Is My Mutual Fund Investment Strategy Sound?

Ans: SBI Multi Asset Allocation Fund - Growth is a better option in hybrid multi- asset and Axis Bluechip Fund – Growth is better option in Large-cap

UTI Equity Fund – Growth is a better option in Multi-cap

Sectoral Infra Funds can be avoided; instead diversified equity funds with higher infra exposure can be considered

Rest of the funds are fine.

Ans: To reach Rs 50 lakh in 10 years, you need to invest about Rs 21-23,000 per month assuming 11-12% average portfolio returns. Since no data about existing investments is provided, and given that you are doing a total of Rs 7000 per month in SIPs, there is first of all a need to increase your monthly investments to the required amount.

Having said that, you don't need so many schemes to invest Rs 20-25,000 per month. Just having a couple of schemes (like largecap index funds, and flexicap funds) would be sufficient.

Note (Disclaimer) - As a SEBI RIA, I cannot comment on specific schemes/funds that are provided or asked for in the questions in the platform. And the views expressed above should not be considered professional investment advice or advertisement or otherwise. No specific product/service recommendations have been made and the answers here are for general educational purposes only. The readers are requested to take into consideration all the risk factors including their financial condition, suitability to risk-return profile and the like and take professional investment advice before investing.

Ans: It's great to see your proactive approach to investing in mutual funds. Let's review your current portfolio and provide some insights:

Parag Parikh Flexi Cap: This fund offers diversification across market segments and has a flexible investment approach. It's a good choice for long-term growth potential.
Nifty Total Market Index Fund: Investing in an index fund provides broad market exposure and low expense ratios. It's suitable for passive investors seeking market returns.
ICICI Prudential Multi Cap Fund: This fund invests across large, mid, and small-cap stocks, providing diversification and potential for higher returns. It complements your portfolio well.
Nippon India Small Cap: Small-cap funds have the potential for high growth but come with higher volatility. Ensure you're comfortable with the risk associated with this fund.
Tata Digital Fund: Investing in thematic funds like digital funds can offer exposure to high-growth sectors. However, they tend to be more volatile and may not suit all investors.
Overall, your portfolio seems well-diversified across market segments and investment styles. However, it's essential to regularly review your investments, monitor fund performance, and adjust your portfolio as needed based on changes in your financial goals and market conditions.

Consider consulting with a Certified Financial Planner for personalized advice tailored to your specific needs and goals. They can help ensure that your investment strategy aligns with your long-term financial objectives and risk tolerance.

Ans: Your portfolio consists of multiple actively managed funds across different categories. Let's evaluate your current investment choices and suggest any improvements based on diversification, overlap, and risk-return potential.

Strengths of Your Portfolio
Long-Term Investment Vision: You plan to invest for another 10 years, which allows compounding to work in your favor.

Actively Managed Funds: Actively managed funds have the potential to outperform the market over the long term.

Exposure to Different Market Caps: Your portfolio includes large-cap, mid-cap, and small-cap funds, offering balanced exposure.

Sector-Specific Allocation: You have exposure to infrastructure and power sectors, which can generate high returns in the long run.

Concerns in Your Portfolio
Overlapping Fund Selection: Many of your funds have a similar investment strategy, leading to duplication of holdings.

Excessive Sectoral Allocation: Your portfolio has three sectoral funds, which increases risk if the sector underperforms.

Too Many Funds: Investing in too many funds does not always improve diversification. It can reduce the impact of outperforming funds.

Multiple Funds from the Same AMC: Having multiple funds from a single asset management company (AMC) may limit diversification.

Diversification Analysis
1. Large-Cap and Large & Mid-Cap Funds
You have allocated funds to both large-cap and large & mid-cap categories.
Large-cap funds provide stability, while large & mid-cap funds offer a balance of growth and safety.
Instead of multiple funds in this category, a single well-performing large & mid-cap fund is sufficient.
2. Mid-Cap and Small-Cap Funds
Mid-cap and small-cap funds can provide high returns, but they are also highly volatile.
Your portfolio has both mid-cap and small-cap funds, which is good for long-term growth.
However, holding too many funds in this category can lead to portfolio overlap.
3. Focused Fund Allocation
Focused funds invest in a limited number of stocks, which can increase risk.
Holding a single focused fund is better than investing in multiple funds with a similar strategy.
4. Sector-Specific Investments
Investing in sectoral funds can generate high returns if the sector performs well.
However, sectoral funds are highly volatile and risky compared to diversified funds.
Your portfolio has too much exposure to infrastructure and power sectors, increasing concentration risk.
Instead of multiple sectoral funds, a well-diversified flexi-cap fund can provide better risk-adjusted returns.
Recommended Portfolio Adjustments
Reduce Fund Overlap: Keep a single large & mid-cap fund instead of multiple large-cap and mid-cap funds.

Reduce Sectoral Exposure: Limit sector-specific investments to a smaller portion of your portfolio.

Consolidate Similar Funds: Instead of multiple mid-cap and small-cap funds, choose one well-performing fund from each category.

Increase Allocation to Diversified Equity Funds: Flexi-cap and multi-cap funds can provide better long-term stability.

Final Insights
Your long-term investment approach is well planned.
However, excessive sectoral allocation and fund duplication can reduce efficiency.
Consolidating similar funds and increasing exposure to diversified funds will improve portfolio performance.
Reducing the number of funds will also make portfolio tracking easier.
Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment