Should I continue SIP with ICICI Bluechip & Canara Robeco Bluechip? Also, what new SIP funds should I start for a 10-year horizon?

Ans: Hello, the corpus amount depends on the time duration you will be investing, For eg if you are investing for 15yrs then your corpus at 12% xirr will be approx Rs.54.95L

Ans: Hello Arun and thanks for writing to me. The funds you investing in are good funds, assuming you are investing for long term wealth creation and you are comfortable with risk.

If you elaborate on your goals, risk appetite and time horizon I may recommend other schemes.

Ans: It's fantastic to see your proactive approach to investing at such a young age. Let's delve into your portfolio and see how you're doing:

• Starting a SIP at 27 is a commendable step towards building wealth for your future. Remember, it's never too late to begin investing, and your consistency will be key to your success.

• Your choice of mutual funds reflects a diversified approach, covering different sectors and market capitalizations. This is a smart strategy as it spreads your risk across various segments of the market.

• Investing in small-cap, flexi-cap, equity opportunities, ELSS tax saver, and dividend yield funds provides you with exposure to different investment styles and strategies. However, it's essential to review these funds periodically to ensure they continue to align with your financial goals.

• Consider assessing the performance of each fund against its benchmark and peers to gauge whether they are meeting your expectations. Look for consistency in returns and fund management expertise.

• As you progress in your investment journey and your financial situation evolves, you may consider increasing your SIP amount gradually. This will accelerate the growth of your portfolio over time.

• Additionally, stay updated with market trends and changes in economic conditions to make informed decisions about your investments. Keeping yourself informed will help you navigate any market volatility effectively.

• If you're unsure about whether your chosen funds are the right fit for you, don't hesitate to seek advice from a Certified Financial Planner. They can provide personalized recommendations based on your financial goals, risk tolerance, and investment horizon.

In conclusion, you're off to a great start with your SIP investments. Stay disciplined, continue to educate yourself about investing, and periodically review your portfolio to ensure it remains aligned with your objectives. With patience and perseverance, you're on track to build a strong financial foundation for the future. Keep up the excellent work!

Ans: You have already started SIPs in ICICI Prudential Large Cap Fund, Nippon Large Cap Fund, and Canara Robeco Bluechip Fund. This shows a good diversification across large-cap funds. Large-cap funds are known for their stability and consistent returns, especially over a long-term horizon like 10 years. Your choice of funds is generally sound for building a strong foundation in your portfolio. However, let’s take a closer look at the specific types of funds and the overall strategy.

Large-Cap Funds: Understanding the Benefits

Large-cap funds primarily invest in companies with a large market capitalization. These companies are usually well-established, financially stable, and less volatile compared to mid-cap and small-cap companies. This means:

Lower Risk: Large-cap companies are more stable, making the investment less risky.

Steady Returns: These funds tend to provide steady and moderate returns over time.

Strong Market Presence: The companies in large-cap funds often have a significant presence in the market, adding an element of security to your investments.

Consistency: Large-cap funds have a track record of providing consistent returns, which is ideal for your 10-year investment horizon.

Analysis of Your Fund Choices

You have chosen to invest in three large-cap funds. Here is how this strategy aligns with your financial goals:

ICICI Prudential Large Cap Fund: This fund is known for its robust portfolio and strong performance in the large-cap space. It tends to be well-diversified, focusing on high-quality companies.

Nippon Large Cap Fund: This fund has a reputation for being more conservative, which can balance the other funds in your portfolio. It is a good choice if you seek stability with moderate growth.

Canara Robeco Bluechip Fund: Canara Robeco’s fund is another strong performer in the large-cap category. It provides a good mix of growth and value investing, which can enhance your portfolio’s overall performance.

These funds collectively provide you with a diversified large-cap portfolio, reducing your risk while aiming for steady returns over the next decade. However, investing in multiple funds of the same category (large-cap) could result in overlap, meaning you might not be fully capitalizing on other segments of the market.

Suggestions for Your Additional SIP Investment

Since you have another Rs 10,000 to invest monthly in SIPs, let’s consider diversifying beyond large-cap funds. Diversification across different categories of funds can help you balance risk and optimize returns. Here are some suggestions:

Mid-Cap Funds: Mid-cap funds invest in medium-sized companies that have the potential for higher growth than large-cap companies. Although they come with slightly higher risk, they can offer better returns, especially in a 10-year horizon.

Small-Cap Funds: These funds invest in smaller companies that are often in the growth phase. They are riskier than large and mid-cap funds but can offer significant returns if the companies perform well over time.

Flexi-Cap Funds: Flexi-cap funds invest across large-cap, mid-cap, and small-cap stocks. They provide flexibility to the fund manager to allocate funds based on market conditions. This can be beneficial in capturing opportunities across market segments.

Balanced Advantage Funds: These funds dynamically allocate between equity and debt based on market conditions. They offer the benefit of equity growth while managing downside risk through debt investments.

Sectoral/Thematic Funds: If you have a higher risk appetite and want to take advantage of specific sectors like technology, pharma, or infrastructure, sectoral or thematic funds could be an option. However, these funds can be more volatile and require closer monitoring.

Advantages of Actively Managed Funds

While index funds are often touted for their low expense ratios, actively managed funds have several advantages, especially in a dynamic market like India:

Potential for Higher Returns: Actively managed funds aim to outperform the benchmark index, offering the potential for higher returns compared to index funds.

Flexibility: Fund managers have the flexibility to adjust the portfolio based on market conditions, which can protect your investments during downturns.

Research and Expertise: Active funds benefit from the research and expertise of fund managers, who make informed decisions to maximize returns.

Tactical Allocation: Active funds can tactically shift allocations between sectors or market caps, allowing you to benefit from market trends.

Disadvantages of Index Funds

Index funds, while popular, come with some disadvantages:

Limited Returns: Index funds are designed to mirror the performance of a benchmark index, which means they cannot outperform the market. This limits your return potential.

No Flexibility: Index funds stick to a predetermined list of stocks, regardless of market conditions. This lack of flexibility can be a disadvantage in volatile markets.

Tracking Error: Although index funds aim to replicate an index, tracking errors can occur, leading to deviations in performance.

No Downside Protection: In a market downturn, index funds will mirror the losses of the index with no protective strategies in place.

The Importance of Investing Through a Certified Financial Planner

Investing through a regular plan with the guidance of a Certified Financial Planner (CFP) can provide several benefits over direct plans:

Personalized Advice: A CFP can tailor your investment strategy based on your specific financial goals, risk tolerance, and investment horizon.

Regular Monitoring: A CFP can regularly review your portfolio and suggest changes as needed to ensure you stay on track to meet your goals.

Holistic Financial Planning: Beyond mutual funds, a CFP can help you with tax planning, retirement planning, insurance, and estate planning, ensuring a comprehensive approach to your finances.

Access to Expertise: Regular plans come with the benefit of professional management and access to the expertise of financial advisors, who can help you navigate complex financial decisions.

Behavioural Guidance: Investing can be emotional, and a CFP can help you avoid common mistakes like panic selling during market downturns or over-investing during booms.

Finally: Aligning Your Investments with Your Goals

Your current portfolio of large-cap funds is a solid foundation for achieving your financial goals over the next 10 years. However, diversifying into other types of equity funds can further enhance your portfolio’s growth potential while managing risk. Consider allocating your additional Rs 10,000 SIP into a mix of mid-cap, small-cap, and flexi-cap funds to capture growth opportunities across the market spectrum.

Investing through a Certified Financial Planner ensures that you receive personalized guidance, expert advice, and regular monitoring of your investments. This can help you achieve your financial goals with confidence, while also ensuring that your portfolio is well-balanced and aligned with your long-term objectives.

Remember, investing is a journey, and staying committed to your plan, regularly reviewing your portfolio, and making informed decisions with the help of a professional will help you reach your destination successfully.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in