Hi, I am 36 years old. I am investing 60k per month in mutual funds as of 2024 with 5%step up every year. I started investing since 2018 with 8k per month sip and gradually increased the amount every year till i reached 60k per month in 2024. My current mutual fund portfolio is 63 lakh with a cagr of 22%. (100% equity mutual fund with equal distribution in large ,mid and small caps) It touched 67 lakh last month but due to recent fall it has lost clode to 4 lakh in one month. I intend to continue invest 60k with 5% increment till i am 50 years old. I also have a stock portfolio of 35 lakh. Ppf- 12.30 lakh (investing 50k yearly) Epf- 15.71(2.4 lakh yearly employer and employee combined) Us stock portfolio - 10k usd(casual investment) Gold - 2.5 lakh(casual investment) Nps - 3 lakh(2.5 lakh tier 1 and 50k tier 2) investing 50k annually in nps tier 1. I want to accumulate 10 cr in next 14 years when i turn 50. Please guide me on the changes needed in my approach. Thanks, Jimmy

Ans: Please continue as planned; however, keep the expectation of returns between 12% and 15%.

Basic thumb rule is risk free returns (10 years govt bond returns) + inflation + equity risk premium

Ans: It's commendable that you've been investing systematically in mutual funds since 2017 and have built a substantial portfolio. Your strategy of continuing for another 10 years with a 10% step-up every 2 years reflects a disciplined approach towards wealth creation.
Let's review your current portfolio and make some suggestions:
1. SBI Small Cap, Nippon Small Cap, DSP Mid Cap: Small and mid-cap funds have the potential for high growth but come with higher volatility. Since you're looking at a long-term horizon, these can be suitable for wealth accumulation. However, monitor their performance closely and be prepared for fluctuations.
2. Parag Parikh Flexi Cap, SBI International Fund, Motilal Oswal Tax Saving: These funds offer diversification across market caps and geographies, which is beneficial for risk management. Parag Parikh Flexi Cap, in particular, follows a flexible approach and invests in a mix of equity, debt, and international stocks, providing stability.
3. Axis Next 50 Index Fund: Index funds offer low-cost exposure to a basket of stocks mirroring a particular index. While they provide diversification, they may lack the potential for outperformance compared to actively managed funds. However, they can be a valuable addition to your portfolio for passive investing.
Considering your investment horizon and the step-up strategy, you can continue investing in these funds with periodic reviews. It's essential to rebalance your portfolio periodically to ensure alignment with your goals and risk tolerance.
Given the significant portfolio value, it's advisable to seek advice from a Certified Financial Planner who can provide personalized guidance tailored to your financial objectives, risk appetite, and tax considerations.
Keep up the good work of systematic investing, and with a well-diversified portfolio, you're on track to achieve your long-term financial goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Ans: Achieving Rs 10 Crores by Age 55: Comprehensive Portfolio Assessment
You’ve made a commendable start by building a corpus of Rs 26 lakhs and contributing Rs 40,000 monthly through SIP. With the goal of reaching Rs 10 crores by the age of 55, it’s important to refine your investment strategy to maximize the potential of your portfolio.

Let’s discuss your current portfolio, proposed changes, and the adjustments necessary to streamline and enhance your investment plan.

Portfolio Overview and Insights
Your current portfolio is diversified across different categories of mutual funds, both through lump sum investments and SIPs. Here's what you have:

Lump Sum Investments:

Multi-Asset Funds
Offshore Fund (China-specific exposure)
SIP Investments:

Large and Mid Cap Funds
Flexi Cap Funds
Mid Cap and Small Cap Funds
Thematic and Sector Funds
Your portfolio provides exposure to a broad range of sectors, asset classes, and geographies. This is important for diversification but also comes with certain risks, particularly in areas like sectoral funds and concentrated offshore investments.

Key Observations and Risks
Before moving on to your proposed changes, it’s important to address several key issues with your current portfolio:

Too Many Funds and Portfolio Overlap:

Your portfolio currently consists of many mutual funds spread across multiple categories. While diversification is critical, having too many funds can lead to portfolio overlap. This means that several of your funds could be investing in the same stocks or sectors, which reduces the benefits of diversification.

For example:

Large and Mid Cap Funds: You hold more than one large and mid-cap fund. While this provides stability, it also increases the chances that these funds are investing in similar stocks.
Thematic and Sectoral Funds: Your portfolio contains several thematic and sectoral funds. These funds have a focused approach, investing heavily in specific sectors or themes. However, this can lead to excessive exposure to a single sector, making your portfolio more vulnerable to sector-specific downturns.
The main issue with having too many funds is that it dilutes the performance of the portfolio. You are likely to face diminishing returns because of the overlap, and it makes tracking the performance of individual funds more difficult.

High Exposure to Thematic and Sectoral Funds:

Thematic and sectoral funds can offer higher returns, but they are also more volatile. These funds depend on the performance of specific sectors or industries, which can be cyclical in nature. When the sector performs well, your returns will be impressive. However, if the sector faces challenges, the performance of these funds will be affected significantly.

For example:

Consumption Theme: A thematic fund focusing on consumption might perform well during periods of high consumer spending, but it could underperform during economic slowdowns.
Thematic Equity: This is a high-risk category, and having multiple thematic funds in your portfolio can lead to an imbalance. You should carefully assess the weight of such funds in your overall portfolio.
Key Risk: The concentrated nature of thematic funds increases the volatility of your portfolio. While these funds can offer great returns in favorable market conditions, they are more vulnerable during market downturns. Hence, they should not make up a large portion of your long-term portfolio.

Offshore Investments and Global Risks:

Having exposure to international markets is often a good way to diversify beyond the Indian market. However, the Edelweiss Greater China Equity Offshore Fund focuses heavily on a single country. This introduces a significant level of risk, as you are exposed to the volatility of the Chinese economy.

Key Risk: China's economy has faced several challenges in recent years, including regulatory crackdowns, political tensions, and economic slowdowns. Investing in a single country, particularly one that has seen a lot of unpredictability, increases the risk in your portfolio. It might be wise to reconsider such concentrated international exposure.

Asset Allocation Strategy:

Your current portfolio consists of a mix of equity and multi-asset allocation funds. While multi-asset funds are designed to reduce risk by investing across asset classes, they can also dilute returns, especially in a long-term wealth-building strategy like yours.

Key Risk: Multi-asset funds often include bonds and other lower-risk instruments. While this provides stability, it might limit the overall growth potential of your portfolio, especially if you are looking to accumulate Rs 10 crores by age 55. Equity, particularly in large, mid, and small-cap stocks, should form the core of your long-term wealth-building strategy.

Proposed Changes: Risks and Considerations
Now, let’s take a closer look at the proposed changes and the risks involved in maintaining or adjusting your investments.

Lump Sum Investment in Multi-Asset Funds:

You are considering switching from multi-asset funds to other investments. Multi-asset funds, while providing stability, often come at the cost of lower returns. These funds typically have a portion of their investments in debt instruments, which may not grow as quickly as equity investments in the long run.

Key Risk: By focusing more on equity over multi-asset funds, you can potentially achieve higher returns, but you will also be exposed to higher volatility. It’s important to strike the right balance between growth and risk, depending on your risk tolerance.

ABSL Multi-Asset Allocation Fund (Consider Switching):

If you decide to move away from this fund, remember that multi-asset funds generally aim to reduce risk by balancing equity with debt and other assets. However, the returns might not match up to pure equity funds, which could be a drawback in your case, where high growth is the primary goal.

Key Risk: The multi-asset fund may offer stability, but moving away from it means increasing your exposure to market volatility. You should be comfortable with the increased risk in exchange for the potential of higher returns.

Edelweiss Greater China Equity Offshore Fund:

This fund focuses on China’s equity market, which, as mentioned earlier, is facing several macroeconomic and political challenges. Having too much exposure to a single country increases the risk of volatility in your portfolio.

Key Risk: While international exposure is a good diversification tool, single-country offshore funds can add significant risk, especially in uncertain global markets. You should assess whether this aligns with your long-term goals and risk tolerance.

ABSL Equity Advantage Fund (Large and Mid Cap):

Large and mid-cap funds provide a mix of stability and growth. These funds invest in both established large companies and growing mid-sized companies. While these funds tend to perform well in stable markets, they might underperform when mid and small-cap stocks surge.

Key Risk: Although large and mid-cap funds offer a balance between growth and stability, they may not fully capitalize on periods of high growth in mid and small-cap stocks. On the other hand, they tend to offer more protection during volatile market periods. Ensure that your portfolio has the right allocation of mid and small-cap stocks to maximize growth.

Thematic and Sectoral Funds (GenNext Fund and Thematic Equity Fund):

The thematic funds in your portfolio are focusing on specific sectors. These funds have the potential for significant returns during favorable periods for the sector but carry increased risk when the sector underperforms.

Key Risk: By holding multiple thematic and sector funds, your portfolio could be overexposed to certain sectors, increasing volatility. While thematic funds can deliver high returns, they should be used sparingly within a broader, diversified portfolio.

Streamlining the Portfolio: Focus on Simplicity and Efficiency
One of the key recommendations for you would be to streamline your portfolio. While diversification is necessary, having too many funds can lead to unnecessary complexity and difficulty in managing your investments.

Portfolio Overlap: With multiple funds in the same categories (large and mid-cap, thematic, multi-asset), you run the risk of duplication in your holdings. This means that multiple funds could be investing in the same stocks, which reduces the benefits of diversification.

Simplification: A well-structured portfolio doesn’t need to have too many funds. You can achieve proper diversification by selecting a few well-managed funds that cover different market segments without significant overlap.

By consolidating your investments into a more focused portfolio, you will be able to track and manage your investments more effectively. This approach will also reduce redundancy and improve the overall performance of your portfolio.

Final Insights
Focus on Equity for Long-Term Growth: Since your goal is wealth accumulation, equity should be the core of your portfolio. Too much exposure to multi-asset or debt instruments could limit growth potential.

Reduce Thematic Exposure: While thematic funds can deliver high returns, they carry higher risk due to their concentrated nature. Consider reducing the number of thematic funds in favor of broader equity funds.

Streamline and Simplify: Reduce the number of funds in your portfolio to avoid overlap. A more streamlined portfolio will be easier to manage and track, leading to better overall results.

Be Cautious with Offshore Exposure: International diversification is important, but be mindful of overconcentration in a single market, especially one as volatile as China’s.

By making these adjustments and focusing on a more streamlined, equity-centric portfolio, you can enhance your chances of achieving your Rs 10 crore goal by age 55.

Best Regards,

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