Looking Ahead 2026: Why Your Investment Portfolio Needs A Clean-Up Before The New Year

By Sanjiv Bajaj

Every December, we open our cupboards and pull out clothes we once loved, once needed, and once used but haven’t touched in years. Some remind us of earlier seasons, some of impulse buys, and some of pure habit. Our portfolios look exactly the same. They’re full of funds that were relevant once or purchased with good intentions but no longer serve a purpose. And just like a cluttered cupboard makes it harder to find what you actually wear, a cluttered portfolio makes it harder for your money to grow.

Decluttering your investments isn’t just financial; it’s emotional. It’s acknowledging that your goals and priorities have evolved and your portfolio must evolve too. With 2026 approaching, this is your moment to let go of the old and make space for what truly matters.

The Same-Same Funds - Duplication Without Diversification

Investors often hold multiple funds in the same category like three large-cap, two flexi-cap, or even two Nifty 50 index funds. This isn’t diversification; it’s duplication.
Why it hurts:

• Returns get diluted.
• Tracking becomes tedious.
• You take the same risk repeatedly.

If two funds have 60-70 per cent overlap, keep only the stronger performer.

The “Bought It Years Ago” Legacy Funds

Old funds are like old clothes - meaningful once, irrelevant now.

Why they become dead weight:

• Fund managers change.
• Strategies drift.
• Performance weakens.
• Your goals shift.

If a fund has been consistently underperforming for 3+ years, exit gracefully.

The Festival-Season or FOMO Buys

Every rally creates a season of emotional buying like pharma in 2020, PSU in 2023, EV in 2024. Most of these funds were bought because the theme was “hot,” not because they fit your plan.

Why they’re clutter today:

• They add volatility.
• They rarely support long-term goals.
• The excitement fades, the fund stays.

If the theme still has a long runway, hold. If not, don’t hesitate to exit.

The High-Cost, Low-Return Culprits

Expense ratios matter more than we realise. Two similar funds with different costs can produce drastically different long-term outcomes.

Why high-cost funds disappoint:

• Many don’t outperform cheaper options.
• Regular plans eat into returns quietly.
• Fees chip away at compounding.

If a fund can’t justify its cost through performance, it’s an easy cut.

The “Too Many Small SIPs” Syndrome

Having Rs 500 SIPs in 7-8 funds is like signing up for multiple gyms and hoping one makes you fit.

Why this weakens your portfolio:

• No SIP becomes meaningful.
• Rebalancing becomes impossible.
• Tracking becomes stressful.

Shift to fewer, stronger funds with meaningful SIP amounts. 

The Overly Aggressive Funds You Don’t Need

Small-cap, thematic, and sectoral funds are powerful but only in moderation. When they exceed 10-15 per cent of your portfolio without intention, they cause more stress than returns.

Why they become problematic:

• Deep drawdowns
• High volatility
• Emotional fatigue
• Higher chances of selling at the worst time

If a fund keeps you anxious, it doesn’t belong in your portfolio.

The Last-Minute Tax-Saving ELSS Funds

February-March is the panic-investing season. People buy ELSS funds just to save tax, resulting in a messy pile of small, disconnected holdings.

Why they create clutter:

• Multiple ELSS schemes accumulate over the years.
• Many underperform after the lock-in.
• They don’t serve any long-term goal.

Once the 3-year lock-in ends, evaluate ELSS funds like any other and exit the laggards.

How to Declutter Smartly

Make a single portfolio sheet: Include fund names, categories, SIP amounts, and returns.

Remove duplicates: One strong fund per category is enough.

Exit laggards slowly: Use systematic withdrawal if needed.

Rebuild with 3–5 core funds: Large-cap, flexi-cap, index funds, and optionally one mid-cap.

Link each fund to a real goal: A fund with purpose stays disciplined.

A clean portfolio is not just easier to track, it performs better. Decluttering isn’t about fixing mistakes; it’s about creating clarity. Before 2026 begins, give yourself a portfolio that reflects who you are today and who you want to become tomorrow.

(The author is Jt Chairman and MD at BajajCapital Ltd)

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