Your Fund Portfolio

AR Ramanarayanan

Yes, if you can afford to, you can stop SWPs in equity funds when stock markets are down and out as it will prevent you pulling out money at very low prices.

However, more than the number of units you are allotted, it is the value of your investment that you must track.

It is true that continuing SIPs across market conditions will help average out your cost of purchase over the long term. SWPs are considered sale or redemption.

In any sale transaction, the question arises as to whether one would like to average out or maximise the sale price. Logically, one would like to maximise the sale price, implying that consistent sale of units through SWPs itself is a sub-optimal choice.

Profits should be booked only when your gains are maximised. But when you need regular income, you compromise on the timing by using SWPs.

It comes down to why you are doing SWPs in the first place. If you have a corpus invested in a fund to fetch regular income in your post-retirement years, SWPs cannot be stopped since you are dependent on it for your routine expenses. However, if you can manage without this income for sometime, you can stop SWPs temporarily and resume later. A way in which you can navigate market ups and downs is by adding to the corpus in the fund (in which you are doing SWPs) to take advantage of the market low (if possible), even as you continue with your SWPs.

Guru Charan Kodali

Before suggesting any funds, we would like you to reassess if you really want to invest the entire ₹10 lakh in mutual funds. Assuming you sold your only car, you may want to invest in another car. While cabs have no doubt been the go-to option for the younger generation until recently due to the convenience factor, the Covid-19 outbreak has made it safer to use personal vehicles for commuting, at least in the near future. If you are used to owning a car, you may want its safety net to tide over the current scenario. You can always sell it a year or two later when things normalise.

Otherwise, if you are very sure about investing the money in financial instruments, make an assessment of your existing debt and equity investments. Yes, the market fall provides good long-term opportunities for equity investments. At the same time, it is also not wise to put all your eggs in one basket.

You seem to be relatively new to the markets, having begun investing only in 2016. This is the first deep correction that you are probably seeing and no one knows how long it will last. It will be better if you reassess your risk appetite before you commit huge sums.

If you don’t have enough investments in debt, allocate 50 per cent of your portfolio to debt instruments such as RBI savings bonds, the National Savings Certificate (NSC) and fixed deposits. A list of fixed-income investment options that are safe and attractive at this juncture was mentioned in BusinessLine Portfolio Big Story dated May 4, 2020.

The rest of the funds can be invested in equity mutual funds. You can invest in funds such as Axis Bluechip, Mirae Asset Large Cap, Invesco India Growth Opportunities, Kotak Standard Multicap and Aditya Birla Sun Life Equity. We recommend an investment horizon of 7-10 years at the least.

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