I am 29 years old and currently investing 25,000 through SIP in below funds. Total corpus invested until now through various MFs is Rs 546,000 with a current value of Rs 648,000. How do I calculate yearly returns to check if it is beating inflation and benchmarks?

1. UTI Nifty Index Fund (Growth) - 2,500

2. HDFC Corporate Bond (Growth) Debt - 5,000 (started recently, just 1 month ago)

3. Axis Growth Opportunity Fund (Growth) Equity Large & Mid Cap - 5,000

4. SBI Small Cap (Growth) - 4,000

5. Mirae Asset Tax Saver (Growth) - 6,000 (was 8,500 until March 2022, stepped down to remain within 80C limit including PF)

6. Mirae Asset Emerging Bluechip Fund (Growth) - 2,500

Ans: These funds are good.

With increase in time horizon the chances of poor returns decreases provided the quality of the scheme portfolio is high and also the margin of safety is higher.

Mutual funds are subject to market risk and therefore it is difficult to ascertain the worst and best returns or timing the markets.

Ans: Let's assess your SIP investments and project the potential returns over a 10-year period, keeping in mind various factors that influence investment outcomes.

Current SIP Portfolio Overview
Allocation Breakdown
SBI Contra Fund: Rs. 2000
SBI Small Cap Fund: Rs. 1000
SBI Small Cap 250 Index Fund: Rs. 1000
Aditya Birla Sun Life PSU Equity Fund: Rs. 2000
Parag Parikh Flexi Cap Fund: Rs. 2000
Motilal Oswal Mid Cap Fund: Rs. 2000
Quant Active Fund: Rs. 2000
Total Monthly SIP: Rs. 12000
Factors Affecting Returns
Fund Selection
Actively Managed Funds: Offer potential for higher returns but involve higher risk and management fees.
Index Funds: Lower fees but may have limitations in beating market benchmarks.
Market Performance
Equity Market Trends: Historical performance and future market conditions impact investment returns.
Economic Factors: Macroeconomic indicators influence market movements and fund performance.
Projected Returns Analysis
Historical Performance
Review historical performance of selected funds to gauge potential returns.
Consider past performance trends, fund manager expertise, and investment strategy.
Market Outlook
Analyze current market trends, economic indicators, and sectoral performance.
Evaluate growth prospects of sectors represented in your SIP portfolio.
Risk Assessment and Diversification
Risk Management
Diversification: Spread investments across different asset classes and sectors to manage risk.
Risk Appetite: Assess your risk tolerance to ensure investment choices align with your financial goals.
Regular Monitoring
Review SIP performance periodically to track progress and make informed adjustments.
Stay updated with market developments and fund performance reports.
Conclusion and Future Outlook
Based on the current investment allocation and market conditions, projecting precise returns over a 10-year period can be challenging. However, a diversified SIP portfolio across various asset classes and fund types is a prudent approach to long-term wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have made excellent strides with your investment journey. Your portfolio is diversified, and you have a long-term approach with a 20-year horizon. Let’s evaluate your current portfolio and address your concerns about reviewing your mutual funds.

How to Decide on Discontinuing Mutual Funds
You have rightly mentioned that some mutual funds may underperform initially but do well over a longer period. Your experience of seeing good returns over 7 years is a solid example. Here's how you can approach the decision to discontinue any mutual fund.

1. Performance Comparison
Compare your funds' returns to the benchmark. If a fund consistently underperforms its benchmark for over 3 years, consider discontinuing it.
Some volatility is normal, but long-term underperformance can be a sign of concern.
2. Fund Management Changes
Keep an eye on the management of the mutual fund. If there's a change in the fund manager or the investment style, review its impact on performance.
A change in the fund manager may lead to a different investment approach, which may not align with your goals.
3. Asset Allocation Review
Review your overall asset allocation during your annual portfolio check. If any fund disturbs the balance of equity and debt, consider discontinuing it.
Stick to your planned risk tolerance and rebalance when needed.
4. Consistent Underperformance vs Peers
If a fund lags behind its peers for over 3-4 years, this may indicate inefficiency.
Compare your funds with other similar schemes. If you notice consistent underperformance, it’s better to exit.
5. High Expense Ratio
While performance matters, also look at the expense ratio. A high expense ratio can eat into returns over time.
If the fund's returns don't justify the cost, it’s wise to explore better alternatives.
Reviewing Your Mutual Fund Portfolio
You’ve selected various categories of funds, and that’s a good approach. Let’s analyze your portfolio to see if any modifications are needed.

1. Balanced Advantage and Debt Allocation
Your portfolio includes both equity and debt funds, ensuring a balanced risk approach.
The inclusion of UTI Medium to Long Duration Fund and ICICI Prudential Balanced Advantage Fund is suitable for long-term stability.
2. ELSS Funds
The ELSS funds in your portfolio are great tax-saving options.
These provide equity exposure and tax benefits under Section 80C.
As you have mentioned past ELSS funds performing well, continue reviewing these regularly to ensure they remain efficient.
3. Flexicap Fund
The JM Flexicap Fund provides flexibility across large-cap, mid-cap, and small-cap stocks.
This helps diversify risk and allows the fund to adjust to market conditions. It’s a good choice for long-term wealth creation.
4. Gold Fund
Your allocation to the SBI Gold Fund is a safe move, but don’t over-allocate.
Gold offers diversification but doesn’t provide high returns like equities over the long term.
A small portion of your portfolio in gold acts as a hedge, and your current allocation is appropriate.
5. Large Cap Fund
You have invested in three large-cap funds, which provides stability in your portfolio.
Large-cap funds are generally less volatile, but having multiple funds in the same category may lead to overlap.
Consider consolidating one or two of these large-cap funds to reduce redundancy.
6. Mid Cap and Small Cap Funds
The Axis Mid Cap Fund and Edelweiss Small Cap Fund add growth potential to your portfolio.
Mid-cap and small-cap funds can be volatile in the short term but provide good returns over the long run.
You’ve maintained a balanced allocation in these categories, which is aligned with your long-term goals.
Suggested Modifications to Your Mutual Fund Portfolio
Based on the above evaluation, here are a few suggestions for improving your portfolio:

1. Consolidate Large Cap Funds
You currently have three large-cap funds.
Large-cap funds often have similar stock holdings, so keeping two instead of three will simplify your portfolio without losing returns.
2. Consider SIP Top-Up Plan
You mentioned you’re not planning any top-up for your SIPs.
However, a small increase of 5%-10% annually can have a huge impact on wealth creation due to compounding.
It helps to fight inflation and boost returns.
3. Increase Debt Allocation Over Time
As you age, you should gradually increase your debt allocation.
This provides stability and reduces risk as you approach your retirement years.
You could allocate a portion of your future investments to more debt or balanced funds.
4. Keep Monitoring Performance
Continue your annual portfolio review practice.
It’s excellent that you’ve been doing this consistently, which helps identify underperforming funds early.
Final Insights
You’ve built a strong and diversified portfolio that’s well-positioned for the future. By consolidating a few funds and gradually increasing your debt allocation, you can further strengthen your financial position.

Continue reviewing your portfolio annually and make adjustments as necessary. Stick to your long-term plan, and don’t get distracted by short-term market fluctuations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hello;

Almost 20% annualized return is a very good performance.

Do you think you could have managed this on your own without help from the MFD website?

Answer this question with full honesty to yourself because a YES means you may invest in direct plans henceforth and move your investments gradually to the direct platform to optimise LTCG impact.

However if the answer is NO then you agree that the MFD platform has added value by guiding and helping you generate such excellent returns.

Typically there is a difference in Total Expense Ratio(TER) applicable for Direct and Regular plan options.

In Direct plans it's DIY(Do It Yourself) hence return maybe slightly higher compared to regular plans but your distributor guides you to suitable schemes which are apt for your risk appetite, financial profile, asset allocation and investment horizon.

But keep a practice of reviewing your fund performance vis-a-vis category average, benchmark and risk adjusted returns annually.

Also the asset allocation needs to be adjusted to suit your risk profile over a span of period.

Happy Investing;
X: @mars_invest