I purchased 30 MFs since July 2021 help me trim my portfolio

Published: October 16, 2021 at 7:22 am

Having mutual funds from all AMCs to buy from at the click of a button is a “convenience” only for those who know what they are doing and when to stop. Many young earners make the mistake of starting SIPs in multiple mutual funds from day one. And multiple here means more than 10! The following is a comment on our YouTube channel

.”Sir, I have made a massive mistake, I reckon. I have invested in nearly 25-30 mutual funds through sip from different platforms. I have started in July recently, so I can’t even exit because of the exit load. And more than 60% of my stocks overlap because of that. Except for thematic, sectoral and international funds. Please help how to proceed. Should I exit with bearing exit load, or should I stay put for at least 1 or 2 years? The expense ratio will also cut down my profit in the long term like this”

Yes, it is a massive mistake, but it is easily redeemable. Please follow these steps to get sorted.

  1. Do not buy any more mutual funds!
  2. List your long term goals. That is your financial need for which money is required after at least ten years.
  3. Suppose you have two long term goals; assign one large cap fund to each goal. If there are some index funds like NIfty or Sensex in that mix, pick them. So that is two large cap funds, one for each goal. If you are comfortable, you can also use a single fund for both goals.
  4. Stop your SIPs in all the remaining funds. Don’t think, just hit that “stop button”. You will not miss anything if you stop investing in mid cap funds, small cap funds, flexicap, hybrid, international, sectoral or thematic funds.
  5. Then get rid of all investing apps and portals. Create an account directly with the AMC and invest from there. Do not track your portfolio frequently. Once a year with a simple spreadsheet for review is all you need.
  6. Don’t worry about “diversification benefits” that does not apply to a portfolio with diworsification syndrome,
  7. Now focus on reaching an asset allocation of 50% equity and 50% fixed income.  You will need to reduce the equity exposure down the line, but that know-how can wait.
  8. Wait for a year to pass. Up to one lakh of capital gains from equity mutual funds is tax-free. So you can redeem a proportional amount to reduce the number of funds. Note that international equity funds are not eligible for this benefit. Invest that money into your existing funds (which hopefully will still be two!)
  9. Whenever a fund is in “red”, that is, the current value is lower than the total investment made, you can again redeem from such funds and invest it into your existing funds.
  10. This way, the exposure to funds tagged to goals will increase, reducing the importance of the other funds.
  11. Get yourself a productive hobby away from financial news. Unfollow all financial guys on social media, YouTube and email, including freefincal.
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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
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