'The one mistake that destroys wealth': Axis MF CIO R Sivakumar answers 13 key questions for mutual fund investors

With markets continuing to test investors’ patience, the bigger question is not whether volatility will return, but how investors should respond when it does. The single biggest mistake that permanently damages long-term wealth creation is letting emotions override a well-thought-out investment plan. When fear leads to panic selling during dips or greed drives buying at market peaks, investors interrupt the power of compounding.

He also discusses how retirees should approach regular income, and the investing mistakes that can hurt long-term wealth creation.

From first-time investors to those planning for retirement, Sivakumar answers 13 questions that are likely to matter to investors navigating the market in 2026.

Excerpts from the interview

Despite the recent volatility, markets are currently only about 6-7% below their all-time highs and nearly 10% above the lows seen earlier this year. This serves as a reminder that market fluctuations, while uncomfortable, are an inherent part of long-term wealth creation.

Investors often focus on identifying the perfect entry point, but history shows that staying invested is usually more rewarding than trying to time the market. For most investors, continuing their SIPs remains the most effective strategy, as periods of volatility allow them to accumulate more units at lower prices.

Those with surplus capital and a long investment horizon may consider gradually increasing their equity exposure, provided it aligns with their overall asset allocation plan. Waiting for a "better opportunity" can be tempting, but such opportunities are often only obvious in hindsight.

Instead of reacting to short-term market movements, investors should remain focused on their financial goals, maintain a disciplined approach, and adhere to their asset allocation framework.

India's long-term growth fundamentals remain strong, supported by favourable demographics, rising formalisation of the economy, increasing financialisation of savings and a healthy domestic investment cycle.

However, over the next 12-18 months, markets will need to navigate a few important risks. Globally, geopolitical tensions, unwinding of the AI trade, energy price volatility, evolving trade dynamics and the trajectory of US interest rates could influence capital flows and investor sentiment.

Domestically, the key variables to monitor are earnings growth, the pace of private sector capex and valuations in certain pockets of the market where expectations remain elevated. That said, investors should remember that volatility is not the same as risk.

Markets have always faced uncertainties, yet long-term wealth creation has been driven by the ability of businesses to grow earnings over time. Rather than reacting to near-term headlines, investors should focus on diversification, asset allocation and maintaining a long-term investment horizon.

Long-term wealth creation typically emerges from structural changes rather than short-term market trends. Among the themes we find particularly compelling are energy, manufacturing, financial services, healthcare and digital transformation.

The energy ecosystem stands out because India's growth ambitions will require significant investments across power generation, transmission, renewables, grid modernisation and energy security.

We are equally constructive on financial services, where deeper financial penetration and the continued financialisation of household savings can support long-term growth.

Healthcare and manufacturing also benefit from strong structural tailwinds. Ultimately, the biggest wealth creators are likely to be businesses that can consistently generate returns on capital, gain market share and compound earnings over extended periods.

The rise of digital investing has brought millions of new investors into equity markets, but it has also increased the tendency to focus on short-term returns and market noise. Successful investing, however, is rarely about predicting the next market move. It is about staying disciplined and aligned to long-term financial goals.

A well-structured portfolio starts with the right asset allocation between equity, debt and other asset classes, based on an investor's risk profile and objectives. Within equity, investors should maintain a diversified style mix across growth, value, quality and momentum rather than chasing whichever style is outperforming at the moment. Similarly, core diversified funds should form the foundation of a portfolio, while thematic or sector bets, if any, should remain limited.

Long-term wealth creation comes not from frequent portfolio changes, but from maintaining a consistent investment framework, staying invested through market cycles, and allowing compounding to work over time. Returns are best viewed as the outcome of disciplined investing, not the sole objective driving every decision.

I would encourage investors to think beyond the number of funds they own and focus instead on whether their portfolio is truly diversified. A well-constructed portfolio does not need dozens of schemes. In most cases, investors can meet their financial goals with a carefully curated mix of funds across equity, debt and hybrid categories.

Within equities, diversification across active and passive strategies, market-cap segments and even geographies can improve portfolio resilience.

International funds can provide exposure to innovative global businesses and sectors that may not be adequately represented in India, while passive funds can serve as efficient core holdings for long-term investors.

The objective should be to build a portfolio that reflects an investor's goals, risk appetite and investment horizon. Simplicity often leads to better investor behaviour, making it easier to stay invested through market cycles and benefit from long-term compounding.

Investors should avoid exiting a mutual fund solely because of a period of short-term underperformance. Every investment strategy goes through cycles and performance should be evaluated over a reasonable time horizon and in the context of the fund’s investment philosophy, process and role within the portfolio. The more important question is whether the fund continues to serve the purpose for which it was originally selected.

An exit may be warranted when there is a change in the investor's financial goals, asset allocation needs or risk profile, or if there is a sustained deterioration in the fund's investment process and ability to execute its mandate.

Fixed deposits have traditionally been a preferred choice for retirees due to their stability and predictability. However, long-term data suggests that debt mutual funds have often delivered better post-tax and inflation-adjusted outcomes than traditional savings instruments and fixed deposits across market cycles. As a result, retirees may benefit from having a meaningful allocation to debt mutual funds as part of their income and capital-preservation strategy.

That said, the choice need not be between mutual funds and fixed deposits. A well-constructed retirement portfolio should combine the safety of fixed income instruments with the flexibility of mutual fund solutions. Debt and hybrid funds, along with systematic withdrawal plans (SWPs), can help generate regular cash flows while potentially improving tax efficiency and preserving purchasing power.

Given that retirement can last 20-30 years, inflation remains one of the biggest risks to financial security. The objective should be to strike the right balance between income generation, capital preservation and long-term growth, ensuring that savings continue to support financial independence throughout retirement rather than just meeting today's expenses.

One of the most common mistakes investors make is underestimating both the length and cost of retirement. Many people plan using today's expenses without adequately factoring in inflation, increasing healthcare costs and longer life expectancy. As a result, the retirement corpus they build often falls short of what they eventually need.

Another mistake is becoming overly conservative too early. While capital preservation is important, retiring portfolios need growth as well, especially when retirement can last two to three decades. Holding too little exposure to growth assets may create the risk of outliving one's savings.

Investors also tend to delay retirement planning, assuming they can compensate later with higher investments.

In my view, successful retirement planning is less about finding the perfect product and more about starting early, investing consistently, maintaining an appropriate asset allocation and allowing the power of compounding to work over time.

International investing should be viewed primarily as a diversification tool rather than a return-maximisation strategy.

Different regions and economies go through different cycles, and global exposure can reduce dependence on a single market. It also allows investors to participate in businesses, sectors and technologies that may not be adequately represented in India.

Investors should approach international funds with a long-term horizon and treat them as a complement to, not a substitute for, their core domestic equity allocation.

If I had to give one piece of advice to a first-time investor, it would be: focus less on markets and more on disciplined investing.

Successful investing is rarely about finding the perfect fund or predicting the next market move. It is about starting early, investing regularly and staying invested through market cycles. As the saying goes, “The best time to invest in the markets was yesterday and the next best time is today.”

A disciplined SIP in a well-chosen mutual fund can be one of the most powerful wealth-creation tools available to investors. The real advantage comes not from timing the market, but from allowing compounding to work uninterrupted over long periods.

Markets will always have phases of optimism and uncertainty, but investors who remain patient and consistent are more likely to achieve their financial goals than those who constantly chase the latest trend or investment idea.

If I had to highlight one mistake that can meaningfully impair long-term wealth creation, it would be allowing emotions to override a well-thought-out investment plan.

Investors often become most optimistic when markets are doing well and most fearful when markets correct. Unfortunately, this often leads to buying at elevated prices and selling during periods of uncertainty.

The real power of investing comes from compounding, and this requires both time and consistency. Interrupting that process by frequently entering and exiting markets can have a far greater impact on long-term outcomes than a temporary market correction.

In my experience, successful investing is less about making extraordinary decisions and more about avoiding costly behavioural mistakes. Staying disciplined, remaining invested through cycles, and focusing on long-term goals are often the biggest contributors to wealth creation over time.

A 20-30% correction may feel extraordinary when it happens, but historically it has been a regular feature of equity investing. In fact, the long-term returns that equities have delivered have always come with periods of sharp volatility along the way.

The more important question is not whether a correction will occur, but whether investors are mentally and financially prepared for it. Investors who have built portfolios aligned to their risk appetite, investment horizon and asset allocation are far more likely to navigate corrections successfully. Such phases should not automatically trigger portfolio changes.

A financially healthy portfolio is not defined by age alone, but by an investor's goals, responsibilities, time horizon and risk appetite. Having said that, portfolio composition should evolve as life stages change. A 30-year-old investor can typically afford a higher allocation to equities and growth-oriented assets, given the long runway available for compounding.

Investors in their 40s may continue to prioritise growth while gradually adding diversification across asset classes, investment styles and geographies.

By their 50s, the focus often shifts towards balancing growth with capital preservation and creating future income streams. For retirees, the objective is to generate sustainable income, preserve capital and maintain sufficient exposure to growth assets to help combat inflation. Regardless of age, a healthy portfolio should be diversified across equity, debt and other suitable asset classes, aligned to financial goals, and structured in a way that investors can stay invested through market cycles with confidence.