Where should I invest until Parag Parikh Flexi Cap Fund reopens?

Published: March 4, 2022 at 6:00 am

Last Updated on March 10, 2022 at 9:41 pm

As readers may be aware, other than existing SIPs, Parag Parikh Flexi Cap Fund is closed for subscriptions from Feb 1st 2022, to avoid breaching the overseas investment limit set by RBI. This restriction is for all mutual funds invested in foreign equity except ETFs. Many investors (who do not use SIPs) would like to know alternatives.

Initially, the MF industry was gung ho about getting the limits increased in a day or two! It has been a month, and there is no news on the matter. So it is time to move on.

Some considerations: Suppose RBI increases the limit, and the fund reopens. Depending on investor interest a similar situation of temporary closure may arise again. Based on how much the limit is increased and how soon, Parag Parikh AMC might rethink their foreign equity investment strategy. After all, the flexicap is their flagship fund and main profit source. They would not like prolonged or repeated disruption to their income.

update:  Parag Parikh Flexicap will reopen for subscriptions from March 15th but the new investments will only be used to buy Indian equity. For once my prediction came true! 🙂

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

The following considerations apply only to those manually investing in Parag Parikh Flexi Cap (PPFC)

Should I wait until PPFC re-opens? No. If you have money to invest, you should asap without waiting for any event. The investment should always be as per an asset allocation (equity: fixed income). However, no great damage will be done if you don’t invest in international stocks for some weeks or months.

PPFC is primarily an Indian equity fund, and therefore a replacement (in the portfolio) should also be an Indian equity fund. It makes little sense to choose a FOF investing in an overseas ETF. If the only reason you are investing in PPFC is for their foreign equity, then it is not a sound strategy.

Favourable taxation and automatic, tax-free asset rebalancing (bet Indian equity and foreign equity) are among the USPs of Indian equity funds holding international stocks. There is no need to give up on this aspiration unless RBI has other plans. We can cross that bridge when we get to it.

Is PPFC your only equity fund? For most people, the answer would be no.

If yes, PPFC is the only fund you hold; we suggest choosing one of the following options:

The reason is, either of these choices can be continued even after PPFC reopens for subscriptions. PPFC has a reasonably flexible investment strategy (for eg. It can act as an aggressive hybrid fund with up to 35% bonds if need be) and finding a close equivalent will be difficult. It is best not to try.

Note: I have started investing in UTI low volatility but this may or may not be suitable for you. See disclosure below for more details.

If PPFC is not only your only equity fund? Then we recommend investing in your other funds.

But what about the international equity exposure? No Earth-shattering difference will occur if you don’t invest in international equity for a few months. Maybe with all the rate hikes expected, it could be a blessing in disguise.

If RBI does not hike the limit for equity funds and only allows FOFs (fund of funds) investing in international ETFs what should be done? Such FOFs can be considered but please note, the most asset class you include your portfolio allegedly for “diversification” the tougher it will be to maintain it. Unless you let it grow like weeds fearing tax on rebalancing.

Even if the fund reopens, should we invest in PPFC? Its AUM has swelled up. This is an issue to think about. So far the fund has not seen a downtrend since launch and the law of averages may strike sooner than later. Again, we can cross that bridge when we get to it.

Disclosure: At the time of writing,  PPFC is the highest holding in my retirement equity portfolio at about 58% (among MFs). HDFC Hybrid Equity comes in next at about 26% and Quantum Long Term Equity at 16%.

The investment closure came at a good time for me as I was getting greedy and chasing momentum in PPFC, ignoring concentration risk. I had the option to invest more in HDFC Hybrid Equity, but since UTI Low Volatility Index Fund (link points to review) came along, I have invested in this.

I like low volatility investing and have reasonable expectations about it. Also, I view it more as a replacement for Quantum Long Term Equity (which I shall shed gradually) than for PPFC.

So my plan is to invest in HDFC Hybrid Equity and UTI Low Vol. Even if PPFC reopens, I cannot invest too much in there. I shall exit QLTE in stages at future rebalances.  Please note: My portfolio today is merely the residue of past investment mistakes. Please decide as per your own circumstances.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. 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 with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)