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Ramalingam

Ramalingam Kalirajan  |9447 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 13, 2024

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
Gaurav Question by Gaurav on Apr 12, 2024Hindi
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Hi Experts, I am 34 and doing SIP (5k each) in Quant Multi Asset, ICICI Equity & Debt Aggressive hybrid, ICICI small cap, Axis bluechip and Tata Resources& Energy MF for sometime now. Is this diversified enough, or needs change?

Ans: Your current SIP portfolio seems like a decent start, but it could benefit from some adjustments for better diversification:

Current Mix:

You likely have exposure to:
Large-cap stocks (through Axis Bluechip)
Mid-cap and small-cap stocks (through ICICI Small Cap)
Debt (through ICICI Equity & Debt Aggressive Hybrid)
A specific sector (Resources & Energy)
Areas for Improvement:

Sector Concentration: A sector fund like Resources & Energy carries higher risk compared to broader market funds. Consider if this aligns with your overall risk tolerance. You might want to replace it with a diversified equity fund to spread risk across different sectors.
Debt Allocation: The role of the aggressive hybrid fund is unclear. If it has a high equity allocation, you might have too much equity exposure overall. Consider a pure debt fund for a clearer asset allocation.
General Recommendations for Diversification:

Large, Mid & Small Cap Exposure: Having a mix of large, mid, and small-cap funds provides exposure to companies of different sizes and growth potential.
Multi-Asset Fund: A multi-asset fund can offer diversification across asset classes like equity, debt, and even international exposure. Consider one if you don't already have it.
Remember:

Risk Tolerance: Ensure your overall asset allocation aligns with your risk tolerance.
Review Regularly: Review your portfolio periodically and adjust based on market conditions and your evolving goals.
Professional Advice: Consulting a registered financial advisor can provide personalized guidance based on your specific circumstances.
By considering these points, you can refine your SIP strategy for a more balanced and potentially more resilient portfolio.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |9447 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

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Hi I am 30 yr old and planning to retire within 17 yrs from now. I am doing SIP as follows , please suggest if requires any diversification 1. ICICI Prudential Bluechip fund - 2K per month 2. Kotak small cap Fund - 1.5K per month 3. Kotak emerging equity fund - 2K per month 4. Quant small cap fund - 2K per month 5. Tata small cap fund - 1K per month 6. Canara Robeco Bluechip Equity fund- 2K per month 7. Parag Parikh Flexi cap fund- 2.5K per month 8. Quant mid cap -1k per month 9. Quant infrastructure -1k per month 10. Quant flexi cap 1.5 per month 11. Kotak equity hybrid 1.5K per month 12. Quant Elss fund 2k per month
Ans: It's great to see your dedication to retirement planning at such a young age. Let's evaluate your current SIP portfolio and explore potential diversification strategies to optimize your investments for your retirement goal.

Assessing Your SIP Portfolio
Your SIP portfolio consists of a diverse mix of funds across different market segments, including large-cap, small-cap, mid-cap, flexi-cap, and hybrid funds. While diversification is essential, it's also crucial to ensure that your portfolio is well-balanced and aligned with your risk tolerance and investment objectives.

Potential Diversification Strategies
1. Streamlining Fund Selection
Consider consolidating your SIPs into a more focused portfolio with a smaller number of high-quality funds. This can help simplify portfolio management and reduce overlapping holdings across funds.

2. Increasing Exposure to Large-Cap Funds
Given your relatively long investment horizon and retirement goal, consider increasing your exposure to large-cap funds. Large-cap funds offer stability and consistent returns over the long term, making them suitable for retirement planning.

3. Adding Exposure to Debt Funds
While equity funds offer the potential for higher returns, it's essential to balance risk by incorporating debt funds into your portfolio. Debt funds provide stability and income generation, helping mitigate the volatility associated with equity investments.

4. Exploring International Funds
Consider diversifying your portfolio by investing in international funds or exchange-traded funds (ETFs). International funds provide exposure to global markets and can help reduce country-specific risk associated with investing solely in domestic markets.

5. Reviewing Fund Performance
Regularly review the performance of your existing funds and replace underperforming ones with better alternatives. Look for funds with a consistent track record of performance, experienced fund managers, and a robust investment process.

Recommendations for Portfolio Optimization
Based on the above considerations, here are some recommendations for optimizing your SIP portfolio:

Consolidate Funds: Consider consolidating your SIPs into a focused portfolio of high-quality funds with a mix of large-cap, small-cap, mid-cap, flexi-cap, and hybrid funds.

Increase Exposure to Large-Cap Funds: Allocate a higher percentage of your SIP investments to large-cap funds to enhance stability and reduce portfolio volatility.

Incorporate Debt Funds: Introduce debt funds into your portfolio to balance risk and provide stability during market downturns.

Explore International Funds: Consider diversifying your portfolio by investing in international funds to access global investment opportunities and reduce country-specific risk.

Regularly Review Portfolio: Monitor the performance of your portfolio regularly and make adjustments as needed to ensure it remains aligned with your retirement goals and risk tolerance.

Seeking Professional Advice
As a Certified Financial Planner, I'm here to provide personalized advice tailored to your specific financial situation and retirement goals. I can help you navigate the complexities of portfolio diversification and ensure your investments are optimized for long-term wealth accumulation and retirement planning.

Conclusion
In conclusion, by diversifying your SIP portfolio, increasing exposure to large-cap funds, incorporating debt funds, exploring international funds, and regularly reviewing portfolio performance, you can optimize your investments for your retirement goal. Remember, retirement planning is a long-term journey, and strategic asset allocation is key to achieving your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9447 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 13, 2025

Asked by Anonymous - Feb 11, 2025Hindi
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Dear Guru, I am 32 year old IT professional, earning monthly 1,30,000-/. I have started doing SIP from April 2024 in Navi nifty 50 index fund Direct - Rs 3000, Motilal Oswal nifty next 50 index fund - Direct Rs 3000, Mahindra Manulife Mid cap 150 Direct - Rs 4000, Quant Small Cap 250 Direct - Rs 3000. Do I need to diversify my portfolio or all Selected MF are fine? I will do 10% setup every year and want to achieve 1 cr in next 10 year.
Ans: Your investment journey is on the right track. You have started early, and that's a big advantage. You are also increasing SIPs every year, which will help reach your target. But, your fund selection needs some improvements.

Issues with Your Current Portfolio
Too Much in Index Funds

You have two index funds, both in direct plans. These funds will only match the market returns.

Index funds do not outperform in volatile or falling markets.

Actively managed funds can generate better returns with expert fund management.

Direct Plans May Not Be the Best Choice

Direct funds may seem to save costs, but they lack professional guidance.

Regular plans through a Certified Financial Planner provide expert fund selection.

A good financial expert helps in tracking and rebalancing investments.

Small-Cap Fund Has High Risk

Your small-cap fund can give high returns but also faces deep corrections.

Small caps can take years to recover from market crashes.

It is better to keep them at a lower allocation.

Mid-Cap Allocation Needs Review

Mid-cap funds perform well in growing markets but fall more during market crashes.

A balanced mix of large, mid, and small-cap funds works better.

Suggested Portfolio Adjustments
Shift from Index Funds to Actively Managed Funds

Replace both index funds with a flexi-cap or large-cap active fund.

Active funds can generate better risk-adjusted returns than passive funds.

Increase Large-Cap Exposure

Your portfolio lacks a strong large-cap presence.

Large-cap funds provide stability in tough market conditions.

Reduce Small-Cap Exposure

Keep your small-cap allocation to 10-15% of your total investments.

Shift some amount to a multi-cap or flexi-cap fund for better balance.

Will You Achieve Rs. 1 Crore in 10 Years?
A 10% annual increase in SIP is a smart approach.

With improved fund selection, your goal is achievable.

Market fluctuations will impact growth, but disciplined investing helps.

Other Important Steps for Wealth Growth
Emergency Fund: Keep at least 6 months' expenses in a liquid fund or FD.

Health Insurance: Ensure you have a good medical policy for financial security.

Term Insurance: If you have dependents, get a pure term life cover.

Tax Planning: Invest in ELSS funds if you want to save tax under Section 80C.

Final Insights
Your SIP habit is excellent, but fund selection needs improvement.

Avoid direct and index funds; choose actively managed regular plans.

Diversify with large, mid, and small-cap funds for stability and growth.

Stay invested for the long term and rebalance when needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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