53-Year-Old Loganathan Asks: Am I Investing in the Right Mutual Funds?

Ans: Loganathan, you are 53 years old and earn Rs. 25,000 per month. You invest 20% of your salary in mutual funds. Your current allocation is as follows:
• Large Cap: 10%
• Small Cap: 10%
• Flexi Cap: 10%
• Liquidity Funds: Remaining
Your dedication to investing is commendable. Let's review and suggest improvements.
Large Cap Mutual Funds
Benefits
• Lower risk compared to small cap funds
• Stability due to investment in established companies
Recommendation
• Keep your large cap allocation.
• Ensure the fund has a strong track record.
Small Cap Mutual Funds
Benefits
• High growth potential
• Higher returns over the long term
Risks
• Higher volatility
• Greater risk compared to large cap funds
Recommendation
• Continue with small cap investments.
• Ensure it aligns with your risk tolerance.
Flexi Cap Mutual Funds
Benefits
• Flexibility to invest across market caps
• Diversification within a single fund
Recommendation
• Flexi cap funds are a good choice.
• They provide balance and flexibility.
Liquidity Funds
Benefits
• Low risk and high liquidity
• Ideal for emergency funds
Recommendation
• Maintain liquidity funds for emergencies.
• Ensure easy access to these funds.
Suggested Changes
Balanced Portfolio
• Consider reallocating your investments.
• Balance between risk and stability.
Increase Large Cap Allocation
• Large cap funds offer stability.
• Consider increasing allocation to 20-25%.
Adjust Small Cap Allocation
• Small caps are riskier.
• Reduce allocation to 5-10%.
Maintain Flexi Cap Allocation
• Flexi caps offer flexibility.
• Maintain current 10% allocation.
Increase Liquidity Fund Allocation
• Ensure sufficient liquidity.
• Increase allocation to 20-30%.
Additional Considerations
Diversification
• Diversify across different asset classes.
• Reduces overall portfolio risk.
Professional Guidance
• Consult a Certified Financial Planner.
• Tailored advice based on your goals.
Regular Review
• Review your portfolio regularly.
• Adjust based on market conditions and life changes.
Long-Term Focus
• Focus on long-term growth.
• Avoid short-term market fluctuations.
Retirement Planning
Importance
• Retirement planning is crucial at your age.
• Ensure you have enough savings for retirement.
Pension Funds
• Consider investing in pension funds.
• Provides regular income post-retirement.
Health Insurance
• Ensure you have adequate health insurance.
• Covers medical emergencies without impacting savings.
Emergency Fund
Importance
• Keep an emergency fund.
• At least 6 months of expenses.
Liquid Assets
• Maintain liquidity in your portfolio.
• Use liquid funds or savings account.
Tax Planning
Tax-Saving Investments
• Invest in tax-saving instruments.
• Reduces tax liability and boosts savings.
ELSS Funds
• Consider Equity Linked Savings Scheme (ELSS).
• Provides tax benefits under Section 80C.
Risk Management
Assess Risk Tolerance
• Understand your risk tolerance.
• Invest accordingly to avoid stress.
Diversify Investments
• Spread investments across various funds.
• Reduces risk and enhances returns.
Finally
Loganathan, your current investment strategy is good. However, slight adjustments can improve your portfolio. Increase your large cap and liquidity fund allocations. Reduce small cap exposure slightly. Maintain your flexi cap investments. Regularly review and consult a Certified Financial Planner for personalized advice.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in