Hi, Please review my portfolio and suggest if any change is required to attain ~14.87% CAGR in 6-7 years: Parag Parikh Flexi Cap Fund : 25.00% ICICI Prudential Equity & Debt Fund : 20.00% SBI Contra Fund : 20.00% Motilal Oswal Large and Midcap Fund : 12.50% Edelweiss Mid Cap Fund : 7.50% Bandhan Small Cap Fund : 7.50% quant Small Cap Fund : 7.50% A few questions - should I switch from Motilal Oswal Large and Midcap Fund to Motilal Oswal Midcap Fund for better alpha, but one should consider higher overlap between Edelweiss Mid Cap Fund and Motilal Oswal Midcap Fund. Is Kotak Emerging Equity Fund is a better choice and can replace Motilal Oswal Large and Midcap Fund in my portfolio without disrupting the balance and diversity and without increasing the overlap? Thanks in advance!

Ans: You have built a well-diversified equity allocation across categories. Let us now review your portfolio thoroughly and assess the possible changes to align better with your target of 14.87% CAGR over 6–7 years.

I will analyse your portfolio step by step using a 360-degree approach.

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Current Fund Allocation Assessment

You have selected seven funds from different categories.

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You have 25% in a Flexi Cap Fund. This is a core fund. It offers flexibility.

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You have 20% in a Hybrid Equity & Debt Fund. This adds stability. But can reduce long-term returns.

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SBI Contra Fund forms 20%. This is a value/contrarian style fund. This needs patience.

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Motilal Oswal Large and Midcap Fund is 12.5%. This is a category mix fund.

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You have three mid and small cap funds. Each has 7.5% weightage.

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The three are: Edelweiss Mid Cap, Bandhan Small Cap and Quant Small Cap.

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Your allocation tilts heavily toward equity. Very minimal stability component is present.

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You are aiming for high returns. That needs high-risk tolerance. Keep that in mind.

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There is low duplication. Fund category diversification looks decent.

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However, some category weights and style biases can be optimised.

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Let us now look at each aspect in more detail.

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Flexi Cap Fund – 25% Weightage

This is a good anchor fund. It offers diversified exposure.

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Fund managers can move between large, mid and small cap.

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25% is a strong core allocation. No change is required here.

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This helps manage market cycles. Continue investing here.

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Flexi cap works well as a foundation for your portfolio.

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Hybrid Fund (Equity + Debt) – 20% Weightage

This adds downside protection. But limits your upside.

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You are targeting 14.87% CAGR. This fund can lower overall return.

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Such funds are better for conservative or nearing-retirement investors.

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You may reduce the allocation to 10%. Use freed-up amount in equity funds.

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Or, if your risk appetite allows, remove this from growth portfolio.

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For safety, use PPF or high-quality debt funds separately.

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Contra Fund – 20% Allocation

Contra or value funds take contrarian calls. They do well in some cycles.

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But they may underperform during momentum phases.

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20% is a heavy allocation. You can reduce to 10-12% to reduce volatility.

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Shift balance to a consistent multi-cap or flexi-cap fund.

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This reduces concentration risk from single style.

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Large and Mid Cap Fund – 12.5% Allocation

This is a hybrid of large and mid cap stocks.

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You asked whether to switch to a midcap fund.

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You must check for overlap with your existing midcap fund.

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Motilal Oswal Midcap has some common stocks with Edelweiss Midcap.

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Too much overlap reduces real diversification.

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Kotak Emerging Equity is a better midcap choice for low overlap.

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It also has a strong performance history and wide sector spread.

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So, yes, consider replacing Motilal Oswal Large & Midcap with Kotak Emerging Equity.

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But confirm overlap using a fund overlap tool before making switch.

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Mid and Small Cap Allocation – 22.5% Across 3 Funds

This is a good mix for higher returns.

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Each fund has 7.5%. Total weight is around 22.5%.

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That is reasonable for a 6–7 year goal with high return target.

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Quant Small Cap is aggressive. But needs close monitoring.

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Keep exposure limited unless you can track the portfolio regularly.

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Bandhan and Edelweiss are relatively more stable in mid and small cap.

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Ensure funds are not holding similar stocks or sector weight.

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Use a portfolio overlap checker online to confirm this.

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Fund Style Analysis

Your overall portfolio has strong growth bias.

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It includes value via Contra Fund. But that allocation is high.

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Try balancing growth and value styles more equally.

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Sector spread should cover banking, pharma, tech, infra, consumer and auto.

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Check sector overlaps and make adjustments if needed.

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Suggested Portfolio Reallocation

Keep Flexi Cap Fund at 25%.

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Reduce Hybrid Equity + Debt Fund to 10%.

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Reduce Contra Fund to 10%.

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Remove Motilal Oswal Large & Midcap Fund.

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Replace it with Kotak Emerging Equity Fund or another diversified midcap fund.

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Retain Edelweiss Mid Cap at 7.5%.

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Retain Bandhan Small Cap at 7.5%.

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Keep Quant Small Cap at 7.5% only if you can track it often.

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Expected Return and Risk Alignment

Aiming for ~14.87% CAGR is possible. But not guaranteed.

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This target needs 65–75% in midcap and smallcap focused funds.

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That means high volatility. You must have long holding power.

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Stay invested through cycles. Don’t react to short-term losses.

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Use SIPs to invest regularly. Don’t time the market.

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Taxation and Rebalancing Considerations

Long Term Capital Gains (LTCG) above Rs 1.25 lakh taxed at 12.5%.

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Short-Term Capital Gains taxed at 20%.

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Debt mutual funds are taxed as per income slab.

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You must rebalance your portfolio once every year.

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Shift from over-performing categories to under-performing ones.

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Rebalancing helps you book profits and manage risk.

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Additional Portfolio Enhancements

Avoid investing in direct plans if you are not experienced.

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Regular plans via MFD with CFP credential offer guided support.

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Regular funds have higher cost. But better handholding and discipline.

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Also avoid index funds or ETFs. They have many drawbacks.

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Index funds blindly follow index. No active fund manager role.

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They fall during market crashes with no downside control.

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Active funds manage risk better and outperform in long term.

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Emergency Fund and Insurance Check

Before investing more, build 6 months of expenses as emergency fund.

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Ensure you have term insurance. Minimum 15–20 times of annual income.

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Ensure health insurance for all family members is in place.

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Without these, portfolio growth can be disrupted anytime.

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SIP Strategy Suggestion

Divide monthly SIPs into 5–6 well-chosen funds.

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Follow your new asset allocation plan.

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Review every 6 months. Adjust based on performance.

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Don’t stop SIPs during corrections. That’s when wealth builds.

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Finally

Your fund selection shows strong research and goal orientation.

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A few optimisations will reduce risk and improve return probability.

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Reduce Hybrid and Contra weight. Exit Large & Midcap.

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Replace with better midcap fund. Maintain SIP discipline.

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Track fund style and sector overlap once a year.

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Have emergency and insurance cover as backup.

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Stick with regular plans via a Certified Financial Planner.

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Avoid index funds, ETFs or direct funds without guidance.

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Keep your target in mind. But remain flexible with returns.

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Stay invested and allow time to do its magic.

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Best Regards,
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K. Ramalingam, MBA, CFP,
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Chief Financial Planner,
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www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment