Hello Sir, I am 28 years old, currently doing SIP in Nifty 50, Nifty next 50, Midcap 150, Small cap 250 & Microcap 250 index funds for 5K each since past 6 months with around 20k invested in gold & silver through ETFs. No financial goal yet but I want to keep myself financially ready for any adverse situations that may arise. Please suggest portfolio adjustments, if any. Should i add debt exposure to my portfolio through a dedicated Debt MF or through Multi/Dynamic asset allocation fund? I have a long investment horizon and a moderate risk appetite.
Ans: You have started at 28. That’s a very good step. Starting early creates a big difference. You already have SIPs in place. This shows responsibility. Keep this habit going strong.
You are also thinking ahead. Preparing for future uncertainty is wise. It shows maturity. Let’s now assess your portfolio. Let’s explore if changes are needed.
Current Portfolio Assessment
You are investing Rs.25,000 per month. That’s a healthy amount. Here’s what we see:
100% in index-based equity funds.
Rs.20,000 in gold and silver ETFs.
No debt fund allocation yet.
No clear financial goal.
While the intention is good, the design needs improvement. Let’s explore why.
Risks in Full Index Exposure
You are investing in only index funds. This has some problems:
Index funds only mirror the market. They don’t try to beat it.
When the market falls, index funds fall fully.
There is no active management to reduce the damage.
No downside protection during volatile phases.
All your equity money is unmanaged.
Overlap between Nifty 50 and Nifty Next 50 exists.
Even midcap, smallcap and microcap indices have overlap.
These sectors can fall very fast during correction.
You are exposed to market risk without any active protection.
Why Actively Managed Funds Work Better
Fund managers do research and adjust holdings.
They remove weak companies and add strong ones.
They focus on quality businesses.
They have flexibility to hold cash if needed.
They aim to beat the market, not just copy it.
Active funds protect you during market crash better than index funds.
With a moderate risk appetite, you need this protection.
Gold and Silver ETFs – A Note of Caution
It is good that you diversified a bit. But exposure to gold and silver ETFs has limits:
Precious metals don’t give regular income.
They are volatile and depend on global events.
They don’t produce profits like businesses.
Long holding of gold ETFs adds no cash flow.
They are good for small exposure only. Don’t increase beyond 10% of total investment.
The Problem with Direct Plans
If your current SIPs are in direct plans, please note these issues:
No Certified Financial Planner support.
No handholding when the market falls.
No personalised portfolio review.
No behavioural guidance during fear or greed.
No asset allocation advice.
Investors often choose funds emotionally in direct mode.
Direct plans may seem low cost. But the value of advice is missing.
Switch to regular funds through a Certified Financial Planner. You get:
Personalised fund selection.
Asset allocation as per your risk profile.
Ongoing review and rebalancing.
Emotional support during market noise.
Small extra cost brings big value.
You Need Debt Exposure
All-weather portfolios always have some debt. Debt brings:
Stability in falling equity markets.
Liquidity for emergencies.
A steady growth even during volatility.
Peace of mind when markets swing wildly.
Even with long horizon, debt plays a role. It balances emotions and returns.
Debt via Pure Debt Fund vs Dynamic Fund
You asked if you should invest in debt via a pure debt fund or via a dynamic asset allocation fund. Let’s examine both.
Pure Debt Funds:
Invest only in fixed income instruments.
Safer than equity in short term.
Good for emergency fund building.
Good for short-term parking.
But:
Returns are low in long term.
They don’t grow much beyond inflation.
Fully taxed as per income slab.
Still, useful for short-term needs and safety.
Dynamic or Multi Asset Funds:
They shift between equity, debt, and gold.
Provide automatic rebalancing.
Lower volatility than full equity funds.
Ideal for moderate risk profiles.
Better long-term growth than pure debt.
These funds offer flexibility and balance.
You can mix both. Use pure debt fund for safety. Use dynamic fund for medium-term growth.
How to Adjust Your Portfolio Now
Here is a more balanced approach:
Reduce exposure to index funds slowly.
Start SIPs in actively managed funds.
Use regular plans through Certified Financial Planner.
Add dynamic asset allocation fund.
Also include one debt fund for short-term needs.
Reduce gold and silver to below 10% of total.
This gives you:
Growth from equity.
Stability from debt.
Safety from asset mix.
Support from Certified Financial Planner.
Asset Allocation Suggestion
With moderate risk and long horizon:
Equity: 60% to 65%
Debt: 25% to 30%
Gold/Silver: 5% to 10%
Within equity, shift towards active funds gradually.
Investment Without Goal Has Risks
Right now, you don’t have a goal. That is fine. But over time:
Set goals for retirement, house, education, or freedom.
It gives clarity and purpose.
You can plan asset mix based on goal time.
You can track progress better.
Even if unsure now, keep your investments flexible. As your life changes, your investment must support it.
Avoid Overlap in Funds
Investing in too many similar funds creates confusion. You are now in:
Nifty 50 and Nifty Next 50 – both large cap.
Midcap 150, Smallcap 250 and Microcap 250 – all aggressive.
This gives too much exposure to one style. Instead:
Choose one or two active flexicap or multicap funds.
Reduce number of index funds gradually.
This removes repetition and brings true diversification.
Too many funds also make tracking difficult.
Tax Awareness is Important
Tax on mutual fund gains depends on fund type and duration.
For equity mutual funds:
Gains above Rs.1.25 lakh in a year are taxed at 12.5%.
Gains below 1 year are taxed at 20%.
For debt mutual funds:
All gains taxed as per income tax slab.
Plan redemptions wisely. Use Certified Financial Planner’s help for tax planning.
Emergency Fund is Must
Keep 3 to 6 months of expenses in a liquid fund. This gives:
Peace of mind during job loss or medical need.
No forced withdrawal from equity.
Don’t skip this. It is your financial safety net.
Insurance Should Be Kept Separate
Don’t buy investment + insurance plans. Keep term insurance for protection only.
If you have any LIC, ULIP or traditional insurance-linked investment:
Check their actual return.
They are low-yielding.
Consider surrender if they are not serving purpose.
Reinvest proceeds into mutual funds.
Keep insurance and investment separate always.
Behavioural Discipline Matters Most
Even the best plan fails without patience. Market will go up and down. Don’t panic. Don’t celebrate too early.
Stay invested. Review annually with Certified Financial Planner. Avoid reacting emotionally.
Finally
You have made a great beginning.
But full index fund strategy has risks.
Shift slowly to actively managed funds.
Add debt exposure for stability.
Use multi asset or dynamic funds for balance.
Keep direct plans away. Go via regular plans with Certified Financial Planner.
Avoid repeating similar index funds.
Set goals gradually.
Keep your gold and silver exposure small.
Build emergency fund without delay.
Stay disciplined and focused.
This 360-degree view will help you stay ready for life’s uncertainties. You will build true financial strength.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment