Invest in small-cap funds for long term if you can ride out this market turmoil1 min read . Updated: 06 May 2020, 09:56 PM IST
If you want to tone down the risk profile of your portfolio, move investments to debt funds
I am 38 years old and have a long investment horizon of at least 15 years, with a moderately aggressive risk appetite. Should I make any changes to my portfolio. I recently (less than a year back) started SIPs in these funds—Axis Small Cap ( ₹5,000), SBI Small Cap ( ₹5,000), Kotak Standard Multicap ( ₹5,000), SBI Focused Equity ( ₹4,000), Axis Focused 25 ( ₹4,000). Axis Blue chip ( ₹5,000), Mirae Asset Emerging Blue chip ( ₹10,000).
Earlier, I invested only in small-cap funds. These schemes included HDFC Small Cap ( ₹3,000), SBI Small Cap ₹3,000). Reliance Small Cap ( ₹4,000) and Sundaram Small Cap ( ₹2,000). Of these, I have stopped SIPs in all funds except in SBI Small Cap.
The total corpus is around ₹4.50 lakh. Most of these funds now have negative returns and I have lost capital.
—Nitish Kumar Lall
Markets recently have not been kind to equity investors, especially to mid and small-cap investors. Between the time you sent in your question and my replying to it, it is likely that your portfolio has gone deeper into the red. Your portfolio was extremely aggressive (with only small-cap funds), and it has only moderated a bit now. If you look at the segment allocation, you will find that 30-40% of your portfolio is going to the small-cap segment. This is a high allocation, and would explain the significant negative returns that you are seeing right now. At this juncture, the choice is yours. As I see, the funds in your portfolio are of good quality and do not need alteration.
However, if you feel that you need to tone down the risk profile, you can stop investing in the small-cap funds (you probably have existing investments from your older investment still in your portfolio) and move them to safe debt funds (like Kotak Savings fund or SBI Ultra-Short fund).
Also, if you think you can ride the market’s ups and downs successfully without getting fazed by it, you could stay invested. After all, your time horizon is very long (15 years) and if you can manage to avert your eyes from the market and the value of your portfolio, you could continue on and, hopefully, reap the rewards in the future.
Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at firstname.lastname@example.org