I am 42. Up to now I have very little investment. One and half years back I started following SIP and lump sum investment in MF along with I have mediclaim policy for 10 lakh for my family. 

1. Axis Midcap Fund regular growth: 1500 per month

2. Kotak Emerging equity fund growth (Regular): 1500 per month

3. SBI small cap fund regular growth: 2000 pre month

4. Canara robeco emerging Equities regular growth: 2000 per month

5. SBI balanced advantage fund regular growth: 1,50,000 Lump Sum

6. Kotak balanced AF Regular growth: 1,50,000 Lump Sum\

7. Canara Robeco Ultra short term fund regular growth: 1,00,000 Lump sum

8. Kotak Saving Fund GRowth regular: 1,00,000 Lump Sum

9. UTI floater fund regular growth: 1,00,000 Lump SUm

10. Rs. 30,000 Shares Of Reliance Industries for long term

11. Rs. 25,000 Shares of Tata Motor for the long term. 

12. Sukanya Samrudhi Account: 4000 per month

All funds are in negative now. All this investment I have made for the long term.

I want to know your expert advice if I should continue with this portfolio as all SIPs and MFs are regular and all SIPs are small cap funds. 

Ans: Please continue

Ans: Prudent approach is to have the family covered for medical and life with pure insurance product.

Post that, create a corpus for emergency fund that should be 6 month of monthly expenses.

Only post that investment is recommended.

Depending upon your cash flows, mode of investment can be SIPs or lumpsums; however, SIPs are recommended.

Existing funds are okay; for further investment Axis ESG Equity Fund – Growth or UTI Flexi Cap fund – Growth can be considered

Ans: Hello Habeeb. Your portfolio seems over-diversified. I would suggest to reconcise and reshuffle your portfolio with 31.5k SIP. I would suggest reconsider the schemes for LIC MF, Axis AMC & SBI AMC.

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