I am 43 years old. I making following investments in Mutual Funds:-

• Mirae Asset Large Cap Fund Regular Plan Growth 2500/- PM
• Axis Focused 25 Fund Growth 5000/- PM
• Axis Blue chip FundGrowth 2500/- PM
• Kotak Flexi Cap Fund Regular Plan Growth 2500/- PM
• ICICI Prudential Blue chip Fund Growth 2500/- PM
• Motilal Oswal Flexi Cap Fund-Growth 2500/- PM
• Nippon India Small Cap Fund-Growth 2500/- PM
• ICICI Pru Life Time Classic 5000/- PM
• ICICI Pru Signature 150000/- PA
• ICICI Pru Savings 100000/- PA
• HDFC Life ProGrowth Plus 30000/- PA

Please advise changes in above portfolio if required. I want to build a corpus of Rs 3-5 crore in next 10-15 years.

Ans: No changes are required.

Ans: Hello;

Your current portfolio corpus of 31 L will grow into a sum 1.05 Cr after 10 years.

The 20 K sip currently ongoing will lead you to a corpus of 49.34 L thereby leading to shortage of 50 L+ in your planned corpus.

It has 2 solutions;
1. Double the sip amount to 40K which will lead you to a sum of around 1 Cr after the end of 10 years.

2. Top-up the existing 20 K sip by 20% minimum every year to lead you to a corpus of 1 Cr at the end of 10 years.

So lumpsum corpus added with sip corpus will help you achieve your intended target of 2 Cr after 10 years.
(A modest return of 13% is assumed)

My view is you should replace Invesco India Infrastructure fund with Kotak emerging equities fund and Quant small cap fund with Nippon India small cap fund.

*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: Value funds are a great option for many investors. They invest in undervalued companies with strong potential for future growth. These funds target businesses that may not be performing well now, but have the capacity to grow in the future. This makes them a good choice if you have a long-term horizon and the ability to tolerate volatility.

A key feature of value funds is that they can outperform during certain market phases. However, during other phases, they may underperform compared to other equity funds like growth funds or flexi-cap funds.

Assessing Long-term Returns
Although your current fund may be delivering 30% XIRR, this is not sustainable in the long run. Market conditions fluctuate, and value funds can see significant ups and downs. Historically, the long-term average return for equity funds is between 10-12%. This will vary depending on market cycles, and it’s crucial to consider this when evaluating the performance of your fund.

So, while the current returns look appealing, they should be viewed as part of a larger trend over time. A key insight here is that investing in equity always comes with volatility. Don’t get caught up in short-term gains; instead, focus on the long-term growth potential.

Value Funds vs. Other Equity Funds
Value funds are one part of the equity category, and they have a specific strategy. But compared to growth funds or flexi-cap funds, value funds can be more volatile in the short run.

In growth funds, investments are made in companies expected to grow faster than the market. They can provide better short-term performance during a bullish phase. Flexi-cap funds, on the other hand, balance risk by investing across large, mid, and small-cap companies. This makes them more flexible and diversified.

While value funds have the potential for higher returns, they may also see more volatility. Other equity funds might provide a smoother ride, albeit with possibly lower highs during market rallies.

Active Funds vs. Index Funds
It is worth noting the difference between active value funds and index funds. Index funds are passively managed and follow the market's movement. They don't aim to outperform but to match a particular benchmark. This means they may offer lower returns compared to actively managed funds, where the fund manager picks stocks based on market conditions and strategies.

One of the disadvantages of index funds is that they cannot react to market changes. If a particular sector is underperforming, index funds will still be forced to hold those stocks, while an active fund manager can make adjustments to avoid losses.

So, in your case, actively managed funds, especially in the value space, can provide better returns with professional management.

Direct vs. Regular Funds
If you are investing through direct funds, you might want to consider the benefits of switching to regular funds through a Certified Financial Planner. Direct funds have lower expense ratios, but that comes with fewer insights and advice. A Certified Financial Planner can guide you through market cycles and help rebalance your portfolio.

A good MFD with a CFP credential will actively monitor and suggest changes in your investments based on changing market conditions. This advice and regular tracking help in making better financial decisions compared to direct funds.

Setting Up an STP for Better Risk Management
Systematic Transfer Plans (STPs) can be a smart option for managing risk. If you're experiencing a windfall in returns, an STP allows you to move your money into a safer option gradually.

Instead of pulling out everything and trying to time the market, an STP can help you balance between high-risk and low-risk investments. You can shift from a value fund into something more stable like a balanced fund or debt fund over time.

This approach can lock in your profits while giving you a more stable future return.

However, an STP is not necessary for everyone. If your goal is long-term, and you can handle market fluctuations, then staying invested in the value fund may be more beneficial. Equity funds reward patience. You should only consider an STP if you're nearing a financial goal or require more liquidity.

Risk Assessment of Value Funds
Every equity fund comes with risk, but value funds can be more volatile. They often invest in companies going through temporary troubles but with strong fundamentals. The risk here is that not all of these companies will recover quickly.

In good times, value funds can outperform the market. But when the economy slows, these funds may underperform. This makes them ideal for long-term investors who are willing to ride out market swings. If you are comfortable with this level of risk, then value funds are still a good option.

The Impact of Volatility
Volatility is a part of investing in value funds. High returns like the 30% XIRR you are seeing now may not last. But even if they drop, the core potential of value funds remains strong. Over a 10 to 15-year period, the return could stabilize around 12% CAGR, which is still healthy.

It is essential to have realistic expectations when investing in these funds. Don't let short-term gains make you overly optimistic or lead you to increase your risk unnecessarily.

Should You Continue Investing in Value Funds?
If your investment horizon is long-term, value funds can still play a crucial role in your portfolio. You should, however, ensure that you are diversified across other fund types to spread your risk. A Certified Financial Planner can help in assessing whether you need to rebalance your investments.

In general, staying invested in value funds is not wrong. They offer great potential for wealth creation but come with volatility. You just need to ensure you’re not overexposed to one fund type.

Final Insights
A 30% XIRR from a value fund is impressive but temporary. Over time, expect returns to normalize around 12% with volatility.

Diversifying across other equity funds can reduce your overall risk. If you’re uncomfortable with the current volatility, consider setting up an STP. But if your goal is long-term, staying invested in the value fund could still yield strong results. Always seek advice from a Certified Financial Planner to ensure you are on the right track.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

Ans: You have built a diversified portfolio with a combination of large-cap, mid-cap, ELSS, and flexi-cap funds. Each fund serves a specific purpose, but a review will help optimize your investments to meet your goal of Rs. 1.5 crore in 12 years. Let’s assess each category.

Large-Cap Funds
Nippon India Large Cap Fund – Rs. 2,000 per month

Mirae Asset Large Cap Fund – Rs. 3,000 per month

Axis Bluechip Fund

These funds focus on large-cap companies, offering stable growth but with relatively lower risk. While having multiple large-cap funds ensures stability, it may lead to overlap in the portfolio. You can consider consolidating them into 1 or 2 funds to reduce redundancy. Mirae Asset and Axis Bluechip are solid options for continued long-term investments.

ELSS Funds
Axis ELSS Tax Saver – Rs. 1,000 per month

Kotak ELSS Tax Saver – Rs. 1,000 per month

ELSS funds offer tax benefits under Section 80C. However, having two ELSS funds for Rs. 2,000 might not be necessary. You can choose the one with consistent performance and focus your ELSS investment there. Axis ELSS has performed well historically, but assess both before making a decision.

Mid-Cap Funds
Motilal Oswal Mid Cap – Rs. 2,000 per month

Axis Mid Cap – Rs. 1,000 per month

Mid-cap funds offer higher growth potential than large-cap funds, but with more risk. Holding two mid-cap funds is a balanced strategy, but since the Axis Mid Cap has been consistently strong, you can consider increasing your SIP here. Motilal Oswal Mid Cap is a good performer but may need to be watched for volatility.

Flexi-Cap Funds
JM Flexi Cap Fund – Rs. 2,200 per month
Flexi-cap funds give fund managers the flexibility to invest across market capitalizations, reducing concentration risk. This fund provides good diversification. Review its performance regularly, as flexi-cap funds can vary in returns based on market conditions.

Passive Multi-Asset Fund
ICICI Prudential Passive Multi-Asset Fund (One-time investment of Rs. 5,000)
This fund combines equity, debt, and gold to balance risk. While passive funds reduce the need for active monitoring, they may not provide the same growth potential as actively managed funds. Actively managed funds tend to perform better in dynamic markets, which could better align with your long-term goal of wealth creation.

Contra Fund
SBI Contra Fund – Rs. 2,000 per month
Contra funds follow a contrarian investment strategy, buying when others are selling. While this can provide significant gains during market recovery, contra funds may experience long periods of underperformance during market booms. It's a high-risk option that may not suit every portfolio. Regularly review its performance to ensure it fits with your investment goals.

Suggestions for Improvement
Consolidate Funds: You have multiple large-cap and ELSS funds. Streamline to 1 or 2 per category to reduce overlap and improve focus. A well-performing large-cap fund and one ELSS should suffice.

Increase SIP in High-Growth Funds: Focus more on mid-cap and flexi-cap funds, as they have higher growth potential. Increase your SIP in Axis Mid Cap and JM Flexi Cap, as they can boost your returns over the long term.

Review Contra and Passive Fund: SBI Contra and ICICI Passive Multi-Asset may not align with your goal of aggressive wealth creation. Consider switching to funds with more aggressive growth profiles, like a focused equity fund or a small-cap fund, to maximize potential returns.

Building a Rs. 1.5 Crore Corpus
To achieve your goal of Rs. 1.5 crore in 12 years, you'll need to invest aggressively. Based on your current portfolio, the estimated return would range between 10-12% annually, depending on market conditions and fund performance. To reach Rs. 1.5 crore in 12 years, you may need to increase your monthly SIP amount to around Rs. 20,000-25,000, depending on the returns.

Steps to Build the Corpus:
Increase SIP Contributions: To reach your goal, gradually increase your SIP amount over time. Aim to raise your SIP to Rs. 20,000-25,000 per month.

Rebalance Annually: Revisit your portfolio at least once a year. Make sure your portfolio remains aligned with your long-term goal.

Stick to Long-Term Investment: Avoid switching funds frequently. Stay committed to your investment horizon, and let the power of compounding work for you.

Emergency Fund: Ensure that you have an emergency fund in place, covering at least 6 months of expenses. This will prevent you from withdrawing your investments during unforeseen events.

Tax Planning with ELSS
You are already investing Rs. 2,000 in ELSS funds, which qualifies for tax deductions under Section 80C. Continue this as part of your tax-saving strategy, but make sure it fits into your overall portfolio without over-diversifying.

Final Insights
Your portfolio is well-diversified but can be simplified by reducing overlapping funds.

Focus on high-growth funds like mid-cap and flexi-cap to achieve your long-term goals.

Regularly review and rebalance your portfolio based on performance and market conditions.

Increase your SIP contributions gradually to ensure you are on track for your Rs. 1.5 crore goal in the next 12 years.

Avoid frequent switching; give your investments time to grow.

Tax planning with ELSS funds is good, but one fund is enough for your tax-saving needs.

Best Regards,

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