Hi sir, I am 43 years old and i have invested lump sum in following MFs

Portfolio - 1:

1.DSP ELSS TAX SAVER 80K Now @ 1.60 lakh holding since 2017

2.SBI long term Equity Dir G 5700 Rs left in Folio

Portfolio - 2:

3.Nippon India Flexi Cap Dir-G 80K

4.Tata Business Cycle Dir-G 60K

5. Nippon India Small Cap Dir-G 70K (Shifted from NI ELSS last week)

6. MO Nasdaq 100 FoF Dir-G 33K + planned Rs.5000/month SIP also (since this August 21)

And I have FOUR Lakh (2 in Sb A/c & can withdraw TWO lakh from my PPF) for investment. I am ready to invest 25-30k/month, minimum of 15 Years, can be increased to 50K after June-2023. I will Retire @2038, thinking Corpus of 10 Crore... Please Suggest... Can I invest in this Funds (Lump sum+SIP)/SIP, or some Good funds for investing.... How to modify/Invest....

Ans: Please continue, we can review after 1 year

Ans: Funds are good, please continue, don’t increase funds; if you need to top up, do in the existing schemes.

Ans: Your current portfolio shows a solid mix of funds across various categories. You have SIPs in Flexi Cap, Large & Mid Cap, Emerging Equity, Small Cap, and Active funds. Additionally, you have lump sum investments in Large Cap, Index, Short Term, and Mid Cap funds. This diversification strategy is commendable as it balances risk across different market segments.

However, there are a few areas that could be optimized for better returns and lower risk, especially considering your 10-year retirement goal.

Disadvantages of Index Funds
You've invested a lump sum in an Index Fund. Index Funds track a specific benchmark, usually the Nifty 50 or Sensex. While they have lower expense ratios, they also lack the flexibility to adapt to market changes.

Active funds, on the other hand, allow fund managers to pick stocks that can outperform the market. In the long term, this can result in higher returns. Therefore, considering your retirement goal, shifting from the Index Fund to an actively managed fund might be more beneficial.

Regular Funds vs. Direct Funds
You haven’t specified whether your investments are in regular or direct funds. If you are considering direct funds, it’s important to know their limitations. Direct funds have lower expense ratios, but they don’t come with professional advice.

Certified Financial Planners (CFP) provide guidance, periodic reviews, and help in rebalancing your portfolio based on market conditions and your financial goals. Investing through a CFP ensures your portfolio is always aligned with your objectives.

Evaluation of Your SIPs
Flexi Cap Fund: This is a good choice, providing flexibility to invest across market caps. However, it might be wise to ensure your exposure isn't overly concentrated in any single market cap.

Large & Mid Cap Fund: This fund offers a balance between stability (large caps) and growth potential (mid caps). Continue this SIP as it aligns with your retirement goals.

Emerging Equity Fund: Mid and small caps tend to be more volatile. Consider reviewing this SIP annually to ensure it meets your risk tolerance.

Active Fund: Active funds can outperform benchmarks if managed well. Continue this SIP, but keep track of the fund’s performance.

Small Cap Fund: Small caps can offer high growth but with higher risk. Given your retirement goal, ensure this SIP doesn’t exceed 20% of your total SIPs, as it could add unnecessary volatility to your portfolio.

Assessment of Lump Sum Investments
Large Cap Fund: Large Cap funds are relatively stable, providing consistent returns. This should be a cornerstone of your portfolio.

Index Fund: As discussed, consider switching this to an actively managed fund for better returns.

Short Term Fund: This is a conservative choice, good for parking funds temporarily. However, for long-term growth, these funds may not be ideal.

Flexi Cap Fund: Diversification is key here, and the fund’s flexibility is advantageous. Continue to monitor its performance.

Mid Cap Fund: This fund offers growth potential but with some risk. Ensure this investment complements your overall portfolio strategy without overexposing you to mid-cap volatility.

Increasing Your SIP
Increasing your SIP by Rs 10,000 is a wise decision. Here’s how you might allocate it:

Allocate Rs 5,000 to a Balanced Advantage Fund: This will add stability to your portfolio by balancing equity and debt exposure. It’s a conservative choice that can offer better risk-adjusted returns.

Allocate Rs 5,000 to a Focused Equity Fund: This can potentially offer higher returns as the fund manager focuses on a limited number of high-conviction stocks.

Portfolio Rebalancing and Monitoring
Rebalancing your portfolio regularly is crucial. Markets can be unpredictable, and what works today might not work tomorrow. Review your portfolio every six months to ensure it’s aligned with your risk tolerance and retirement goals.

Final Insights
Your portfolio is well-diversified, but there are opportunities to optimize it further. By shifting from index funds to actively managed funds, and considering the guidance of a Certified Financial Planner, you can potentially achieve better returns. Increasing your SIP is a positive step towards securing your retirement, but make sure to allocate it wisely across different fund categories.

In summary:

Consider shifting from Index Fund to an actively managed fund.

Evaluate your exposure to small caps and ensure it aligns with your risk tolerance.

Invest the additional SIP amount in balanced and focused equity funds.

Regularly rebalance your portfolio and seek guidance from a CFP.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Planning for Rs. 3 crores in 20 years is achievable with disciplined investments. Systematic planning and fund selection are crucial for long-term growth. Your current SIP portfolio reflects commitment, but there is room for improvement to align with your goal.

Observations on Your Current Portfolio
Canara Robeco Flexi Cap Fund (Rs. 4,000)
This is a good diversified option. Flexi-cap funds balance risks across market caps.

Canara Robeco Consumer Trends Fund (Rs. 2,000)
Thematic funds focus on specific sectors. These may carry higher risks due to limited diversification.

Motilal Oswal Midcap Fund Direct Growth (Rs. 10,000)
Midcap funds can generate higher returns but are volatile. A large allocation to this fund increases portfolio risk.

Canara Robeco Small Cap Fund Direct Growth (Rs. 5,000)
Small-cap funds are high-risk, high-reward options. A balanced allocation here is essential to avoid overexposure to volatility.

Canara Robeco ELSS Tax Saver (Rs. 5,000)
ELSS is beneficial for tax-saving purposes. It also ensures equity exposure with a lock-in period of three years.

Recommendations for Current Portfolio
Rebalance the Allocation

Your portfolio leans heavily towards mid-cap and small-cap funds. Diversify further with large-cap or multi-cap funds.
This will stabilize returns during market downturns.
Reassess Thematic Fund Allocation

Consider limiting the Consumer Trends Fund allocation. Such funds may underperform if their sector faces a downturn.
Continue ELSS Investments

This is essential for tax savings. It also helps in building a disciplined approach.
Taxation Perspective
Equity Mutual Funds
Long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Funds
Both LTCG and STCG are taxed as per your income tax slab.

Optimize withdrawals to minimize tax impact. Align investments with tax-efficient instruments.

Suggestions for Additional SIP Investments
To allocate Rs. 10,000 in new SIPs:

First SIP (Rs. 5,000)

Consider an actively managed large-cap fund. These funds focus on established companies with stable returns.
They provide consistency and balance to your portfolio.
Second SIP (Rs. 5,000)

Invest in a multi-cap fund. These offer flexibility across market caps, ensuring better adaptability to market conditions.
Recommendations for Lumpsum Investments
For Rs. 50,000 annual lumpsum investments:

Balanced Advantage Fund

A mix of equity and debt ensures lower volatility.
These funds are ideal for lumpsum investments, especially during market uncertainty.
Equity Opportunities Fund

Invest in funds focusing on long-term growth across sectors.
This complements your SIP-based equity investments.
Debt Fund with Low Duration

To park short-term capital, allocate some portion here.
This maintains liquidity and offers moderate returns.
General Investment Guidelines
Review Portfolio Performance Regularly

Assess fund performance every six months. Exit consistently underperforming funds.
Diversify Across Fund Houses

Avoid concentrating investments in one AMC. This mitigates fund house-specific risks.
Utilize a Certified Financial Planner (CFP)

Work with a CFP for expert insights and a holistic financial plan.
Regular funds via an MFD ensure better handholding and guidance.
Emergency Fund

Keep six months’ expenses in liquid assets. This ensures stability during uncertainties.
Evaluating Actively Managed Funds
Actively managed funds adapt to market changes. They aim to outperform benchmarks.
Fund managers’ expertise ensures a strategic approach, unlike index funds that merely replicate indices.
Drawbacks of Index Funds

Lack flexibility during market shifts.
Can lead to suboptimal returns if indices underperform.
Final Insights
You have a commendable start with SIPs. Focus on aligning investments with your financial goals. Rebalancing and diversifying across funds will reduce risks. Invest systematically and review periodically to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment