A similar situation was faced by 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 valued at around Rs 31 lakh against a total investment of Rs 15.5 lakh.
The portfolio consists entirely of regular plans from a single fund house – SBI Mutual Fund and includes schemes such as SBI Equity Hybrid Fund, SBI Contra Fund, SBI ESG Fund, SBI Consumption Opportunities Fund, SBI Focused Fund, and SBI MNC Fund. Vijay had also been investing through SIPs earlier, but stopped contributions in October 2025.
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Recently, he noticed that the value of his portfolio declined by around Rs 1.5 lakh in just 12 days. This led him to believe that being invested in regular plans could be the reason behind the loss, prompting him to consider redeeming the investments and moving to direct plans. He is also planning to restructure his portfolio and use the available long-term capital gains exemption of Rs 1.25 lakh before March 31.
Vijay also proposed a new portfolio allocation where 50% would be invested in flexi-cap funds such as Parag Parikh Flexi Cap Fund and HDFC Flexi Cap Fund, around 15% in midcap funds, including HDFC Midcap Fund and Edelweiss Midcap Fund, about 15% in global equities, and nearly 10% in gold.
In addition, he continues to invest Rs 90,000 per month through SIPs and aims to build a corpus of around Rs 1 crore within five years. He also wants to know whether his diversification plan is appropriate and which funds may be suitable for long-term retirement planning.
Existing portfolio analysis
According to Vishwajeet Parashar, a mutual fund expert, the first issue in Vijay’s portfolio is concentration risk. All the investments are currently with a single asset management company. While SBI Mutual Fund is the largest fund house in India, having all investments within one AMC may not be ideal. Diversifying across different fund houses can help reduce risk and improve portfolio balance.
However, Parashar advises Vijay not to redeem the entire portfolio at once. “He should diversify across AMCs for better diversification, and should not idly redeem the entire 30 lakhs in one chunk and he should withdraw slowly and gradually because otherwise, he would draw a good amount of capital gain tax,” Parashar said.
Since Vijay invested around Rs 15 lakh and the current value is close to Rs 30 lakh, the capital gains amount to roughly Rs 15 lakh. Redeeming the entire amount in one go could result in a capital gains tax of nearly Rs 1.8 lakh. Instead, he suggests withdrawing the money gradually across financial years. This staggered approach can help reduce the tax burden and avoid exiting the market at a single point.
He also recommends using the available long-term capital gains exemption of Rs 1.25 lakh before March 31 by redeeming units accordingly from selected funds.
Within the current portfolio, Parashar believes that two schemes—SBI Contra Fund and SBI Focused Fund—are strong performers and can be continued. The remaining funds may be gradually redeemed as Vijay restructures his portfolio and diversifies across fund houses.
“He can go slowly and instead of timing the market also in one shot, so it would be better if he can take out a few lakhs this financial year and maybe a few lakhs in the next financial year, so that would stagger the investment also. Having said this, two of his funds within the SBI category, SBI AMC, are good,” Parashar said
“So, he should continue with that like the 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 enjoy this capital gain benefit of 1.25 lakh before March 31st, so he can withdraw from other funds and take this advantage,” the expert further said.
Decline in portfolio – Regular plan or market volatility
Addressing Vijay’s concern about the recent decline in his portfolio, Parashar clarified that the loss is not linked to the fact that the funds are regular plans. The fall is largely due to market volatility and geopolitical tensions affecting equity markets currently. The difference between direct and regular plans lies primarily in the expense ratio, as direct plans have lower costs because they do not include distributor commissions.
However, investors should note that shifting from regular to direct plans is treated as a redemption followed by a fresh investment. Even if the switch is within the same fund house, it will still be considered a redemption for tax purposes. Therefore, investors should plan such transitions carefully while keeping tax implications in mind.
Proposed allocation
Looking at Vijay’s proposed allocation, Parashar believes the overall selection of funds is good but suggests avoiding duplication within categories. Instead of investing in two flexi-cap funds, he recommends choosing Parag Parikh Flexi Cap Fund, which also provides some exposure to global equities. Similarly, among the midcap options, he suggests continuing with HDFC Midcap Fund rather than holding two midcap schemes.
Along with these funds, Vijay can continue with the SBI Contra Fund and the SBI Focused Fund. This combination would provide diversification across fund houses and investment styles. Since Vijay is also planning 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 appears to be on track. With SIP contributions of Rs 90,000 per month and assuming an average return of around 12% annually, his SIP investments could grow to roughly Rs 73 lakh over the next five years. His current portfolio value of about Rs 29.5 lakh, after the recent decline, could potentially grow to around Rs 52 lakh over the same period. Together, this would take the total corpus to approximately Rs 1.25 crore, which is higher than his target of Rs 1 crore.
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Retirement planning
For long-term retirement planning, Parashar suggests that Vijay may eventually consider hybrid-oriented funds that offer better downside protection. Funds such as ICICI Balanced Advantage Fund or ICICI Multi Asset Fund can help balance equity exposure and reduce volatility during market downturns.
He recommends that Vijay continue with his equity-oriented portfolio for now and gradually move a portion of the corpus toward hybrid or debt-oriented funds about a year before retirement to safeguard the accumulated gains.
Overall, the key takeaway for investors is that short-term declines in mutual fund portfolios are usually linked to market movements rather than the type of plan chosen. While shifting from regular to direct plans can reduce costs over time, not offset the loss incurred in the portfolio. So, such decisions should be made carefully with attention to taxation, diversification, and long-term investment goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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