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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 04, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by John on Jul 07, 2025Hindi

Sir i have 25k SIPs. Bifurcation is 8.5 in UTI nifty200 momentum 30, 5k each in hdfc mid cap and parag parikh flexi, 3k in tata digital india and 3.5 in quant small cap. Pls judge my portfolio and advice on corrections if any

Ans: You are already investing Rs. 25,000 monthly through SIPs. That is highly appreciated. The diversification across categories shows thoughtfulness. Still, it is important to check balance, overlaps, and purpose alignment.

Here is a detailed review and suggestions from a Certified Financial Planner’s point of view.

» Portfolio Composition Overview

– Your SIPs are spread across 5 mutual fund schemes.
– Rs. 8,500 in a momentum-based thematic fund.
– Rs. 5,000 in a mid cap fund.
– Rs. 5,000 in a flexi cap fund.
– Rs. 3,000 in a sectoral tech fund.
– Rs. 3,500 in a small cap fund.

Your approach shows a tilt towards high-risk, high-return funds. Good for long-term goals. But needs review from risk alignment and stability view.

» Momentum-Based Index Fund Risks

– Momentum investing focuses on trending stocks.
– It ignores valuations and fundamentals.
– This works in bull runs but underperforms in volatile markets.
– You have Rs. 8,500 monthly here, which is a large chunk.

» Why index-based funds can be dangerous

– Index funds like these track a formula, not quality.
– No human manager to avoid bad calls.
– They blindly follow price momentum, even in overvalued zones.
– Downside protection is very poor.
– Active fund managers avoid weak stocks.
– Index funds cannot filter bad entries.

Reduce your exposure here. Use only if you understand the risk. Better to use actively managed flexi-cap or multi-cap funds with dynamic strategy.

» Sectoral Digital Fund Caution

– You are investing Rs. 3,000 in a tech-based fund.
– These funds work well during digital expansion.
– But they carry very high risk due to concentration.
– They are vulnerable to global tech correction, regulations, and valuation risks.

Exposure to sectoral funds must be limited to 5-10% of total SIP. Yours is already at 12%. Reduce or pause fresh SIP here.

» Mid Cap and Small Cap Allocation Review

– Rs. 5,000 in mid cap and Rs. 3,500 in small cap.
– That is nearly 34% of your total SIP.
– Mid and small caps are wealth creators in long term.
– But both are very volatile in the short term.

Make sure your goal horizon is above 7 years. For medium-term goals (3–5 years), avoid small cap. Also, check overlapping between these two funds.

» Flexi Cap Fund – A Strong Foundation

– Rs. 5,000 in a reputed flexi cap fund.
– This provides a core diversified base.
– It offers dynamic allocation across large, mid, and small caps.
– Acts as a good balancing anchor.

Consider increasing SIP here if trimming from high-risk funds. Flexi caps can deliver consistency.

» Portfolio Category Weightage Analysis

Let’s check your category allocation from Rs. 25,000 SIPs:

– Thematic/Index-based momentum fund: 34%
– Mid cap: 20%
– Flexi cap: 20%
– Sectoral/Tech fund: 12%
– Small cap: 14%

This is highly tilted towards aggressive funds. Defensive funds like large cap, multi cap, and balanced advantage are missing. Long-term investing does not mean ignoring downside protection.

» Need for Large Cap or Multi Cap Stability

– No allocation currently to large cap or multi cap.
– These provide cushion in falling markets.
– Large caps offer stability and low beta behaviour.
– Multi caps bring mandatory balance among all categories.

Introduce one large cap or multi cap fund with Rs. 4,000–5,000 monthly SIP. This will help protect capital during sharp corrections.

» Avoid Direct Mutual Funds for Retail Investors

If you are investing in direct funds, then please consider this:

– Direct funds look cheaper, but carry long-term risk.
– No guided rebalancing or human intervention.
– Missing periodic reviews or emotional discipline.
– Regular funds via MFDs with CFPs offer consistent handholding.
– A Certified Financial Planner builds long-term discipline and adjusts asset allocation based on your goals.
– Returns without strategy are dangerous.

So, don’t chase direct funds only for saving 0.5% expense. Regular funds bring more peace and guidance.

» Importance of Goal Linking

– Are your SIPs mapped to specific goals?
– This helps avoid panic during volatility.
– Child education, house buying, retirement – all need different risk setups.

Currently, your SIPs look growth-focused, not goal-mapped. Categorise each SIP towards goal – short term (3 yrs), medium term (5–7 yrs), and long term (10+ yrs).

» Emergency Fund and Insurance Check

– Don’t invest all monthly surplus in mutual funds.
– Ensure 6–12 months of expenses in emergency fund.
– Keep it in sweep FD or liquid funds.

Also, check life cover for family protection. A term plan of 10x annual income is minimum. Health cover must be Rs. 10 lakhs minimum per person, especially post-40 age.

» Portfolio Corrections Suggested

– Trim SIP in momentum-based fund to Rs. 4,000.
– Reduce or pause SIP in tech sectoral fund.
– Increase SIP in flexi cap by Rs. 2,000–3,000.
– Introduce a new large cap or multi cap fund with Rs. 4,000–5,000 SIP.
– Small cap and mid cap SIPs are fine if your horizon is 7–10 years.
– Check for fund overlap using mutual fund portfolio analyzer.
– Prefer regular plans with advisory support. Avoid direct plans.

Overall, you must rebalance to reduce thematic and sectoral risk. Introduce stable growth engines.

» MF Capital Gains Tax Awareness

– From April 2024, new MF taxation rules apply.
– Equity MF LTCG above Rs. 1.25 lakh taxed at 12.5%.
– STCG taxed at 20%.
– Debt MF gains taxed as per your slab.

Plan your redemptions wisely. Use tax harvesting each year. SIPs are better for taxation as gains spread out.

» SIP Investment Time Horizon Discipline

– Every SIP must be continued for 7–10 years.
– Frequent switching hurts returns.
– Thematic and small cap funds must be reviewed every 18 months.
– Don’t judge funds only on 1-year returns. Look at 5-year rolling performance.

Avoid breaking SIPs for small market corrections. Consistency creates compounding.

» Final Insights

– You are on the right path with disciplined SIPs.
– Your portfolio is well diversified, but very aggressive.
– Momentum and tech are risky themes. Reduce exposure.
– Add one stable fund like large cap or multi cap.
– Flexi cap fund must play a larger role.
– Map each SIP to a clear goal.
– Avoid direct funds. Choose regular plans with certified guidance.
– Review fund performance every 12–18 months, not too frequently.
– Maintain emergency funds and adequate insurance alongside investments.
– Keep investing. Keep learning. Keep compounding.

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

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.