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Ramalingam Kalirajan |10870 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 11, 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

Asked by Anonymous - May 11, 2024Hindi

Dear sir, I am 36. I am investing 25k SIP every month for last 5 months in 9 mutual funds, 1. UTI nifty 50, 2. HDFC balanced advantage fund, 3. HDFC mid cap, 4. Quant mid cap, 5. Kotak tax saver fund, 6 Noppon india small cap fund, 7. Mirae Asset mid cap fund, 8. Prag parikh flexy cap fun, 9. SBI mid cap & large cap fund. Can you please help me with your advice if i am doing right ot i need to make changes and also can you please suggest how much amount i should allocate each fund? Thanks for your valuable time and your advice in advance.

Ans: It's great to see your proactive approach to investing, especially at the age of 36. Investing through SIPs in mutual funds is a smart way to build wealth over the long term. Let's assess your current investment strategy and see if any adjustments are needed.

Firstly, investing in nine mutual funds might be excessive and could lead to over-diversification. Managing too many funds can be challenging and may not necessarily lead to better returns. It's generally recommended to have a focused portfolio with a smaller number of well-chosen funds.

Secondly, your portfolio seems to have a tilt towards mid-cap and small-cap funds, which can be riskier compared to large-cap funds. While these funds have the potential for higher returns, they also come with increased volatility. It's essential to ensure that your portfolio aligns with your risk tolerance and investment goals.

As a Certified Financial Planner, I suggest streamlining your portfolio by consolidating your investments into fewer funds that cover a broader spectrum of the market. Consider retaining one or two well-performing funds from each category (large-cap, mid-cap, small-cap, etc.) to achieve diversification while keeping things manageable.

Regarding allocation, it's crucial to align your investments with your risk profile and financial goals. A common approach is to allocate a higher percentage to large-cap funds for stability and then allocate smaller portions to mid-cap and small-cap funds for growth potential. However, the exact allocation would depend on factors like your risk tolerance, investment horizon, and overall financial situation.

I recommend consulting with a Certified Financial Planner who can conduct a detailed analysis of your financial goals and risk profile to provide personalized advice on asset allocation and fund selection.

In conclusion, while your initiative to invest through SIPs is commendable, refining your portfolio and asset allocation can optimize your returns and reduce unnecessary complexity.

Best Regards,

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

Asked on - May 11, 2024 | Answered on May 11, 2024

Thank you so much for your promt reply. Can you please suggest what funds I need to remove from my portfolio and what funds i need to keep invsting in? Your advice will be highly appreciated. Thanks

Ans: UTI Nifty 50: This fund aims to replicate the performance of the Nifty 50 index, providing broad exposure to India's top 50 large-cap companies. It's suitable for investors seeking stable returns aligned with the overall market performance.

HDFC Balanced Advantage Fund: This fund dynamically manages its asset allocation between equity and debt based on market conditions. It offers the potential for capital appreciation with lower volatility compared to pure equity funds.

HDFC Mid Cap Fund: This fund invests primarily in mid-cap companies, aiming to generate long-term capital appreciation. It's suitable for investors with a higher risk appetite seeking exposure to the growth potential of mid-sized companies.

Quant Mid Cap Fund: This fund focuses on mid-cap stocks with a quantitative investment approach. It aims to identify undervalued stocks using mathematical models and research. Investors should be aware that quantitative strategies may underperform during certain market conditions.

Kotak Tax Saver Fund: This ELSS (Equity Linked Savings Scheme) fund offers tax benefits under Section 80C of the Income Tax Act while providing exposure to diversified equity markets. It has a lock-in period of three years and is suitable for investors looking to save taxes while investing in equities.

Nippon India Small Cap Fund: This fund invests in small-cap companies with the potential for high growth but higher volatility. It's suitable for investors with a long-term investment horizon and a higher risk tolerance.

Mirae Asset Mid Cap Fund: This fund focuses on mid-cap stocks with strong growth potential. It has a track record of delivering consistent returns over the long term and is suitable for investors seeking exposure to mid-sized companies.

Parag Parikh Flexi Cap Fund: This fund follows a flexible investment strategy, allowing it to invest across market caps and sectors based on market conditions. It's managed by a seasoned team and is suitable for investors looking for a diversified equity portfolio.

SBI Mid Cap & Large Cap Fund: This fund invests in both mid-cap and large-cap stocks, offering diversification across market segments. It's suitable for investors seeking a balanced approach to equity investing.

Based on a balanced approach to your investment portfolio, let's identify the funds you may consider removing and those you should continue investing in:

Remove from Portfolio:

Quant Mid Cap Fund: While quantitative strategies can be effective, they may not always perform consistently, especially in dynamic market conditions. Consider removing this fund to reduce complexity and focus on more proven strategies.

Kotak Tax Saver Fund: Since you're already investing in other diversified equity funds, you may not need additional exposure to tax-saving funds. Moreover, ELSS funds have a lock-in period of three years, limiting liquidity compared to other equity funds.

Before investing, consider factors such as your investment goals, risk tolerance, and investment horizon. Diversifying across different fund categories can help mitigate risk while optimizing returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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