Hi, I'm 37 and I just started to invest in MFs regularly. My investments are listed below. Except a couple of them, all of them are either 1 month to a few days old. As mentioned below, started SIP of 40000 between Motilal Oswal Nifty Midcap 150 and Nippon india small cap. I would like to invest 40000 more in SIPs making my total investment as 1CR over the next 10 years, in the hopes of creating a portfolio of 2 CR with a 12% return on year. I understand that there are 11 MFs here but appreciate your suggestions on trimming this down while meeting the above mentioned financial goal. Thanks. 1. Motilal Oswal Nifty 500 Momentum 50 Index Dir-G: One Time: Investment: 50000: Current Value 50000: 2. Nippon India Nifty 500 Momentum 50 Index Dir-G: One Time: Investment: 50000: Current Value: 50000: 3. Mirae Asset ELSS Tax Saver Dir-G: One Time: Investment: 50000: Current Value:70277: 4. Mirae Asset ELSS Tax Saver Reg-G: One Time: Investment: 24998: Current Value:38598: 5. Parag Parikh Flexi Cap Dir-G: One Time: Investment: 50000: Current Value: 52727: 6. Axis ELSS Tax Saver Dir-G: One Time: Investment:30000: Current Value: 63863: 7. Nippon India Large Cap Dir-G: One Time: Investment: 49999.99: Current Value: 52358: 8. Motilal Oswal Midcap Dir-G: One Time: Investment: 50000: Current Value: 54061: 9. Quant Small Cap Dir-G: One Time: Investment: 100000: Current Value: 103437: 10. Motilal Oswal Nifty Midcap 150 Dir-G: SIP: Investment:19999.98 Current Value: 20319: 11. Nippon India Small Cap Dir-G: SIP: Investment: 20000: Current Value 20040:

Ans: Schemes are decent but there are too many.

XIRR of 26.5 per cent is very good. However, it is not sustainable in the long run.

Risk-free rate (10 year G-sec) + inflation and some alpha should be a reasonable expectation.

In 12 years, a monthly SIP of Rs 39,000 may create a corpus of Rs 1.5 crores @ 13 per cent interest rate.

 

Ans: The funds that can be continued are 15, 16, 26, 27, 28, 29, 30, 32 and 33; 27, 29, 30, and 33 being debt funds and 15, 16, 28 and 32 being equity funds.

Ans: Creating Wealth with Aggressive Mutual Fund Investments
your commitment to building a substantial corpus for the future is commendable. Let’s assess your current mutual fund portfolio and explore ways to achieve your goal of Rs. 10 crore in the next 10 years.

Evaluating Your Current Portfolio
Current Mutual Fund Investments
Aditya Birla Sun Life Frontline Equity Fund - Growth
Aditya Birla Sun Life MNC Fund - Regular Plan - Growth
Aditya Birla Sun Life Multi-Cap Fund - Regular Plan - Growth
Axis Flexi Cap Fund - Regular Plan - Growth
Axis Focused 25 Fund - Regular Plan - Growth
DSP Small Cap Fund - Regular Plan - Growth
Franklin India Smaller Companies Fund - Growth
HDFC Mid-Cap Opportunities Fund - Growth
ICICI Prudential Equity & Debt Fund - Growth
L&T India Value Fund - Regular Plan - Growth
Mirae Asset Large Cap Fund - Regular Plan - Growth
Samco Flexi Cap Fund - Regular Plan - Growth
ICICI Prudential Value Discovery Fund - Growth
ICICI Prudential NASDAQ 100 Index Fund Direct Growth
Edelweiss Balanced Advantage Fund - Growth
Kotak Small Cap Fund - Growth
DSP Quant Fund - Direct - Growth
Portfolio Analysis
Diversity and Overlap
Your portfolio consists of a mix of large-cap, mid-cap, small-cap, multi-cap, and value funds. While this diversity can reduce risk, there may be significant overlap in holdings, especially in large-cap funds.

Performance Evaluation
Evaluate the performance of each fund over different time periods. Check if they consistently outperform their benchmarks and peers. This analysis helps identify underperforming funds.

Risk Assessment
Given your aggressive growth strategy, higher allocation to mid-cap and small-cap funds is suitable. However, it's crucial to balance this with some large-cap and multi-cap funds for stability.

Recommended Changes
Reducing Overlap
To reduce overlap, consider consolidating similar fund types. For example, choose one or two large-cap funds instead of multiple. This approach streamlines your portfolio.

Focus on Consistent Performers
Retain funds with a strong track record of consistent performance. Replace underperforming funds with those having better potential. This strategy enhances overall portfolio performance.

Suggested Mutual Funds
Large Cap Funds
Large-cap funds invest in well-established companies. They offer stability and moderate growth.

Mid Cap Funds
Mid-cap funds target companies with high growth potential. They balance risk and reward effectively.

Small Cap Funds
Small-cap funds invest in emerging companies. They offer high growth potential but come with higher risk.

Multi Cap Funds
Multi-cap funds diversify across market capitalizations. They offer balanced risk and reward.

Value Funds
Value funds invest in undervalued companies. They provide growth potential through capital appreciation.

Investment Strategy
Monthly Investment Plan
With a monthly investment of Rs. 1 lakh, allocate funds as follows:

Large Cap Funds: Rs. 30,000
Mid Cap Funds: Rs. 30,000
Small Cap Funds: Rs. 20,000
Multi Cap Funds: Rs. 10,000
Value Funds: Rs. 10,000
Annual Review and Rebalancing
Review your portfolio annually. Rebalance to maintain the desired allocation. This approach ensures alignment with your goals and market conditions.

Risks and Benefits of Direct Investing
Disadvantages of Direct Funds
Direct funds may have lower expense ratios. However, they require active management. Without expert guidance, you may miss market opportunities or take on unnecessary risks.

Benefits of Regular Funds
Investing through a Certified Financial Planner offers several benefits. They provide professional management, regular monitoring, and timely adjustments to your portfolio. This approach can lead to better long-term performance.

Conclusion
your dedication to achieving your financial goals is impressive. By optimizing your mutual fund portfolio and investing consistently, you can build significant wealth. Ensure you review and rebalance your investments regularly to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Dear Suprabhat Jatty,

Your long-term commitment to mutual funds is commendable. With an XIRR of 18.5% and a current valuation of 50L, achieving 1.5 Cr in 12 years is ambitious but feasible with strategic planning.

Consolidation: To address over-diversification, start by consolidating similar funds across categories, retaining those with consistent performance and aligning with your investment strategy.
Rebalancing: Maintain your asset allocation targets by periodically rebalancing your portfolio. Adjust the equity and debt allocations to align with your risk tolerance as you approach your goal.
Review and Exit: Regularly review fund performance and exit underperforming or redundant funds. Use this opportunity to streamline your portfolio.
Diversification: While reducing the number of funds, ensure diversification across asset classes remains intact to manage risks.
Considering your target and current portfolio, with disciplined management and periodic reviews, achieving your goal is within reach. Consult a financial advisor for personalized guidance tailored to your needs.

Ans: Your situation and plans for the future are well thought out. Let's explore how you can manage your investments and reach your retirement goal of Rs. 10 crores.

Current Financial Situation
Age: 48 years

Monthly Salary: Rs. 3 lakhs

Sons: Two, aged 19 and 17, in college

Wife: Homemaker

House and Car: Fully paid

Monthly SIP: Rs. 1.5 lakhs (large, mid, and small cap)

MF Corpus: Rs. 3.7 crores

PPF: Rs. 60 lakhs

PF: Rs. 20 lakhs

Retirement Goal: Rs. 10 crores in 5 years

Reviewing Mutual Fund Strategy
1. Fund Diversification

Current Portfolio: 19 different funds. This is excessive and can be streamlined.

Rationalisation: You can merge similar funds to reduce the number without paying high capital gains tax immediately. Use the Systematic Transfer Plan (STP) to gradually merge funds.

Aggressive Investment Approach
2. Small Cap Investments

Observation: Small cap funds have shown high returns historically.

Risk Assessment: Small caps are volatile and risky. Investing solely in small caps for the next 5 years could be risky.

Balanced Approach: Continue investing in a mix of large, mid, and small cap funds. Consider increasing allocation to small caps, but not exclusively.

Tax Efficiency
3. Managing Capital Gains Tax

STP Strategy: Use Systematic Transfer Plans to transfer investments gradually into fewer funds.

Long-Term Capital Gains: If you hold investments for more than a year, the tax rate is 10% on gains exceeding Rs. 1 lakh per year.

Reviewing PPF and PF
4. Provident Fund (PF) and Public Provident Fund (PPF)

Secure Returns: Both PF and PPF offer secure, tax-free returns.

Continue Contributions: Keep contributing to these for risk-free growth.

Additional Considerations
5. Emergency Fund

Liquidity: Ensure you have an emergency fund covering 6-12 months of expenses. This should be easily accessible.
6. Education Fund for Sons

College Expenses: Set aside funds specifically for your sons’ education to ensure it doesn’t disrupt your retirement corpus.
7. Review and Rebalance

Regular Review: Periodically review and rebalance your portfolio to stay aligned with your goals.
8. Professional Guidance

Certified Financial Planner: Consult a Certified Financial Planner for tailored advice. They can help you optimise your investment strategy and tax planning.
Final Insights
Streamlining your mutual funds and balancing your investments is crucial. Going all-in on small caps is risky. Diversify wisely and use tax-efficient strategies like STPs. Regularly review your portfolio and consult a professional for optimal results.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in