Hi Ramalingam,
I am 26 and currently starting SIP 9 months ago .
Nippon small cap -2k
Quant small cap -3.3k
Bandhan small cap - 2k
Motilal Midcap - 2.5k
Sbi long term equity - 2k
Sbi psu - 50k lumpsum
Could you please suggest portfolio allocation and if I want to increase my from 13300 to 40000
Ans: You are 26 years old and already doing SIPs. That shows your discipline and future readiness. Starting early builds wealth better over time. Investing Rs. 13,300 monthly and planning to raise it to Rs. 40,000 is smart. Let’s now look at your existing portfolio, assess the risks, and suggest a proper diversified structure.
We will offer a 360-degree solution that balances growth, stability, and future flexibility.
Your Current Portfolio Overview
Your current SIPs are in:
Nippon Small Cap Fund – Rs. 2,000
Quant Small Cap Fund – Rs. 3,300
Bandhan Small Cap Fund – Rs. 2,000
Motilal Midcap Fund – Rs. 2,500
SBI Long Term Equity (ELSS) – Rs. 2,000
Total SIP = Rs. 11,800
Lumpsum in SBI PSU = Rs. 50,000
This is a strong start. You are willing to take risk for long-term growth. But, there are a few important things to fix and improve.
Initial Observations – Risks and Gaps
Overexposure to Small Cap
You have three funds in small cap. That’s about 60% of SIP.
Small caps are volatile. They give good return, but only after 7–10 years.
Too much small cap can cause sharp losses in market correction.
Low Diversification
No allocation to large cap or flexi cap.
These are needed for balance and downside control.
You have only one midcap and one ELSS.
Single Midcap Fund
Midcap helps reduce sharp risk of small caps.
But having only one midcap limits your structure.
PSU Fund Lumpsum
Sectoral funds like PSU are risky.
They depend on government policy and economy cycles.
Don’t add more to this. Hold it, but don’t increase.
Correcting the Allocation
Let’s now divide the total Rs. 40,000 monthly SIP properly.
This will create better balance between growth and stability.
Suggested Allocation:
Large Cap Fund – Rs. 7,000
Flexi Cap Fund – Rs. 8,000
Mid Cap Fund – Rs. 6,000
Small Cap Fund – Rs. 7,000
ELSS Fund (Tax Saving) – Rs. 4,000
Multi-Asset or Hybrid Fund – Rs. 6,000
Total = Rs. 38,000 approx. Keep Rs. 2,000 spare for future increase.
This mix provides:
Stability with large caps
Growth from mid and small cap
Flexibility with flexi cap
Safety cushion with hybrid or multi-asset
Don’t select funds yourself.
Avoid direct funds even if expense ratio is low.
They don’t offer review, rebalancing, or correction.
Invest in regular plans through a Mutual Fund Distributor who is a Certified Financial Planner.
He will help you choose better performing funds and track progress regularly.
Why Reduce Small Cap Exposure
You have high small cap exposure now.
These funds show big returns sometimes. But also fall fast in bad cycles.
You must have small cap exposure. But limit it to 20%–25% of total SIP.
This keeps your portfolio healthy in all market cycles.
More small cap may look attractive now. But it causes worry in bear markets.
Add Large Cap and Flexi Cap
You are missing large cap completely.
These funds are stable, and invest in top 100 companies.
Flexi cap adds flexibility to shift between segments.
Fund managers move across small, mid, and large based on market trend.
This gives better return with less risk.
Both are must for young investors like you.
Add Hybrid or Multi-Asset Fund
You are 100% equity today.
That’s fine for your age, but not always best.
Diversification is needed.
Hybrid funds combine equity, debt, and gold in one scheme.
This helps control the risk. Especially during market fall.
Keep 15% in hybrid or multi-asset for safety.
Add ELSS for Tax Saving Purpose Only
SBI Long Term Equity is an ELSS fund.
These funds have 3-year lock-in.
Use them only if you need 80C tax saving.
If your Section 80C is already filled with PF, PPF, or insurance premium, then skip ELSS.
Otherwise, keep ELSS under Rs. 4,000 monthly.
Don’t use ELSS only for investment. Use it for dual purpose – tax saving and long-term wealth.
Keep Sectoral Fund Exposure Low
You have Rs. 50,000 in SBI PSU fund.
That’s a sectoral theme.
Sectoral funds are not for long-term SIP.
They work only in a specific market cycle.
Do not do SIP in any sector fund.
Do not add more lumpsum.
Hold this fund and track its performance every 6 months.
If it shows good profit after 3–4 years, you may redeem it.
Invest proceeds in diversified equity mutual fund instead.
Increase SIP Gradually
If Rs. 40,000 is not possible from next month, build gradually.
Use this step-up approach:
Next 3 months – Increase SIP to Rs. 20,000
After 6 months – Raise to Rs. 30,000
After 1 year – Reach Rs. 40,000
This prevents stress on your budget.
Also keeps your cash flow balanced.
But set this plan and stick to it.
Direct vs Regular – Choose Wisely
Never invest in direct funds without expert support.
Disadvantages of direct funds:
No guidance
No regular review
You choose based on returns, not suitability
Wrong fund choice can cause long-term damage
Regular funds cost a bit more, but that is for service and monitoring.
Work with an MFD who is also a Certified Financial Planner.
They know how to build goal-based portfolio.
They will also help in:
Goal mapping
Fund switching
Tax planning
Rebalancing in market ups and downs
This professional help is worth the small cost.
Don’t Go for Index Funds
You may think index funds are cheaper and simple.
But index funds come with key limitations.
Problems with index funds:
Blindly follow index stocks
No active decision in poor market
No risk control or rebalancing
You lose flexibility
Actively managed funds have better risk control.
Fund managers exit poor sectors or companies early.
This helps protect capital in falling markets.
So don’t choose index funds for long-term goals.
Tax Impact of Mutual Funds
Understand the tax on your investments.
Equity mutual funds:
LTCG above Rs. 1.25 lakh taxed at 12.5%
STCG taxed at 20%
Debt funds and hybrid funds:
Both short and long term gains taxed as per income slab
Plan redemptions carefully.
Redeem in parts if needed to stay within tax-free limits.
Your Certified Financial Planner can guide better here.
Use SIPs for Future Goals
Plan your SIPs around your future goals.
Break your Rs. 40,000 SIP like this:
Retirement goal – Rs. 12,000
Home down payment after 10 years – Rs. 10,000
Wealth creation (flexible goal) – Rs. 8,000
Emergency fund through hybrid fund – Rs. 6,000
ELSS for tax saving – Rs. 4,000
This gives direction to your portfolio.
Also helps avoid early redemptions.
Goal mapping is important for discipline.
Monitor Portfolio Regularly
Review your funds every 6 months.
Track SIP performance and adjust if needed.
Switch non-performing funds.
Rebalance allocation if small caps rise too much.
Don’t wait 5 years to check returns.
Consistent monitoring ensures long-term success.
Avoid These Common Mistakes
Don’t do SIP in 5 small cap funds
Don’t pick funds based on past returns only
Don’t invest in direct plans
Don’t withdraw SIP money unless goal is reached
Don’t mix tax saving and general investing unless necessary
Stick to a disciplined approach.
Don’t stop SIPs in bad market.
That’s when wealth is created.
Finally
You are on the right path. You have started early.
You are now ready to increase SIP from Rs. 13,300 to Rs. 40,000.
But structure is more important than size.
Build a diversified portfolio across categories.
Avoid overexposure to small cap or sector funds.
Work with a Certified Financial Planner.
Don’t invest in direct funds or index funds.
Review your SIPs and rebalance regularly.
This approach will build strong, lasting wealth.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
