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45-Year-Old Man Seeks Advice on Mutual Fund Investment Strategy

Milind

Milind Vadjikar  |315 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 02, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Oct 01, 2024Hindi
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Hi. I'm 45 years and lately I've been investing in MF myself through app. I do lumpsum as I prefer to avoid monthly payments. But as I don't have much knowledge now a days I'm getting quite concerned on the risks involved as most are high risk funds. Taking our market growth, are there chances to lose my principal amount. I can hold these funds for 5-10 years as my kids are small. Please find my portfolio below. If I need to switch, please advice to which fund. Also is it unwise investing into many funds ? Aditya Birla Sun Life PSU Equity Growth Direct Plan - Rs 151200 Bank Of India Flexi Cap Growth Direct Plan Rs 50000 Canara Robeco Small Cap Growth Direct Plan Rs 347240 Franklin India Smaller Companies Growth Direct Plan Rs 102000 HDFC Focused 30 Growth Direct Plan Rs 181550 HDFC Infrastructure Growth Direct Plan Rs 120000 HDFC Mid Cap Opportunities Growth Direct Plan Rs 50000 Invesco India Infrastructure Growth Direct Plan Rs100000 Invesco India PSU Equity Growth Direct Plan Rs 30650 Motilal Oswal Midcap Growth Direct Plan Rs 210000 Nippon India Power & Infra Growth Direct Plan Rs 52550 Nippon India Small Cap Growth Direct Plan - Rs 201868 Quant Flexi Cap Growth Direct Plan Rs 57780 Quant Infrastructure Growth Direct Plan Rs 191500 SBI Consumption Opportunities Growth Direct Plan Rs 198873 SBI Contra Growth Direct Plan Rs 415100 SBI Equity Hybrid Regular Growth Plan Rs 1080700 SBI Focused Equity Growth Direct Plan - Rs 1625400 SBI Large & Midcap Growth Direct Plan Rs 548850 SBI Magnum Global Growth Direct Plan Rs 454000 SBI Magnum Midcap Growth Direct Plan Rs 166350 SBI PSU Growth Direct Plan Rs 111650

Ans: Hello;

You have a corpus of around 64.5 L spread over 22 mutual fund schemes.

My investment precept is if your investible scheme count is going beyond single digit then you are spreading it too thin.

Investing has to be done objectively only based on concrete criteria with no scope for any familiarity or recency bias.

High allocation to thematic/sectoral funds is a huge risk.

I recommend you to change your portfolio allocation as follows:

1. Flexicap cap fund: 25%
(PPFAS flexicap fund)
2. Large and Midcap type Fund: 25%
(SBI Large and Midcap fund)
3. Small cap type fund: 10%
(Nippon small cap fund)
4. Thematic fund: 10%
(SBI Technology Opportunities Fund)
5. Dynamic asset allocation fund: 15%
(HDFC BAF)
6. Multi asset allocation fund:15%
(ICICI Pru Multi asset allocation fund)

This allocation tries to acquire growth primarily through equity also adding a semblance of stability through moderate exposure to debt and gold.

Funds have been recommended based on long-term returns in their respective category.

Happy Investing!!

You may follow us on X at @mars_invest for updates.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ans: Assessment of Mutual Fund Portfolio and Financial Planning:

Current Investment Portfolio:

Your disciplined approach towards investing since November, coupled with an annual increase of 10%, reflects a commendable commitment to wealth accumulation.
The selection of mutual funds spanning various categories indicates a diversified investment strategy aimed at achieving long-term financial goals.
However, it's crucial to review your portfolio periodically to ensure alignment with your evolving financial objectives and risk tolerance.
Analysis of Fund Selection and Risk:

Small-cap and mid-cap funds such as Quant Small Cap and PGIM India Mid Cap Fund offer growth potential but entail higher volatility.
Flexi-cap funds like Parag Parikh Flexi Cap Fund and Mirae Asset Emerging Blue Chip Fund provide a balanced approach by investing across market capitalizations, potentially reducing portfolio risk.
Equity income and dividend yield funds like ICICI Prudential Dividend Yield Equity Fund offer stable income but may exhibit lower capital appreciation compared to growth-oriented funds.
Multi-asset and hybrid funds like ICICI Prudential Equity and Debt Fund and ICICI Prudential Multi Asset Fund offer diversification across asset classes, providing stability during market fluctuations.
Long-Term Financial Planning:

Considering your investment horizon of 15 years, equity-oriented funds may offer higher growth potential compared to debt funds.
However, it's essential to maintain a balanced portfolio by allocating a portion of your investments to debt funds like HDFC Long Duration Debt Fund to mitigate volatility.
Regularly monitor your portfolio's performance and adjust asset allocation based on changing market conditions and financial goals.
As a government employee, you may have access to certain benefits like pension schemes, which can complement your investment portfolio and provide additional retirement income.
Risk Management and Insurance:

As you mentioned, you currently do not have any term or life insurance coverage. It's advisable to consider purchasing adequate insurance to safeguard your family's financial future in the event of any unforeseen circumstances.
Term insurance plans offer comprehensive coverage at affordable premiums, providing financial security to your loved ones in your absence.
Conduct a thorough assessment of your insurance needs and consult with a Certified Financial Planner to determine the appropriate coverage amount based on your income, liabilities, and future financial obligations.
In conclusion, while your mutual fund portfolio showcases a diversified approach towards wealth creation, it's essential to incorporate risk management strategies and insurance coverage into your financial plan for comprehensive protection and long-term financial security.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Hi sir I'm from Assam and doing a job as Teacher, i m investing in various MF schemes from last 3yrs.My risk appetite is very aggressive. My portfolio is 1canara Robecco blue chip equity fund direct 2000/ month & emerging equity fund 3000/ month 2Mirae Assets emerging blue chip equity fund direct 3000/ month. 3 J m flexi cap fund 3000/ month 4Motilal oswal midcap fund 1500/month 5Pgim india midcap oppurtunities fund 2500/ month 6Quant small cap fund 2000/fud 7,Quant midcap fund 2000/ month 8 Quant flexi cap fund/2500.9 Hsbc value fund 2000/month. 10 sbi small cap fund 2000/ month 11 Tata digital india fund 1000/ month 12 Tata small cap fund 1000/ month
Ans: Assessing and Optimizing Your Mutual Fund Portfolio for Aggressive Risk Appetite

As a Certified Financial Planner (CFP), I'll evaluate your mutual fund portfolio and suggest potential optimizations to align with your aggressive risk appetite and long-term financial goals.

Analyzing Current Portfolio Allocation and Diversification

Your portfolio comprises a diverse mix of equity funds spanning various market capitalizations and sectors. While this diversification can potentially enhance returns, it's crucial to assess the overall allocation and ensure it aligns with your risk appetite and investment objectives.

Identifying Overlapping Holdings and Concentration Risks

Reviewing your fund selection, I observe potential overlap in holdings across funds, leading to concentration risks. Overlapping investments may increase portfolio correlation and susceptibility to market fluctuations, necessitating a reassessment of fund selection to achieve better diversification.

Assessing Fund Performance and Consistency

Evaluating the performance of individual funds over different time horizons can provide insights into their ability to deliver consistent returns. It's essential to identify funds that have demonstrated resilience across market cycles and outperformed their benchmarks and peers over the long term.

Considering Expense Ratios and Fund Costs

Expense ratios and fund costs impact overall returns and should be scrutinized to ensure they align with the value proposition offered by each fund. While lower expense ratios are desirable, it's essential to weigh them against other factors such as fund performance and portfolio management quality.

Exploring Opportunities for Optimization and Rationalization

Given your aggressive risk appetite, optimizing your portfolio to enhance potential returns while managing risks is paramount. This may involve consolidating overlapping holdings, reallocating investments towards high-conviction funds, and introducing exposure to emerging themes or sectors with growth potential.

Emphasizing the Importance of Regular Monitoring and Review

As a CFP, I stress the significance of regular portfolio monitoring and review to adapt to changing market dynamics and investor preferences. Periodic reassessment of fund performance, asset allocation, and risk exposure can help optimize your portfolio and capitalize on emerging opportunities.

Seeking Professional Guidance for Portfolio Optimization

I recommend consulting with a qualified financial advisor or Mutual Fund Distributor (MFD) with a CFP credential to conduct a comprehensive portfolio review and optimization exercise. Professional guidance can provide valuable insights and recommendations tailored to your specific risk profile and investment objectives.

Making Informed Investment Decisions for Long-Term Wealth Creation

In conclusion, optimizing your mutual fund portfolio for aggressive risk appetite requires a strategic approach that balances potential returns with prudent risk management. By conducting thorough analysis, seeking professional guidance, and maintaining a disciplined investment approach, you can work towards achieving your long-term financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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