Dhirendra Kumar sheds light on the performance of small-cap funds
I have nine mutual funds in my portfolio. To name a few, I have investments in Mirae Asset Emerging Bluechip Fund, Tata Digital India Fund, SBI Equity Hybrid Fund, HDFC Small-cap Fund, SBI Bluechip Fund. Of them, HDFC Small-cap Fund is not performing well for a while. What should I do - continue with it or redeem my investments?
I understand you have different types and flavours of funds in your portfolio. Apart from a few of these funds, some funds will be performing well, while others may not be. So, many funds won't actually be adding any value to your portfolio. Thus, I would like you to consider reducing the number of funds in your portfolio, as you don't require nine funds. Two-three multi-caps with one or two mid- and small-cap funds should be enough.
With regard to the performance of HDFC Small-cap Fund, this category of funds is like this only. For a long time, they do not perform but suddenly in a short period of time, they deliver spectacular returns. Investors can only benefit from a small-cap fund when they continue with their investments in bad times. However, investors tend to behave in the opposite manner - investors tend to invest when the fund is gaining traction and creating wealth and stop their investments when the performance is going down.
HDFC Small-cap Fund is a good fund. In the current scenario, most of the small-cap funds aren't performing well but when they start performing, they'll help you build substantial wealth. I don't know when that time will come but in a time frame of seven to eight years, small-cap funds are able to give healthy returns. Thus, you should stick to the fund even during these tough times.