A similar situation befell Vijay, a 43-year-old IT professional from Haryana and a viewer of the Money show on ET Now. His mutual fund portfolio, originally created by his father in 2013 and transferred to him in 2023, is currently worth around Rs 31 lakh against a total investment of Rs 15.5 lakh.
The portfolio consists entirely of managed plans from a single fund house – SBI Mutual Fund and schemes including SBI Equity Hybrid Fund, SBI Contra Fund, SBI ESG Fund, SBI Consumption Opportunities Fund, SBI Focus Fund, and SBI MNC Fund. Vijay had earlier invested through SIPs, but stopped contributing in October 2025.
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Recently, he saw the value of his portfolio drop by around Rs 1.5 lakh in just 12 days. This led him to believe that investing in regular plans could lead to losses, prompting him to withdraw his investment and move to direct plans. He also plans to restructure his portfolio and use the long-term capital gains exemption of Rs 1.25 lakh till March 31.
Vijay also proposed a new portfolio allocation where 50% will be invested in flexicap funds such as Parag Parikh Flexicap Fund and HDFC Flexicap Fund, around 15% in midcap funds, including HDFC Medcap Fund and Edelweiss Medcap Fund, around 15% and around 15% in global gold.
In addition, he continues to invest Rs 90,000 per month through SIPs and aims to build up around Rs 1 crore within five years. He also wants to know if his diversification plan is suitable and which funds might be suitable for a long-term retirement plan.
Analysis of existing portfolio
According to mutual fund expert, Vishwajit Parashar, the number one issue in Vijay’s portfolio is concentration risk. All investments are currently with a single asset management company. While SBI Mutual Fund is the largest fund house in India, having all investments in one AMC may not be ideal. Diversification across different fund houses can help reduce risk and improve portfolio balance.
However, Parashar advises Vijay not to lose the entire portfolio at once. “He should diversify across AMCs for better diversification, and should not redeem all Rs 30 lakh in one piece and he should withdraw gradually because otherwise, he will incur a good amount of capital gains tax.”
Since Vijay invested around Rs 15 Lakhs and the current value is close to Rs 30 Lakhs, the capital gain is around Rs 15 Lakhs. Withdrawal of the entire amount at once may result in capital gains tax of approximately Rs 1.8 lakh. Instead, he suggests withdrawing the money gradually over fiscal years. This amazing strategy can help reduce the tax burden and prevent you from exiting the market at one point.
He also proposes to use the long-term capital gains exemption of Rs 1.25 lakh till March 31 by redeeming units under designated funds.
In the current portfolio, Parashar believes that two schemes—SBI Contra Fund and SBI Focus Fund—are strong performers and can be continued. The rest of the funds can be withdrawn gradually as Vijay restructures his portfolio and diversifies across fund houses.
“He can go slow and in one shot instead of timing the market, so it would be better if he raises a few million this fiscal and maybe a few million next fiscal, that will also shock the investment. Having said that, his two funds in the SBI category, SBI AMC, are good.”
“So, he should continue it like SBI Contra Fund and SBI Focused Fund. The rest of the funds he can think of withdrawing. And yes, he is definitely right. He should be enjoying a capital gain of 1.25 lakhs till March 31, so he can withdraw from other funds and make that profit.”
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Decline in Portfolio – Regular Plan or Market Volatility
Responding to Vijay’s concern over the recent decline in his portfolio, Parashar clarified that the loss is not related to the fact that the funds are regular plans. The decline is largely due to market volatility and geopolitical pressures currently affecting equity markets. The difference between direct and regular plans is primarily in the cost ratio, because direct plans have lower costs because they do not have distributor commissions.
However, investors should note that switching from regular to direct plans is treated as a redemption after making a new investment. Even if the switch is within the same fund house, it will still be treated as redemption for tax purposes. Therefore, investors should plan such transactions carefully while considering the tax implications.
Suggested Allocation
Looking at Vijay’s suggested allocation, Parashar believes the overall selection of funds is good but recommends avoiding duplicating across categories. Instead of investing in two flexi-cap funds, he suggests opting for the Parag Parikh Flexi-Cap Fund, which also provides some exposure to global equities. Similarly, among the mid-cap options, he suggests sticking with HDFC’s mid-cap fund instead of maintaining two mid-cap schemes.
Along with these funds, Vijay can continue with SBI Contra Fund and SBI Focus Fund. This combination will provide diversification across fund houses and investment styles. Since Vijay also plans to invest directly in gold and silver, he may not need additional multi-asset or multi-cap funds for diversification.
From a financial goal perspective, Vijay seems to be on track. With a SIP contribution of Rs 90,000 per month and an average return of around 12% per annum, his SIP investment can grow to nearly Rs 73 lakh in the next five years. His current portfolio worth around Rs 29.5 lakh, after the recent decline, could potentially grow to around Rs 52 lakh over the same period. Together, these will take the total to around Rs 1.25 crore, which is higher than his target of Rs 1 crore.
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Retirement plan
For long-term retirement planning, Parashar suggests that Vijay may eventually consider hybrid-based funds that offer better downside protection. Funds like ICICI Balanced Benefit Fund or ICICI Multi Asset Fund can help balance equity exposure and reduce volatility during market downturns.
He suggests that Vijay continue with his equity portfolio for now and gradually move a portion of craps into hybrid or debt-based funds around a year before retirement to save accumulated gains.
Overall, the key takeaway for investors is that short-term declines in mutual fund portfolios are usually associated with market movements rather than the type of plan chosen. While switching from regular to direct plans can reduce costs over time, not offset losses in the portfolio. Therefore, such decisions should be made carefully, taking into account financial, diversification, and long-term investment goals.
((rejection: The recommendations, suggestions, opinions and views given by the experts are their own. (It does not represent the views of The Economic Times.)
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