What strategy should investors follow for underperforming mutual funds? Experts explain

The recent 10% fall in the Nifty has dragged down equity mutual fund values, unsettling investors and prompting questions about whether to invest a lumpsum, increase SIPs, or rebalance portfolios by exiting loss-making schemes. Here’s what experts say, as reported by ETBureau.

Wealth managers say lumpsum investing at this stage needs to be viewed in the context of valuations and one’s risk appetite. Fund managers point out that sub-20 levels have historically been seen as “fair” for long-term entry, with further declines making it more conducive to invest. Investors with a time horizon of over five years and the ability to ride out near-term volatility can consider putting some money to work now. That said, a staggered approach may feel more comfortable.

Investors can deploy about 30% now and spread the rest over the next few months. Another option is to park funds in a liquid scheme and start a daily or weekly Systematic Transfer Plan (STP) over about six months. This way, the money continues to earn 6–7% while gradually moving into equities.

Investors with a time horizon of over seven years can continue with diversified equity funds and look past short-term volatility. However, if a significant portion of the portfolio is in thematic or sectoral funds—especially beyond the intended allocation—it may be worth reviewing.

If exposure is high and bey one’s risk tolerance, investors could consider trimming these positions and reallocating to diversified equity funds, where fund managers have the flexibility to invest across a broader set of opportunities.

Financial planners say this may be a good time for investors to step back and review their portfolios in line with their risk appetite and long-term goals. Those heavily tilted towards one asset class could consider diversifying across equity, debt, and other assets. Investors who are already well diversified and aligned with their goals can largely ignore the noise.