38-year-old earning 125k monthly seeks advice on 11.6 lakh diversified MF portfolio - Overdiversification, Overlap, and Fund Selection

Ans: Thanks for candidly sharing your goals, current income and savings/investments.

You have adequate term life cover but recommend to cover family and parents with healthcare cover of 50 L as a minimum considering increasing cost of medical treatments and rise in illnesses with age.

Your existing investments are considered as 95 L (Ignoring Emergency fund and saving account balance)

Crypto holdings are considered 0 since they are highly volatile, unregulated and not backed by any tangible asset.

1.5 Cr house reconstruction expenses 12 years hence translates into around 3 Cr considering 6% inflation.

So start a SIP of 90K for 12 years into Nippon India Multicap Fund & HDFC top 100 Fund(50:50)which may yield a corpus of 3.12 Cr(Considering modest return of 13%)

Next goal is car purchase after 6 years so initiate a SIP of 40K in HDFC balanced advantage fund which will yield a corpus of 40L considering modest return of 10.5%

Next goal is a corpus of 3-5 Cr when you will be 55 so you can do a SIP of 50K in PPFAS flexicap fund which will yield a corpus of 5.73 Cr assuming conservative return of 13%

Further important goal is corpus for child education so considering timeframe of 14 years recommend to do a SIP of 50K in HDFC Children's Gift Fund which will yield a corpus of 2Cr+ assuming modest return of 12%

Finally retirement goal of 30Cr assumed to be 25 years from now so you may start a SIP of 70K in ICICI Pru Retirement Fund Pure Equity Plan which yield you a corpus of 15.9 Cr considering modest growth of 13%.
Plus your corpus of 95 L at a modest return of 9.5% will yield a value of 9.18Cr after 25 years
So your total retirement corpus is now 15.9+9.18=25.08 Cr
Further the amount getting released after achievement of all other goals apart from retirement can be redeployed in a value based BAF(HDFC; 10% return) for residual span towards retirement goal.
i.e. 90K for 13 years --2.89 Cr
40K for 19 years--2.73 Cr
50K for 5 years----0.39 Cr
50K for 11 years---1.2 Cr
Total_-----------------------7.21 Cr

Adding this to our earlier calculated retirement corpus gives us comprehensive retirement corpus of 7.21+25.08= 32.21 Cr

Anything you get from Crypto is bonus!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing

You may follow us on X at @mars_invest for updates

Happy Investing!!

Ans: At the age of 27, with a long-term investment horizon, you have built a diverse portfolio. However, a review of your portfolio is necessary to ensure optimal returns and financial security. Let’s assess each of your existing investments while providing insights on potential improvements.

1. PPF (Public Provident Fund)

The PPF is a solid choice for risk-free, tax-efficient, long-term savings.

It offers guaranteed returns and tax benefits under Section 80C.
It should be continued as part of your debt allocation.
However, you may want to limit over-reliance on low-return instruments like PPF, as it has a lock-in period of 15 years and a lower growth potential compared to equities.
2. Postal Life Insurance (PLI)

PLI is one of the oldest and most reliable life insurance products in India.

It offers low premiums with high returns.
However, if you are purely looking for life cover, term insurance may offer a higher sum assured at a lower cost.
For wealth accumulation, this may not be the most optimal choice due to its moderate returns. It is advisable to review whether you need both PLI and Jeevan Umang (discussed below).
3. Jeevan Umang

Jeevan Umang is a combination of life insurance and investment, providing regular payouts.

Such investment-cum-insurance plans generally offer lower returns compared to mutual funds.
You might want to re-evaluate keeping this plan since standalone life insurance (term insurance) combined with mutual fund investments may provide better growth and flexibility.
Cancelling or surrendering this policy should be considered after evaluating its surrender value and whether it's feasible based on your financial goals.
4. Recurring Deposit (RD)

RDs are low-risk instruments but have relatively lower returns.

While RDs ensure capital safety, they might not be ideal for wealth creation, especially for long-term goals.
Since you're still young with a long investment horizon, it might be better to channel more funds into equities for higher growth potential.
Consider reducing or stopping this RD and redirecting the funds into equity-based investments.
5. ICICI Equity and Debt Fund

This hybrid fund is a balanced option offering exposure to both equity and debt.

It provides the potential for growth through equities while managing volatility with debt.
As you are young and have a long-term horizon, a higher allocation towards pure equity funds might yield better long-term results.
Evaluate whether you need a hybrid fund in your portfolio, as your other debt investments (PPF, RD) already provide stability.
6. ICICI India Opportunity Fund

This is a thematic fund, focused on certain sectors or market opportunities.

Thematic funds can be more volatile and risky compared to diversified equity funds.
Consider whether you need exposure to such a niche strategy. These funds can work well in a bull market but may not be ideal for consistent long-term growth.
It might be wiser to replace this fund with a more diversified equity mutual fund for better stability.
7. Kotak Multi Cap Fund

Multi-cap funds invest across large-cap, mid-cap, and small-cap stocks.

Multi-cap funds are suitable for long-term growth as they provide diversification across different market capitalisations.
This is a good choice to hold as it balances risk and returns by spreading investments across different categories.
No change is required here.
8. Sundaram Service Fund

Thematic funds like this one tend to focus on specific industries or sectors.

Sector-focused funds are prone to higher volatility due to limited diversification.
While such funds can provide high returns in specific cycles, they may not be ideal for consistent long-term growth.
You could consider switching to a diversified equity fund to reduce concentration risk.
9. Nippon Small Cap Fund

Small-cap funds have high growth potential but are also volatile.

Given your long-term horizon, small-cap funds can offer excellent growth opportunities.
However, small-cap funds should be a part of your portfolio, but with a smaller allocation due to higher risks.
Keep an eye on the fund’s performance and market conditions but maintain some exposure to small caps for aggressive growth.
10. HDFC Multi Cap Fund

Similar to the Kotak Multi Cap Fund, this fund offers broad exposure across different types of companies.

Multi-cap funds are an important component of a well-diversified portfolio.
Holding multiple multi-cap funds may lead to overlapping stock investments, so it may be beneficial to consolidate into one multi-cap fund for simplicity and efficiency.
No immediate need for cancellation, but consider streamlining your investments.
11. Canara Robeco Blue Chip Equity Fund

Blue chip equity funds invest in well-established companies with strong track records.

Blue chip funds are a stable option for long-term wealth creation with moderate risk.
These funds tend to perform well in the long term, providing stable growth.
Continue investing in blue-chip equity for consistent, lower-risk returns.
12. Motilal Oswal Large and Mid Cap Fund

This fund invests in a mix of large and mid-cap companies.

Large and mid-cap funds offer a balance of stability from large caps and growth potential from mid caps.
It’s a good choice to keep, given your long-term investment horizon.
Continue your SIP in this fund as it provides a diversified exposure to both stable and high-growth companies.
Portfolio Insights

Your portfolio is a mix of both equity and debt instruments. There are areas where you could improve efficiency and focus more on growth. Since you are young, your portfolio should focus more on equity investments rather than debt or conservative instruments.

Here are some points for improvement:

Consider reducing or stopping PLI, Jeevan Umang, and RD. They offer lower returns and are not ideal for wealth accumulation.
Consolidate your multi-cap funds to avoid redundancy and improve efficiency.
Consider moving away from thematic funds (ICICI India Opportunity, Sundaram Service) and replace them with more diversified options for better risk management.
Maintain small exposure to small-cap funds but don’t over-allocate due to volatility.
Large-cap and blue-chip funds should continue, as they provide stability to your portfolio.
Investment Strategy Moving Forward

Since you are currently pursuing your MD, you might want to focus on building a strong long-term growth portfolio. The following strategy could help you optimise your investments:

Increase Equity Exposure: Given your young age and long-term goals, you could increase your equity exposure to maximise returns. Equity mutual funds have historically outperformed other asset classes over long periods.

Reduce Debt Instruments: PPF is a good debt instrument, but the RD and life insurance policies may not be ideal for wealth creation. Consider directing those funds into more growth-oriented investments.

Review Insurance Needs: If your current life insurance policies are not providing adequate coverage, switch to a term plan that offers high coverage at a lower premium. This will allow you to free up more funds for investment purposes.

Consolidate and Simplify: You have multiple schemes in similar categories, which might lead to unnecessary overlap. Streamlining your portfolio by focusing on a few high-quality funds can make it easier to track performance.

Continue SIPs: SIPs are a great way to invest systematically. Increase your SIPs in funds with strong performance records and reduce exposure to underperforming or high-risk funds.

Monitor Portfolio Regularly: Keep track of your fund performance, rebalance annually, and make adjustments as needed to align with your goals.

Final Insights

Your portfolio is already in a good shape for someone at the start of their professional career. However, there are some areas where you could optimise for better returns. By focusing more on equity and less on conservative products like life insurance and RDs, you can enhance your wealth creation potential.

This shift in strategy will allow you to focus on long-term growth, ensuring a solid financial foundation for the future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: I appreciate the clarity with which you've shared your financial picture. You are in a strong financial position, and it's great that you're looking ahead to structure a clear retirement plan and address short-term goals.

Let’s break down your situation and give you a comprehensive approach that covers all angles. This will include suggestions on your house purchase, marriage expenses, retirement planning, and investments, all tailored to help you achieve your goals.

Short-Term Goals: House Purchase and Marriage
House Purchase (3-4 Years): Rs 1.5 - 2 Crore
You have mentioned wanting to purchase a house in the next 3 to 4 years with a budget of Rs 1.5 to 2 crores. Given that this is a significant investment, here’s what I suggest:

Gradual Investment in Debt-Oriented Funds: Since the goal is relatively short-term, you should not allocate this entire sum to equity markets, as they can be volatile. You can gradually invest in debt mutual funds or balanced funds, which offer moderate returns with lower risk compared to equity. This will help your savings grow without exposing them to significant market risk.

Systematic Transfer Plans (STP): You can park your money in liquid or ultra-short-term funds initially. Over time, you can gradually transfer these funds into equity-oriented hybrid funds through an STP. This will ensure that your funds grow but with reduced exposure to market volatility. Avoid lump sum investments in equity at the moment, especially since the market is at an all-time high.

Down Payment Planning: Keep in mind that for a house purchase, you'll need to have 20-25% of the property cost ready as a down payment. You can allocate a portion of your Rs 72 lakh in savings and your Rs 2.3 crore in FDs towards this goal. However, avoid putting this entire amount in equities right away.

Marriage (1 Year): Rs 20-25 Lakhs
Since you need this amount within a year, I would suggest keeping this fund in ultra-safe investment options.

Use Short-Term Debt Funds: For such short-term goals, stick to debt-oriented mutual funds or fixed maturity plans (FMPs). These funds offer safety and predictability, ensuring that you don't lose capital while getting slightly better returns than a savings account or fixed deposit.

Liquid Funds: Another option is to park your funds in liquid mutual funds. These are relatively safer than equity mutual funds and still provide slightly better returns than a traditional savings account.

Allocate the required Rs 20-25 lakhs from your current savings and park it in one of these low-risk options. This ensures that you have the funds readily available without worrying about market movements.

Long-Term Goal: Retirement at 46 Years
Current Lifestyle and Future Expenses
You aim to retire in 10 years at the age of 46. Your current monthly expenses are Rs 1.5 lakh, which will increase due to inflation. Considering 8-9% inflation, your monthly expenses at retirement could be around Rs 3-4 lakhs.

It’s essential to create a plan that ensures you have enough to cover these expenses for at least 40-50 years post-retirement. Even though you plan to work after retirement, having a solid retirement corpus is crucial to maintaining your lifestyle.

Investment Strategy for Retirement
Continue with Equity Mutual Funds: You are already investing Rs 1.75 lakh per month in equity mutual funds through SIPs, which is a smart move. Equity investments are essential for long-term wealth creation, and the SIP route helps mitigate market volatility by averaging your costs. Continue with this strategy for the next 9-10 years to maximize the power of compounding.

Equity Allocation in Mutual Funds: Considering your goal of retiring early, it is crucial to keep a significant portion of your investments in equity. Equity mutual funds are a great way to ensure long-term growth, especially in large-cap, mid-cap, and small-cap funds. These funds have the potential to offer higher returns, but they also come with higher risk. Since you have a 10-year horizon, this risk is manageable.

Regular vs. Direct Funds: While you may come across direct funds that offer lower expense ratios, I suggest sticking with regular funds through a Certified Financial Planner (CFP). A CFP adds value with expert advice, portfolio rebalancing, and timely strategy adjustments. Direct funds lack this advisory support, which could lead to uninformed decisions during volatile market phases.

Gradually Shift to Safer Instruments Closer to Retirement: As you approach your retirement age, say 2-3 years before retirement, you should start gradually reducing your equity exposure and move toward safer debt funds or balanced hybrid funds. This ensures that your corpus is protected from market downturns just when you need it most.

Create a Withdrawal Plan: Once you retire, having a strategy for withdrawing funds from your investments is vital. You can adopt a systematic withdrawal plan (SWP) from your mutual funds, which provides you with a steady income. SWP ensures regular withdrawals while your investments continue to grow, thanks to the remaining balance in your equity funds.

Fixed Deposits and Savings Account
Concerns About Investing Lumpsum in Equity
You have a significant amount (Rs 2.30 crore in FDs and Rs 72 lakh in a savings account) that you want to move into equity mutual funds but are hesitant due to the current market highs. Your caution is valid, and I suggest the following:

Systematic Transfer Plan (STP): Instead of making a lumpsum investment, consider moving your money into a liquid fund or short-term debt fund. From there, you can initiate an STP to gradually transfer money into equity mutual funds. This will help you avoid the risk of entering the market at a high point and allows you to spread out your investments over time.

Asset Allocation: Ensure that you maintain a balanced asset allocation between equity and debt. Given your goals and risk profile, a 60:40 allocation between equity and debt may work well. The equity portion will provide the growth you need, while the debt portion will offer stability and liquidity.

Gradual Equity Exposure: Avoid rushing into equities all at once, especially when markets are at record highs. Use the STP strategy to slowly increase your equity exposure. This will allow you to take advantage of any potential corrections while still benefiting from long-term market growth.

Inflation and Life Expectancy
Your concern about inflation is valid. At 8-9% inflation, your current expenses will more than double over the next 9-10 years. Planning for a long retirement (till age 100) means that your investments must continue to grow and outpace inflation even after you stop working full-time.

Hedging Against Inflation:
Equity Investments: Equities are one of the best inflation hedges available. By maintaining a significant portion of your portfolio in equity mutual funds, you ensure that your investments grow faster than inflation over the long term.

Balanced and Hybrid Funds: For moderate risk and inflation-adjusted returns, balanced and hybrid funds provide a combination of equity and debt. This mix offers both growth and protection, making it an ideal solution for long-term retirement planning.

Healthcare and Emergency Fund: Given the long life expectancy, healthcare expenses could rise significantly. Make sure you have adequate health insurance coverage and a separate emergency fund. You should also regularly review and increase your health insurance cover to account for rising medical costs.

Action Plan for Next Steps
To summarize, here is a step-by-step plan tailored to your goals:

House Purchase: Allocate funds to short-term debt funds or FMPs and gradually build the corpus required for the down payment.

Marriage Fund: Keep Rs 20-25 lakh in liquid funds or ultra-short-term debt funds for the upcoming expense.

Equity Investments: Continue your SIPs but use STP for any lumpsum investments from your FDs or savings account to avoid market highs.

Retirement Corpus: Maintain equity exposure for the next 7-8 years, gradually shifting to safer debt instruments as you approach retirement.

Inflation Protection: Keep a strong focus on equity to hedge against inflation and ensure your corpus lasts for the long term.

Health and Emergency Fund: Ensure you have a robust health insurance plan and a liquid emergency fund for unforeseen expenses.

Finally
You are in a great financial position to achieve your goals. By taking a structured and disciplined approach, you can ensure that your retirement is financially secure, your short-term goals are met, and your investments continue to grow.

Stay focused on maintaining a balanced portfolio, and don’t let market highs or lows dictate your decisions. A long-term strategy with periodic reviews will ensure that you stay on track for a comfortable retirement and achieve all your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Dear ,

It is really disappointing for any one to have nill work experience since 2019 though I personally don't believe . Low CGP doesn't become an impediment for any one which will not allow any job or engagement for ant graduate engineer . Getting a job depends upon your sincere desire and efforts ,not entirely on your cgp. A mechnical Engineer can easily join as site incharge for any mechnical project company . Can get into Techno commercial like Sales Engineer's job in B2B companies who keep on looking for smart engineers . Even Engineering service providers like Automobile company, Industrial products mfg companies as GT then in their Production , Operations or maintenance deptt. If not any thing you can join any FMCD company in their sales & Service dept so for me you can get numerous jobs but of course you need to try for it.

Ans: The CSE (Artificial Intelligence and Machine Learning) program your son is pursuing at Techno India University, Kolkata, offers a strong future as AI and ML are rapidly growing fields.
Top recruiting companies for the AI/ML branch would include TCS, Cognizant, Accenture, Wipro, Capgemini, and HCL.

Ans: Yes, you can pursue. To get into an MSc Mathematics program at IITs, you will need to qualify in IIT JAM.

Ans: Presidency University, Bengaluru

Ans: EEE graduates from BITS Goa generally see good placement records.

Ans: Many organizations are there as listed below. For application procedures and timelines see websites.
Indian Council of Medical Research (ICMR)
Council of Scientific and Industrial Research (CSIR) - Institutes
Biotechnology Industry Research Assistance Council (BIRAC)
Department of Biotechnology (DBT) - Govt. of India
National Institute of Immunology (NII), New Delhi
etc.