Can I stop investing in ELSS if ELSS is giving very poor returns?

—Name withheld on request

You can stop your SIP in ELSS fund which is not performing to your satisfaction. And you can also start a new SIP or invest lumpsum in any other ELSS fund, which includes other ELSS funds you have. The only thing that is subject to lock-in will be the units that you already have in both the ELSS funds (units created by your full SIP installments).

Each SIP installment will create ownership of a new number of units for you in the ELSS fund, and these units are subject to a lock-in of three years from each of these SIP dates. However, this does not prevent you from stopping the SIP or starting a new one.

I am 35 years old and have monthly SIP 40,000 in 10 funds. my current fund is 40 lakh more funds are Axis Flexi Cap, Axis Liquid, Canara Robeco Flexi Cap, Canara Robeco Liquid, DSP Flexi Cap, DSP Liquidity, Edelweiss Liquid, Kotak Liquid, Mirae Asset Large Cap, PGIM India Flexi Cap (Regular, Growth Schemes. Most Fund). Please review my investments.

—Name withheld on request

You are currently investing 50% of your SIP in liquid funds and another 50% in equity funds, most of which are flex-cap funds. Given this limited data and information about your age, we can make two observations about this portfolio. One is that this asset allocation would be suitable for you if you are a conservative investor or investing for a time frame of 5-7 years.

If someone of your age invests with a longer duration (above 7 years), he may risk a more aggressive asset allocation. You have chosen a category of funds, both debt and equity. Liquid funds are relatively a good choice from the debt point of view. However, choosing to go with flexi cap funds primarily on the equity side is an overall allocation to a category of funds. This category gives maximum flexibility to the fund manager in terms of allocating money to different market segments and are generally overweight on large-cap segments.

Alternatively, you may want to go with index funds for the large cap segment and mid or small cap funds for the more aggressive segment of the market. In addition to this, I also observe that most of your investments are in regular schemes of mutual funds. Unless you’re using the distributor’s services to provide consultation and support, you’d do better to go with direct money and save costs.

Srikant Meenakshi is the co-founder of PrimeInvestor.