I am 25 and investing around 44k per month in SIPs. 11k in quant small cap, 10k in nippon small cap, 5k in icici prudent technology direct fund, 5k in icici prudent bharat 22 fof direct, 7k in HDFC small cap, 1k in 360 one focused equity fund, 1k in axis growth opportunities fund direct, 2k each in quant psu direct and quant infrastructure fund, and 200 in HDFC infrastructure. Is this mix good for a 10-15 year term
Ans: Assessment of Your Current Portfolio
You are investing Rs 44,000 per month in a variety of mutual funds. Here’s an assessment of your current portfolio:
Quant Small Cap Fund: Rs 11,000
Nippon Small Cap Fund: Rs 10,000
ICICI Prudential Technology Direct Fund: Rs 5,000
ICICI Prudential Bharat 22 FoF Direct: Rs 5,000
HDFC Small Cap Fund: Rs 7,000
360 One Focused Equity Fund: Rs 1,000
Axis Growth Opportunities Fund Direct: Rs 1,000
Quant PSU Direct Fund: Rs 2,000
Quant Infrastructure Fund: Rs 2,000
HDFC Infrastructure Fund: Rs 200
Portfolio Analysis
Strengths
Aggressive Growth Potential: Your investments in small cap and sector-specific funds indicate a focus on aggressive growth.
Sector Diversification: Exposure to sectors like technology, infrastructure, and public sector units provides sectoral diversification.
Weaknesses
High Risk: A significant portion of your portfolio is in small cap and sector-specific funds, which are high-risk investments.
Over-Diversification: Investing small amounts in many funds (e.g., Rs 200 in HDFC Infrastructure Fund) may not yield significant returns.
Concentration in Small Caps: Heavy investment in small cap funds could increase volatility and risk.
Recommendations for Improvement
Balanced Diversification
Reduce Overlap: Avoid investing in too many similar funds. This will simplify your portfolio and improve potential returns.
Include Large Cap Funds: Adding large cap funds will provide stability and reduce overall portfolio risk.
Increase Focused Investments: Instead of spreading small amounts across many funds, focus on a few well-performing funds to maximize growth.
Quality Over Quantity
Consistent Performers: Focus on funds with a proven track record of consistent performance rather than chasing the latest trends.
Consult a CFP: To avoid costly mistakes, seek advice from a Certified Financial Planner. They can guide you in choosing consistently performing funds.
Strategic Allocation
Core-Satellite Approach: Allocate a core portion of your investments in diversified equity funds (large, mid, small cap) and a smaller portion in sectoral/thematic funds.
Periodic Review: Regularly review and rebalance your portfolio to align with your financial goals and market conditions.
Suggested Portfolio Structure
Core Investments
Large Cap Funds: Allocate 30-40% to large cap funds for stability.
Multi Cap Funds: Allocate 20-30% to multi cap funds for diversified growth.
Satellite Investments
Small Cap Funds: Allocate 20% to small cap funds for aggressive growth.
Sectoral/Thematic Funds: Allocate 10-20% to sector-specific funds (technology, infrastructure) based on market conditions and trends.
Emergency Fund and Debt Allocation
Emergency Fund: Maintain an emergency fund in liquid assets (equivalent to 6 months’ expenses).
Debt Funds: Allocate 10-20% to debt funds for fixed income and reduced risk.
Final Insights
Your portfolio shows a strong inclination towards growth with high-risk, high-reward funds. Balancing this with stable, consistent performers will help in achieving long-term financial goals with reduced risk. Regular consultation with a Certified Financial Planner and periodic portfolio reviews will ensure alignment with market dynamics and personal financial objectives.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in