Dhirendra Kumar reviews an investor's portfolio
I have invested in Axis Long Term Equity and IDFC Tax Advantage Fund for tax-saving purposes. Also, I bought the first tranche of CPSE ETF and Bharat 22 ETF with a long-term perspective. Nevertheless, I have now realised that some multi-cap are performing better. When I started investing, IDFC Tax Advantage was four-star rated but now, it is a three-star fund and underperforming. Should I stick to these funds?
Besides, I am looking for a portfolio clean-up and for this, have chosen Axis Focused 25, Parag Parikh Long Term Equity Fund and ICICI Balanced Advantage Fund. Is this fine?
Tax-saving funds of both Axis and IDFC are good. IDFC fund may not be performing better than peers but it has a qualitative and diversified portfolio. Thus, you should hold onto it now but if it slips from here, maybe that can be a point of concern. Both these funds are well-diversified and will benefit whenever there will be a market turnaround.
Regarding CPSE ETF and Bharat 22 ETF, both invest in PSUs which always are attractive but as of today, they have been in a difficult situation. So, this is not a good time to sell these. From a corporate governance standpoint, the disadvantage of PSUs is the fact that they are government-owned entities. This is their biggest risk factor, as the govt. focuses on various dimensions rather than just making profits. Further, PSUs only work towards certain business areas and so, they have a narrow focus.
When such companies start operating in a competitive framework, their competitive advantage reduces. And in a monopoly, all companies perform well. Collectively, all these factors act as a big drawback.
So, I feel right now this is a very low-point and whenever the market turns around, there should be some changes in this area of your portfolio.
To summarise, hold your tax-saving funds and whenever the opportunity seems right, sell both ETFs. I would like to add that your decision to add a balanced fund to your portfolio is a good one. This is because it is toughest for investors to stay invested in these uncertain times and allocation in such funds provides some relief. However, in April, when people would have felt most anxious, we instead saw an upward market trend but we don't know how long this will sustain.
One thing is certain that market movements will be extremely volatile here and it will be tough to stick to the market during such times. Thus, investing in balanced funds during these times is a good idea.