I am 46 years old now and estimating a requirement of approx 2 Cr at the age of 58. I am continuing below mentioning SIP from the last two years. Need you valuable suggestions to achieve my target. 

SIPs are for Total Amount of 33000/ month

• Axis Focused 25 Fund - Growth -- 2500
• Aditya Birla Sun Life Frontline Equity Fund - Growth -- 2500
• HDFC Hybrid Equity Fund - Regular Plan - Growth -- 5000
• Axis Bluechip Fund - Growth -- 2500
• Axis Growth Opportunities Fund - Growth -- 2500
• DSP Mid Cap Fund - Growth -- 3000
• HDFC Small Cap Fund - Regular Plan - Growth -- 3000
• IDFC Focused Equity Fund - Growth -- 3000
• L&T Emerging Businesses Fund - Regular Plan – G -- 3000
• SBI Blue Chip Fund - Growth -- 3000
• UTI Flexi Cap Fund - Growth -- 3000

Ans: Funds are good, however too many ELSS funds, it’s nice to see that you have stopped a few. 

Ans: Hello Kiran. With your current portfolio allocation, I would suggest shuffling and rebalancing your portfolio. For future sips, you may consider considering few schemes like ABSL Tax and Parag Parikh Flexi Cap Fund. To add more sips, try adding to the modified portfolio. It is not suggested to increase the current number of schemes. To achieve the corpus of 2Cr in next 13 years, the required sip amount is 50 k approx which you are already willing to start.

Ans: Current Financial Snapshot
At 43 years old, you earn Rs. 75,000 monthly. You have a home loan EMI of Rs. 15,000 per month. Your goal is to accumulate Rs. 3 crores in the next 10-15 years. You’ve been investing Rs. 12,000 per month in SIPs for 1.5 years. Let’s assess how you can achieve this ambitious target.

SIP Portfolio Analysis
Your current SIPs are spread across small-cap, mid-cap, and large-cap funds. Here’s a detailed evaluation of your portfolio:

Small-Cap Exposure: You’ve allocated Rs. 6,500 monthly to small-cap funds. Small-cap funds have the potential for high returns but come with high risk. At 43, it’s essential to strike a balance between growth and stability.

Mid-Cap Allocation: Rs. 2,500 per month is invested in a mid-cap fund. Mid-cap funds are a good mix of growth and risk, offering potential returns while being slightly less volatile than small-cap funds.

Large-Cap Focus: Rs. 2,000 per month is in a large-cap fund. Large-cap funds are more stable, investing in well-established companies. This provides a solid foundation for your portfolio.

Balanced Fund: Your investment in a fund that likely balances equity and debt adds some stability to your portfolio. This is a wise choice for risk management.

Enhancing Portfolio Diversification
Your current SIPs are heavily weighted towards small-cap funds, which are volatile. Diversifying your portfolio will reduce risk and increase the likelihood of reaching your Rs. 3 crore goal.

Increase Large-Cap Allocation: Large-cap funds offer more stability and consistent returns. Consider increasing your monthly SIP contribution to large-cap funds. This will add balance to your portfolio and reduce risk.

Introduce Balanced or Hybrid Funds: Balanced funds invest in both equity and debt. They provide growth potential while reducing volatility. Adding such funds can help stabilize your portfolio.

Reduce Small-Cap Exposure: While small-cap funds have high growth potential, they are also highly volatile. Given your age and goals, consider reducing your small-cap exposure.

Actively Managed Funds vs. Index Funds
Actively managed funds, which your portfolio consists of, can outperform index funds, especially in the Indian market. Here’s why actively managed funds are a better choice:

Higher Potential Returns: Actively managed funds aim to outperform the market. This can result in higher returns compared to index funds.

Professional Management: These funds are managed by professionals who actively make investment decisions based on market conditions. This increases the chances of capitalizing on market opportunities.

Avoid Index Funds: Index funds simply track the market and may not provide the returns you need to meet your Rs. 3 crore goal. The lack of active management in index funds can be a disadvantage in a dynamic market like India.

The Importance of Regular Funds
Investing through regular funds via a Certified Financial Planner (CFP) offers several benefits. Here’s why it might be better than direct funds:

Expert Guidance: A CFP can provide tailored advice based on your financial goals, risk tolerance, and market conditions. This helps in optimizing your portfolio.

Risk Management: CFPs help in balancing risk by suggesting appropriate asset allocation. This ensures your investments align with your risk appetite.

Periodic Reviews: Regular funds managed through a CFP are reviewed periodically. This helps in making necessary adjustments based on market conditions or changes in your financial goals.

Increasing SIP Contributions
To achieve your Rs. 3 crore goal, consider increasing your SIP contributions. Here’s why and how you should do it:

Annual Increase: Consider increasing your SIPs by 10-15% annually. This will help you accumulate a larger corpus over time. An annual step-up in your SIPs aligns with potential salary increments.

Step-Up SIPs: Some mutual funds offer a step-up SIP option. This feature allows your SIP contribution to increase automatically each year. This is a convenient way to boost your investments without needing to manually adjust your SIP amount.

Additional Investments: Besides increasing SIPs, consider making lump sum investments whenever you have surplus funds. This will further enhance your portfolio’s growth potential.

Managing Home Loan and Investments
Your home loan EMI of Rs. 15,000 is manageable but should be carefully balanced with your investment commitments.

Loan Prepayment: If you receive any bonuses or windfalls, consider using a portion to prepay your loan. This will reduce your interest burden and free up more money for investments.

EMI and SIP Balance: Ensure that your EMI and SIP contributions are well balanced. Don’t stretch yourself too thin. It’s important to maintain a healthy cash flow to manage both commitments comfortably.

Tax Planning and Wealth Accumulation
Effective tax planning is crucial for maximizing your returns and reaching your Rs. 3 crore goal. Here’s how you can optimize tax benefits:

Utilize Section 80C: Ensure that your investments like PPF, ELSS, and life insurance premiums fully utilize the Rs. 1.5 lakh deduction under Section 80C. This will reduce your taxable income and increase your savings.

Tax-Efficient Funds: Consider investing in tax-efficient funds such as ELSS, which provides tax benefits along with growth potential. This will enhance your overall returns.

Retirement Planning
As you approach your 50s, retirement planning becomes increasingly important. Here’s how to ensure you’re on track:

Dedicated Retirement Fund: Consider setting up a separate retirement fund. This could include NPS, PPF, or a retirement-specific mutual fund. These instruments offer a good mix of equity and debt, which is ideal for long-term growth and stability.

Review Retirement Goals: Regularly assess your retirement corpus to ensure it aligns with your future needs. Adjust your savings rate if necessary to meet your retirement goals.

Final Insights
Achieving a Rs. 3 crore corpus in 10-15 years requires a balanced and disciplined approach. Start by diversifying your SIP portfolio, increasing your SIP contributions, and considering additional investments. Manage your home loan effectively and optimize your tax planning to maximize savings. Regularly review and adjust your financial strategy as needed. With the right approach, your goal is well within reach.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in