I am 45 & my monthly SIP are as below - To have a final value of 10 cr in 12 years will below be enough ? UTI Nifty 50 Index Fund (G) - Direct plan - 50000/- Parag Parikh Flexicap Fund (G) - Direct plan - 50,000/- SBI Magnum Midcap Fund (G) Direct Plan - 15,000/- ICICI Prudential Equity and Debt Fund- G – Direct Plan - 15,000/- ICICI Prudential Gilt Fund- G – Direct Plan - 15,000/- Mirae Asset Emerging Bluechip Fund Growth - 5,000/- Bank RD - 20,000/-

Ans: Hello Mriganka. Your portfolio appears to be over-diversified. There is a proportion in both sector and thematic funds. Hence, I would suggest you to reconcise and reshuffle your portfolio. Also, reconsider Edelweiss mid-cap and Tata Small Cap Fund. With 31k monthly sip you may achieve a corpus of 4.08 cr in the next 20 years with 14% CAGR.

Ans: First, of all it is good to know that capital intensive goals like fixed assets and loans are completed. You have planned your finances well. My responses are below:
• The Funds listed by you have performed reasonably well
• Currently, most of your portfolio is Equity oriented and are high risk. This is ok, but it is good to have some money on debt options. This has not been provided by you, so cannot comment.
• An assumption of 12% annualized returns over a period of 14 Years looks a little overstretched if one considers having a good mix of Equity, Debt and Gold in the portfolio. Your current SIP’s fall a little short of achieving INR 7 crore over 14 Years with 12% annualized returns. You could increase this on a yearly basis as your income goes up and you should be fine. Over the years, you can also increase the mix of Debt and Gold.
• Another question one needs to ask is whether the Corpus of INR 7 crore is enough assuming that one is planning for retirement. Our retirement models show that this kind of Corpus might be sufficient to cover monthly expenses of approximately INR 1.5-1.6 lacs in today’s scenario. The standard of living varies from person to person, so you can assess based on these inputs.

Ans: It's great that you're investing systematically through SIPs to achieve your financial goals. However, it's essential to review your investment strategy periodically to ensure it aligns with your objectives and risk tolerance.

Considering your aim to accumulate 50 lakhs in 5 years and your willingness to take high risk, here are some considerations:

One-time SIPs: Investing in small-cap and multi-cap funds can potentially offer higher returns but also comes with higher volatility. Given your relatively short investment horizon of 5 years, ensure you're comfortable with the risk associated with these funds.
Monthly SIPs: Continuing SIPs in small-cap and PSU funds aligns with your risk appetite. However, it's crucial to monitor the performance of these funds regularly and be prepared for market fluctuations.
Review and Adjust: Periodically review the performance of your funds and assess if they're on track to meet your goal of accumulating 50 lakhs in 5 years. If necessary, consider rebalancing your portfolio or switching to funds with better growth potential and risk-adjusted returns.
Diversification: While high-risk investments have the potential for higher returns, it's essential to diversify your portfolio to mitigate risk. Consider adding funds from different categories such as large-cap or balanced funds to achieve diversification.
Consult a Financial Advisor: Given the complexity of investing and your specific financial goals, consider consulting with a financial advisor who can provide personalized advice tailored to your needs and objectives. They can help you evaluate your investment strategy, identify any gaps or areas for improvement, and make informed decisions to maximize your returns while managing risk.
By staying informed, regularly reviewing your portfolio, and seeking professional guidance when needed, you can increase the likelihood of achieving your financial goals effectively.

Ans: Your investment strategy is off to a great start. You're investing Rs. 60,000 per month across three funds. Additionally, you contribute Rs. 14,000 monthly to NPS, Rs. 12,000 to EPF, and Rs. 10,000 to PPF. These contributions reflect a disciplined approach to long-term wealth creation.

However, the goal of building a Rs. 1 crore education fund by 2034 for your children is ambitious. With the right strategy, it is achievable.

Reviewing Your Mutual Fund Investments
Fund Selection: Your current SIPs in Parag Parikh Flexi Cap, SBI Bluechip, and HDFC Large and Midcap are diversified across different market caps. This is a solid strategy, as it balances risk and return.

Flexi Cap Fund: This type of fund gives the fund manager the flexibility to switch between market caps based on market conditions. This can be advantageous, but the performance is highly dependent on the manager's skill.

Bluechip Fund: Large-cap funds like SBI Bluechip are relatively safer. They invest in established companies with a stable track record. This provides stability but limits the potential for very high returns.

Large and Midcap Fund: The HDFC Large and Midcap Fund balances the stability of large caps with the growth potential of mid-caps. This adds a layer of moderate risk to your portfolio.

Considering your goal, a mix of growth-oriented funds (like mid-cap and flexi-cap) and stability-focused funds (like large-cap) is good. However, given the education goal for your kids, a more aggressive strategy in the early years could potentially yield higher returns.

Contribution to NPS, EPF, and PPF
NPS: The National Pension System (NPS) is a good option for retirement planning. Your Rs. 14,000 monthly contribution is tax-efficient and offers decent returns. However, NPS has a lock-in until retirement, which may limit liquidity.

EPF: Your Rs. 12,000 contribution to EPF is another safe, tax-efficient option. It provides guaranteed returns and adds to your retirement corpus.

PPF: PPF is a safe investment with tax benefits. Your Rs. 10,000 monthly contribution ensures stable, long-term growth. However, the returns from PPF are modest compared to equity investments.

Assessing the ICICI Smart Kid Policy
Policy Overview: The ICICI Smart Kid policy is a combination of insurance and investment. You’ve been contributing Rs. 48,000 annually since 2016.

Policy Efficiency: Investment-cum-insurance policies generally offer lower returns compared to pure investment products like mutual funds. Moreover, the insurance coverage might not be adequate. It’s often better to separate insurance and investment.

Recommendation: Given the long-term goal and the potential underperformance of such policies, consider surrendering this policy and reallocating the funds to higher-performing mutual funds. You can use the surrender value to boost your SIP contributions.

Is Your Current SIP Sufficient for Rs. 1 Crore by 2034?
Projection: Your current SIP of Rs. 60,000 per month in the mentioned funds will need to grow at a significant rate to reach Rs. 1 crore by 2034. Assuming an average annual return of 12%, which is realistic for equity mutual funds, your portfolio could grow substantially. But it’s crucial to periodically review and adjust your SIP amounts to stay on track.

Potential Shortfall: If the market underperforms, you may face a shortfall. To mitigate this risk, consider increasing your SIP amount or reallocating funds to more aggressive growth options like mid-cap or small-cap funds. This can help bridge any potential gaps in your target amount.

Strategy for Retirement Planning
Current Contributions: Your NPS, EPF, and PPF contributions are all directed towards retirement. However, you should assess whether these will be sufficient to meet your retirement goals, considering inflation and lifestyle needs.

Retirement Corpus: The goal should be to accumulate a corpus that can generate a steady post-retirement income, adjusted for inflation. Given your current age and the fact that you have 20 years until retirement, you should focus on building a corpus that can sustain your desired lifestyle.

Asset Allocation: As you get closer to retirement, gradually shift towards safer assets like debt funds or fixed income instruments. But for now, focus on growth through equity funds.

Reevaluating Your Insurance Needs
Insurance Coverage: Ensure you have adequate life insurance, separate from your investments. Term insurance is a more cost-effective way to secure your family's future.

Health Insurance: Since you didn’t mention health insurance, it’s crucial to ensure you have adequate coverage for unforeseen medical expenses. If you don’t have one, consider a comprehensive family health insurance plan.

Final Insights
Increase SIP: Consider increasing your monthly SIP by at least Rs. 10,000 to ensure you meet your education goal for your children. This can be done gradually, as your income grows.

Reallocate Funds: Evaluate the ICICI Smart Kid policy and consider surrendering it to reallocate the funds to mutual funds. This could potentially offer better returns for your child’s education and your retirement planning.

Retirement Planning: Keep your focus on building a retirement corpus that accounts for inflation and rising expenses. Your current contributions are on track, but regular reviews are essential.

Regular Monitoring: Review your investments at least once a year. This will help you stay aligned with your goals and make necessary adjustments.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in