I am a senior citizen and retired as a university professor. I have invested about Rs 1.20 lakh per month in the last five years through SIPs in various MFs. Presently CAGR is 13.5 per cent. Please suggest whether I should go for reappropriation of my investment in MFs or switch to any other investment option.
Reply by Mayank Bhatnagar, Chief Operating Officer, FinEdge
First off, congratulations on maintaining SIP continuity for the past five years, despite the ups and downs in the market! Indeed, the past five years have tested even seasoned investors with its volatility. You have been richly rewarded with a fantastic CAGR of 13.5 per cent, which means that your current fund value is in the range of Rs 1 crore or so.
Your question on whether or not you should rebalance your portfolio (which is, presumably, equity heavy) is extremely valid. After all, you are in your retirement years now and safeguarding your corpus should be one of your priorities.
The decision to rebalance should not be based on market levels, as it really is impossible to predict whether we are at the top or bottom of a particular cycle, or if there is further steam left. Rather, your decision should be based upon your individual goals with this fund. Do you intend to start drawing upon this corpus to generate a regular income for yourself? Or do you have other sources of income, and can afford to not draw upon this corpus for the next five–seven years?
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If the answer is the former, you should ideally begin a structured re-balancing of your portfolio towards lower risk funds such as arbitrage funds and liquid funds. You do not need to go all out and switch everything in one shot. Rather, earmark whatever you will need in the next three–five years and keep the remaining funds invested into equities.
If you do not need to access this capital immediately, remaining invested without trying to time the market is the best option. Your success with your SIP’s already reflects that you have great control over your investing behaviours, and there is no reason why you won’t continue to benefit from equities in the coming years. An alternative option is to temporarily de-risk your portfolio in part by switching from equity to debt, and then immediately moving back to equity funds through 9–12-month STP’s. This may help you in case the present rally goes into a retracement or consolidation mode for a while, which remains a possibility as mean reversion is inevitable in any up or down cycle.
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