Need Expert Advice?Our Gurus Can Help

29-year-old investing 30k/month, seeking portfolio advice: What changes should I make?

Ramalingam Kalirajan |8093 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 30, 2024

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 roshan on Dec 28, 2024Hindi

Sir, I am a 29 year old male and i am investing monthly 30k per month with 10% stepup every year for the next 25 years. This is my current portfolio : 1. 8k in Nippon nifty 500 momentum 50 index fund. 2. (7.4k) in Kotak nifty midcap 150 momentum 50 index fund. 3. (Rs.4,920) in Parag parik flexicap mutual fund. 4. (Rs.3630) in Kotak Nifty Next 50 kndex fund. 5. (Rs.3500) in Tata small cap fund. 6. (Rs.2550) in Mirae Assets nifty smallcap 250 momentum quality 100 index fund. Would please check my current portfolio and please suggest me to make any changes to the current portfolio. Thank you.

Ans: Your disciplined approach to investing is commendable. A 25-year horizon with step-up SIP ensures compounding benefits. Let us evaluate your portfolio and suggest improvements.

Strengths of Your Current Portfolio
1. Diverse Asset Allocation
Investments include large-cap, mid-cap, small-cap, and flexicap funds.
This creates exposure to varied market capitalisation for balanced growth.
2. Focus on Momentum Investing
Momentum funds aim to capitalise on high-performing stocks.
Your choices reflect a growth-oriented strategy.
3. Regular Contributions
Monthly SIPs ensure disciplined investing.
The 10% annual step-up aligns with inflation-adjusted wealth creation.
4. Long-Term Perspective
Your 25-year investment horizon maximises compounding.
Market volatility will average out over time.
Key Areas for Improvement
1. Over-Dependence on Index Funds
Your portfolio heavily favours index funds.
Index funds mimic benchmarks and lack flexibility during market downturns.
Actively managed funds, guided by experts, may offer better returns.
2. Small Allocation to Flexicap Fund
Flexicap funds adjust allocation across market caps for stability.
Increasing this allocation can provide balanced growth and reduce volatility.
3. Sector and Style Overlap
Momentum strategies dominate your portfolio.
Momentum funds may underperform during market corrections.
Diversify to include value-based or balanced funds.
4. Limited Small-Cap Allocation
Small-cap funds are vital for long-term growth but carry higher risks.
Ensure you don’t overallocate beyond risk tolerance.
Suggested Changes
1. Increase Actively Managed Funds
Include funds with a proven track record in various market cycles.
Focus on funds managed by experienced fund managers.
2. Rebalance Between Active and Passive Funds
Reduce exposure to passive index funds.
Add actively managed multicap or equity funds for consistent performance.
3. Reassess Momentum Fund Exposure
Consider limiting momentum fund investments to 30%-40% of your portfolio.
This balances growth potential with risk management.
4. Add Balanced Hybrid Funds
Hybrid funds combine equity and debt, ensuring stability in volatile markets.
Allocate 15%-20% of your portfolio to such funds.
5. Increase Flexicap Fund Allocation
Raise flexicap allocation to at least 25% of your portfolio.
This brings flexibility and adaptability to market trends.
6. Regular Portfolio Review
Review the portfolio annually for performance and alignment with goals.
Adjust based on changes in financial goals or market dynamics.
Taxation Insights
1. Capital Gains Taxation
Equity fund LTCG above Rs 1.25 lakh is taxed at 12.5%.
STCG is taxed at 20%.
2. Minimise Tax Impact
Hold equity funds for at least one year to avoid higher STCG rates.
Use tax-loss harvesting to offset gains.
Final Insights
Your portfolio is structured well for long-term growth. However, reducing reliance on passive funds and adding diversification can optimise returns. A balanced allocation to active, hybrid, and flexicap funds will ensure stability and growth. Regularly review and rebalance your portfolio for continued success.

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.