Home >Money >Q&a >Shift to less risky mutual funds when markets become pricey

I've been investing through SIP in MFs since 2018 and my portfolio is generating an annualized return of 25%+. My current age is 30. The details of my investment are as follows (Plan-Monthly SIP Amt-XIRR-Invested since):

1.Axis Mid Cap Growth Direct Plan-10000-63%-Apr 2020

2.Parag Parikh Flexi Cap Growth Direct Plan-10000-52%-Dec 2020

3.Nippon India Small Cap Growth Direct Plan-5000-40%-May 2018

4.SBI Small Cap Growth Direct Plan-5000-37%-Jun 2018

5.L&T Emerging Businesses Growth Direct Plan-5000-32%-Apr 2018

6.Axis Long Term Equity Growth Direct Plan-10000-30%-Feb 2019

7.SBI Focused Equity Growth Direct Plan-5000-26%-May 2018

8.SBI Blue Chip Growth Direct Plan-5000-20%-Jan 2018

9. Mirae Asset Emerging Bluechip Growth Direct Plan-2500-NA-Aug 2021(New Investment)

Please review my portfolio, and let me know if any rejig is required for my portfolio.

Name withheld on request

You have a very aggressive portfolio, made of all equity funds and leaning quite heavily towards mid and small cap funds. Of the 57,500 you are investing every month, 57% of the money goes to small and mid-cap funds, 35% to flexi-cap funds (which have allocations to this high-risk market segment), and the remaining 8% is going to the solitary large-cap fund (SBI blue chip).

The markets have been kind during your investment period, especially during the last year, resulting in handsome gains and eye-popping IRR numbers. I hate to be a party spoiler, but it is the responsibility of a prudent advisor to temper enthusiasm in such times and warn investors that such good times don’t last forever. The average annual market returns are in the range of 12% in the long term, and we can expect your portfolio returns to revert to this mean, over a period of time. When that happens, the riskier part of your portfolio will bear the brunt of losses.

Hence, at this point in time, you could do well to reallocate some of your portfolio to less volatile investment classes such as hybrid funds, debt funds, or even gold - all these can cushion the impact of any potential market fall on your portfolio.

If, as a result of this adjustment, you can bring your portfolio allotment to a ratio of 20% large-cap, 30% small and mid-cap, 30% flex-cap, and the remaining in debt, such a portfolio would continue to be aggressive but will be better positioned to weather the market storms.

Answered by Srikanth Meenakshi, founder,

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