Your MF investments – Time to take stock

I am quite sure this post will have many people unhappy, but it is important to understand the impact that many investor portfolios have now had, due to the continuous sell off in the markets. Given that there seems to be no real slow down in the carnage and even the 7000 levels of Nifty not looking safe, it is high time that investors take stock of their MF portfolios that they have built assiduously through the SIP mode over the years.

To start with you can do this exercise for your portfolio:-

  1. Look at the current XIRR as of today and if possible plot the XIRR over the last few months. You would probably see that, even for the best of funds, the XIRR would have come down from 15-18 % to a figure of 7-8%.
  2. If your fund selection was not good to begin with the situation will be much worse.
  3. In case of the investments of 2014 April to about 2015 August, the investments made through SIP or otherwise are likely to be in the deep red.
  4. Understand one thing clearly – it does not matter what time or price you bought your units, what matters now is only the value of your portfolio.
  5. Recalculate your SIP amount for the goals with current portfolio value as the base and 10 % XIRR. You may be surprised to see how much more SIP you need to do in order to reach your earlier goals.

The whole idea of investors doing well when the markets tank in a disastrous manner is unfortunately only true for new investors. For all long term investors a brutal cut in the markets will only result in serious destruction of wealth. This is more worrisome for people who have their financial goals coming up in the next 2-3 years. However, even for those who have a long term horizon of 15 years or so, the current destruction of their portfolio definitely has a serious impact on the amount of corpus they will end up with.

Based on the above, what should be the strategy for the current year as well as going forward? For starters we need to recognize the problem for what it is, not be lured by 15-18 % tax free returns on equity – life unfortunately, is not so simple. Next we must have a debt portfolio as a hedge so that we do not indulge in distress selling. Thirdly, it may be prudent to clean up your portfolio of unwanted funds, while you can.

Let me get into the details of such strategies in the next post.


2 thoughts on “Your MF investments – Time to take stock

  1. Sir,
    You have brought up some very pertinent points here. I am looking forward to your next post. I do agree with the cushioning effect of the debt considering my own portfolio which is down only -3% mainly due to the presence of debt MF.

    One point which I would like to request you to share your perspectives on is to whether top-up existing portfolio with lumpsum investments in this down market to get a better average over long term.


  2. Sir, Excellent & timely advice !!Having started my SIP in Aug.2015, does matter good now. Thank you & best regards,Bharath.Mandon. PS. I am reading a book by Robert Kiyosaki  ” Second Chance “.I recommend you read it. Very informative in the present environment.


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