SIR BASED ON MY PREVIOUS QUESTION YOU HAD ADVISED ME TO EXIT BIRLA FRONTLINE - 3000 PER MONTH HDFC TOP 100 - 2000 PER MONTH SBI BLUE CHIP FUND - 5000 PER MONTH HSBC MIDCAP - 5000 PER MONTH DSP FUND - 5000 PER MONTH ADD PARAG PARIKH FLEXI CAP TO MY PORTFOLIO PLEASE CLARIFY FOLLOWING :- (A) WILL IT NOT RESULT IN REDUCING THE COMPOUNDING EFFECT OF THESE FUNDS (B) SHOULD I WITHDRAW ABOVE FUNDS AND DEPOSIT LUMPSUM IN PARAG PARIKH OR STOP SIP OF THESE FUNDS AND START SIP OF 20000 IN PPFC (C) CAN TARGET OF 5 CR BE ACHIEVED AFTER 12 YRS PLEASE REPLY EACH SERIAL FOR CLARITY

Ans: You may continue with the 5 & 4 rated funds; however for others better alternative is available

Equity - Large Cap Funds:

- LIC MF Large Cap Fund-Regular Plan-Growth

- Axis Bluechip Fund - Regular Plan - Growth

- Kotak Bluechip Fund - Growth

- Mirae Asset Large Cap Fund - Growth Plan

Equity - Mid Cap Funds:

- Motilal Oswal Midcap 30 Fund (MOF30)-Regular Plan-Growth Option

- DSP Midcap Fund - Regular Plan - Growth

Equity - Value Funds:Tata Equity P/E Fund Regular Plan -(Growth Option)

Equity - Focused Funds:

- Axis Focused 25 Fund - Regular Plan - Growth Option

- Motilal Oswal Focused 25 Fund (MOF25)- Regular Plan Growth Option

Equity - Large & Mid Cap Fund

- BOI AXA Large & Mid Cap Equity Fund Regular Plan- Growth

- Canara Robeco Emerging Equities - Regular Plan - GROWTH

- Tata Large & Mid Cap Fund- Regular Plan - Growth

Hybrid - Aggressive Hybrid Fund

- Axis Equity Hybrid Fund - Regular Plan Growth

- Dsp Equity And Bond Fund - Growth

- Motilal Oswal Equity Hybrid Fund-regular Plan Growth

Ans: I offer you two scenarios:
1. Step up both SIP and lumpsum by 40% every year to reach your target of 1 Cr corpus, 10 years from now.

2. Step up your SIP and lumpsum by 15% every year to reach your target of 1 Cr corpus 15 years from now. (Modest return of 13% assumed)

Your sip break up is:
PPFAS flexicap fund (2 K)
MO Midcap fund (1.5 K)
Axis Small Cap (2.5 K)
ICICI Pru Value Discovery Fund (1 K)

I suggest you to remove ICICI Pru Value Discovery Fund from your portfolio and add that 1 K sip into MO midcap fund.

Also I recommend you to migrate to Nippon India Small Cap Fund (2.5 K)

The lumpsum I would suggest you to invest in Quant ELSS tax saver fund and SBI Technology Opportunities 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: You’ve structured a diversified portfolio of mid-cap, small-cap, flexi-cap, and contra funds, which shows a well-considered approach. Let's take a closer look to evaluate each aspect.

1. Portfolio Structure and Goals Alignment

Investing in mid-cap and small-cap funds provides growth opportunities. However, these funds also come with higher risk and volatility.

Including a flexi-cap fund like Parag Parikh is a wise choice. Flexi-cap funds bring stability by dynamically investing across large, mid, and small caps. This adds a level of risk management.

Adding contra funds such as the SBI Contra Fund brings diversification and the potential to benefit from out-of-favor sectors. This is a good balance against mid-cap and small-cap funds.

Your portfolio choices display strategic thought, but it may need a few adjustments to maximize returns and minimize risk.

2. Insights on Fund Selection: Regular vs. Direct

You’ve wisely chosen regular plans for most funds. Investing through a Certified Financial Planner (CFP) can offer ongoing insights and proactive management, especially when markets fluctuate. This adds significant value for long-term investors, as MFDs with CFP credentials offer experienced guidance and assistance with changes in tax laws, like the recent CG taxation updates.

Direct funds might have lower fees, but they can lack the support and expertise that a CFP-backed plan offers. Regular plans ensure the added advantage of advisory support, making it easier to align investments with your goals.

3. Re-evaluating Sector and Market Cap Allocation

Mid-Cap Allocation: With multiple mid-cap funds (Mirae, SBI, HSBC, and Quant), your exposure here is relatively high. While mid-cap funds can yield higher returns, they are susceptible to volatility. It might be wise to reduce the number of mid-cap funds and focus on the most consistent performer among them. For example, continuing with one or two robust mid-cap funds rather than four can bring simplicity and reduce overlapping.

Small-Cap Allocation: Small caps add substantial growth potential but come with high volatility. Starting with a lower SIP amount in the Nippon Small Cap fund and gradually increasing it reflects a balanced approach. Ensure you’re comfortable with small-cap risks, as these funds tend to have longer recovery periods after market corrections.

Flexi-Cap and Contra Funds: The inclusion of Parag Parikh Flexi Cap and SBI Contra Fund introduces both flexibility and contrarian strategies into your portfolio. Retaining these is recommended, as they provide a counterbalance to the mid- and small-cap funds, improving portfolio stability.

4. Evaluating the Role of Fund Overlap and Rationalizing Choices

Having multiple funds in the same category, especially within mid-cap and small-cap funds, can lead to overlapping holdings. Overlap means you may own similar stocks across different funds, which could limit diversification and increase risk without added benefits.

Consider streamlining your investments by selecting the most reliable performers in each category. This approach optimizes your portfolio, making it easier to track and manage.

5. Suggestions for Portfolio Refinement and Long-Term Growth

To maintain simplicity while achieving growth, here are some suggestions:

Reduce the Number of Mid-Cap Funds: Retain the top-performing mid-cap fund that aligns with your goals. For instance, focusing on Mirae or Quant Mid Cap may bring optimal returns without the need for multiple funds in this category.

Small-Cap Funds: Continue with the gradual increase in your SIP in Nippon Small Cap if the fund performance and your risk tolerance remain aligned. Quant Small Cap can complement Nippon Small Cap, but monitor its performance over the next year to decide if it remains suitable for your portfolio.

Avoid Frequent Changes: SIPs work best when maintained over long periods. Continue with your SIPs in chosen funds consistently for at least 5–7 years to allow compounding and market cycles to benefit your investments.

6. Should You Increase Your Investment Amount?

Assessing Contribution Levels: If you have the capacity to increase your SIP, consider doing so in funds with balanced exposure like flexi-cap or balanced advantage funds. These funds are typically better suited for conservative increases as they manage volatility effectively.

Long-Term Perspective: Given your 5–7 year timeframe, additional contributions in mid-cap or flexi-cap funds may offer solid returns. Avoid increasing allocation to small-cap funds too aggressively due to their higher risk.

7. Understanding the Disadvantages of Index Funds in Your Portfolio

While index funds offer passive growth, they lack the active management needed to outperform the market. Actively managed funds, like those in your portfolio, are better suited to deliver returns above the index through stock selection and sector rotation. These funds aim to maximize gains during bullish markets and minimize losses during downturns, which is critical for achieving your financial goals.

8. Tax Implications on Future Gains

The recent changes in Capital Gains (CG) taxation should be considered:

Equity Funds (like mid-cap, small-cap, flexi-cap): Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.

Debt Funds (if considered in the future): Gains are taxed as per your income tax slab, regardless of holding duration.

Understanding these implications allows you to plan redemptions and adjust investments efficiently.

Finally

Your current portfolio reflects strategic and goal-oriented thinking. With a few refinements—such as consolidating funds, monitoring performance, and potentially increasing SIPs in stable fund categories—you can optimize growth while managing risk effectively.

For best results, consider annual reviews with your Certified Financial Planner to keep your investments aligned with any changes in goals or market conditions.

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