Mid cap, small cap mutual funds are shining again. Is it time to invest?1 min read . Updated: 03 Sep 2020, 07:40 AM IST
Is resuming your SIPs in mid cap and small cap equity mutual funds a good idea now?
I am a 31 years old working professional. I started investing in mutual funds in June 2017. I picked up two large cap, two mid cap and two small cap funds which were then rated five star. I have incurred huge losses in my mutual funds' portfolio since then. Till date I have invested ₹4.5 lakh through SIPs and the current value is down by around 60,000 rupees. I discontinued my SIPs in one mid-and one small-cap fund in April this year. Recently in a month or so, I have seen some recovery in the scheme returns where I had invested earlier. Should I enter mid cap and small cap schemes through SIP again? Is it the right time?
By Dinesh Rohira, Founder & CEO, 5inance.com
The portfolio you have built is spread across different categories which is an ideal way to invest. Also investing through the SIP route is an appropriate way to create long-term wealth. However, it is also equally important to evaluate your portfolio on a periodic basis to ascertain the quality of schemes as the market dynamic changes over a period of time which ultimately changes the ratings. Further, you made a mistake by discontinuing the SIP during the falling market as it works best in a volatile market where you get more units.
Since you have not disclosed the name of the schemes it will be difficult to provide an exact solution. We ideally recommend you to invest in multicap funds instead of mid cap and small cap looking at current market conditions on account of their volatility. (SBI Magnum Multicap Fund or Canara Robeco Equity Diversified Fund).
The returns you witnessed in the recent period via lumpsum investment is due to pullback that came after massive correction in March which usually differs from SIP because of time period. It is always a good time to enter the market but what you should know is when to exit the market. Exit is important because that’s where you make the actual money while making an investment.
(Views as expressed by the expert)