gang, chief executive officer of Moneyfront."As far as we are concerned, there is no change in our portfolio... We have very carefully allocated as much in the mid- and small-caps as the investor can take," Roongta said."If you have a small-mid-cap portfolio of Rs 20 and it has run up to Rs 25, then by all means you should take out Rs 5 and rebalance it to some other market cap or some other asset class altogether," Gang said."But if you are well within your portfolio limitations, then you don't need to panic, as markets will see bouts of correction. They (investors) should continue building up their corpuses," he said."Most of the investors have come into small caps by just seeing the returns in the last two–three years," Roongta said.For investors who only saw returns and did not do risk analysis, this is a "great time to exit and get profit, even if you have made some mistakes," he said.I have invested Rs 7 lakh in quant small cap fund direct growth and invested Rs 3 lakh in the quant active fund direct growth. So, should I be invested in these funds or should I invest in other funds for better returns in order to create a lump-sum corpus for future needs?Name: Shreekishore. Age: 69.Harshvardhan: Given a personal choice, I wouldn't have created his portfolio like this. We're at a kind of stage when we should not invest with a trading mindset. In case there is a correction, small cap will fall in the same propensity it has gone up. My suggestion is that go with a balanced approach for the Rs 7 lakh, by exiting small-caps and allocating that in one large-cap fund and one mid-cap fund.Investors' expectations need to be moderated, as they're not prepared for a sharp correction, he said.SEBI Caution On Small- And Mid-Cap Funds May Drive Flows Into Large Caps