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Ramalingam Kalirajan |10872 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 28, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Rohit on Aug 27, 2025Hindi

I am currently investing a total of ₹10,000 per month through SIPs in the following mutual funds, with a long-term investment horizon of more than 10 years: 1. ICICI Prudential Large Cap Fund – ₹3,000 SIP 2. Motilal Oswal Mid Cap Fund – ₹1,500 SIP 3. Quant Small Cap Fund – ₹1,000 SIP 4. Parag Parikh Flexi Cap Fund – ₹3,000 SIP 5. ICICI Prudential Multi Asset Fund – ₹1,500 SIP Kindly advise whether this portfolio allocation is appropriate for my long-term goals or if any modifications are recommended.

Ans: You have taken a strong step by starting SIPs for your long-term future. Investing with discipline creates real wealth over time. Your portfolio already shows diversification across different categories. That is a very good base to build on. Let us carefully evaluate from all angles and see how to optimise.

» Current Allocation Review

– You have exposure to large cap, mid cap, small cap, flexi cap, and multi asset.
– This brings mix of stability, growth potential, and risk balance.
– Large cap offers steady and relatively safer growth.
– Mid cap and small cap provide higher return potential with higher risk.
– Flexi cap allows fund manager to move across segments based on opportunities.
– Multi asset brings exposure beyond equity, reducing volatility.
– Overall, your portfolio is spread out across categories, which is good.

» Strengths in Your Portfolio

– You are investing in different market cap segments.
– You are adding a multi asset option, which reduces risk.
– SIP discipline helps you average costs during market ups and downs.
– Flexi cap provides active allocation advantage.
– Investment horizon of 10+ years gives enough time for compounding.

» Areas That Need Attention

– Your allocation tilts more towards equity aggressive categories.
– Mid cap and small cap exposure can create volatility.
– Too many schemes may overlap in holdings.
– Large cap allocation is less than 35% of total, which may reduce stability.
– Multi asset allocation is small, limiting diversification benefit.
– Taxation on equity remains same, but holding too many schemes complicates tracking.

» Suggested Allocation Strategy

– Keep large cap allocation around 40–45% for stability.
– Mid cap and small cap combined should be around 25–30%.
– Flexi cap can be 20–25% for tactical active management.
– Multi asset can be 10–15% to provide cushion.
– This mix balances growth and safety for long term.
– Too much exposure to small cap is not ideal for stability.

» Disadvantages of Index Funds

– You have avoided index funds, which is correct.
– Index funds only mirror the market, giving no flexibility.
– They cannot protect during downturns as they must hold all stocks.
– No fund manager skill is used, only passive tracking.
– Actively managed funds like you hold can outperform with research and strategy.
– Over long term, active management helps create more wealth.

» Role of Regular Funds vs Direct Funds

– If you consider direct funds, note the hidden disadvantages.
– Direct funds require investor to manage everything alone.
– Many investors fail to review and rebalance regularly.
– Mistakes in timing or choice can reduce wealth creation.
– Regular funds through Certified Financial Planner ensure expert monitoring.
– They help align portfolio with goals and reduce emotional mistakes.
– Guidance adds more value than small cost difference.

» Risk-Return Assessment

– Your mid cap and small cap funds increase growth but raise portfolio risk.
– They can create large swings in value during market cycles.
– Multi asset reduces risk but your exposure is small.
– Large cap and flexi cap balance risk, but need higher share.
– Current split is slightly aggressive compared to long-term safety need.
– A little adjustment will give better balance without reducing return potential.

» Portfolio Simplification

– Too many schemes lead to overlapping stocks.
– Monitoring becomes hard and unnecessary duplication occurs.
– Holding 3–4 well chosen funds is enough for long-term.
– Simpler structure helps in easy review and better tracking.
– Reduce small exposures and consolidate into stronger categories.
– For example, consider trimming small cap allocation slightly.

» Taxation Angle

– For equity funds, LTCG above Rs 1.25 lakh taxed at 12.5%.
– STCG taxed at 20% if sold before one year.
– Long holding horizon reduces frequent tax impact.
– Hence, SIP with discipline helps to maximise post-tax wealth.
– Keeping portfolio simple makes tax planning easier during redemption.

» Long-Term Wealth Potential

– With consistent Rs 10,000 SIP for 10+ years, wealth growth is significant.
– Compounding will accelerate especially in later years.
– Balance of stability and growth ensures smoother wealth journey.
– Equity allocation with right mix can beat inflation and build surplus.
– Rebalancing every 2–3 years will protect gains and control risk.

» Importance of Review

– Market cycles change allocation naturally over years.
– Equity portions may grow faster than other segments.
– Regular review helps to rebalance and stay aligned with goals.
– Without review, risk exposure may increase unknowingly.
– Certified Financial Planner can guide in periodic portfolio reshaping.

» Emotional Discipline

– Small and mid caps will test patience with sharp moves.
– Many investors exit early in panic.
– Your long-term approach gives you strong advantage.
– Stay invested despite short-term fluctuations.
– SIP ensures automatic buying during lows, which builds wealth.
– Avoid chasing new funds frequently, consistency is better.

» Financial Goal Alignment

– Identify future goals like retirement, children’s education, or wealth creation.
– Match expected timelines with right mix of funds.
– Long-term goals suit equity heavy mix.
– Medium-term needs can use balanced or multi asset categories.
– Goal clarity improves discipline and avoids random decisions.
– Always map SIPs with goals for better tracking.

» Protection and Safety

– Do not ignore insurance while investing.
– Adequate term cover ensures family safety.
– Health insurance prevents medical expenses from disturbing investments.
– Emergency fund in liquid form adds security.
– These protect your SIPs from sudden disruptions.

» Finally

– You are already on the right path with SIP discipline.
– Your portfolio has good diversification but slightly high aggression.
– Adjusting allocation towards large cap and flexi cap will help balance.
– Reduce small cap share to manage volatility.
– Keep portfolio simple with fewer schemes for easy tracking.
– Continue SIPs with patience and review every 2–3 years.
– Build insurance, emergency fund, and goal mapping alongside.
– This balanced approach will ensure long-term wealth creation and safety.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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