'16 mutual funds, no strategy': Why your investments may be underperforming despite regular SIPs – expert explains
Many investors assume that consistent investing over the years will automatically translate into strong portfolio growth. But that’s not always the case, says Ashwani Ghai, former Chief Operating Officer of LIC Housing Finance Ltd, as he shared insights from a recent portfolio review that highlighted some common yet costly mistakes.
Ghai recounted the case of a mid-level professional in his early forties who had been diligently investing in mutual funds for over a decade. “Despite his regular contributions, his returns lagged behind benchmarks and peers. A detailed portfolio analysis revealed why,” said Ghai.
No clear goals, no direction
One of the biggest issues, according to Ghai, was the lack of well-defined financial goals. “His investments were reactive rather than purpose-driven. Without clearly laid out objectives like retirement, home purchase or education planning, there was no roadmap guiding his choices,” Ghai noted. “Investing without purpose is like sailing without a destination.”
The absence of a timeline or budgeting strategy further weakened his ability to align investments with life milestones. Ghai stressed, “A goal-driven approach not only provides clarity but also keeps investors disciplined during volatile market phases.”
Fund overload with no diversification
The investor had put money into 16 mutual fund schemes, hoping to diversify. But as Ghai points out, quantity isn’t quality. “There was a heavy bias towards large-cap funds, which meant real diversification was missing. Moreover, there was no structured method to select these funds—no thought given to risk profile, time horizon or asset class mix,” he said.
“Diversification isn’t about owning more funds. It’s about owning the right mix of assets.”
He also emphasized that asset class diversification—such as including debt, gold, or REITs—was completely absent. “This left the portfolio vulnerable to equity market fluctuations with no downside cushion,” he added.
No emergency fund, frequent liquidations
Perhaps the most damaging mistake was the absence of an emergency fund. “Every time a financial need arose, he was forced to redeem his investments early. As a result, his average mutual fund holding period was just 1.5 years. That’s far too short to reap the benefits of compounding or long-term equity growth,” Ghai explained.
This highlights why building an emergency buffer is vital before committing to long-term investments. “It protects your portfolio from being derailed at the first sign of trouble.”
Financial literacy key to better outcomes
Reflecting on the case, Ghai said it reaffirmed his long-held view: “This case reinforces my belief that we need to deepen financial literacy. Strategic planning, disciplined execution, and goal-based investing are non-negotiable for long-term success.”
For investors who feel their portfolios aren’t delivering despite regular SIPs, this real-life example is a wake-up call to revisit their approach—and seek guidance when needed.