Hi sir, please give me your expert opinion to build corpus of 2-3 cr in next 15 year with 60K of monthly MF SIPs (or STPs) in all categories. Also lump sum of around 10Lakh, what are the options to invest in MF for long term up to 20 years to help my daughter for her education, marriage etc.

Ans: Portfolio is fine and it's good that you have started investing early. For moderate risk you may look at hybrid funds in balanced advantage category.

Ans:

Ans: Four funds are sufficient; no need to have additional funds. Further with Rs 10K investment and 20% step-up, a corpus of Rs 4 crore can be created in 20 years.

Ans: Hi Satya, thanks for writing to me.

To create a corpus of Rs.1 Crore in 15 years, you need to begin by investing Rs.12,000 in this year and then annually stepping up your SIP's by at least Rs.2,000 every year.

You can consider monthly SIP's as I mention below:
1-Edelweiss Nifty 100 Quality 30 Index Fund-Rs.3,000
2-Axis ESG Fund-Rs.3,000
3-UTI MNC Fund-Rs.3,000
4-SBI Focused Equity Fund-Rs.3,000

Ans: Nitin, you've done a commendable job investing in mutual funds from the age of 29. You have built a substantial corpus of Rs 1.6 crore. Investing Rs 66,500 monthly, along with regular step-ups, shows your commitment to long-term wealth building. Your goal of Rs 5 crore by the age of 60 is achievable, but it requires a careful analysis of your current portfolio and projections.

Let’s break down the strategy and see if adjustments are needed.

Current SIPs Overview
Here are your SIP details:

Canara Robeco Small Cap: Rs 4,000
DSP Small Cap: Rs 5,000
Edelweiss Flexicap: Rs 6,000
Franklin Focused: Rs 2,000
HDFC Midcap: Rs 2,000
Mirae Multicap: Rs 5,000
Mirae Midcap: Rs 13,000
Mirae Large and Midcap: Rs 9,000
Nippon Multicap: Rs 17,500
Franklin India Opportunities: Rs 4,000
Bank of India Flexicap: Rs 4,000
Total monthly investment: Rs 66,500.

Let's first check if your current portfolio aligns with your Rs 5 crore goal.

Goal Achievement: Will You Reach Rs 5 Crore by 60?
You have 13 years left to achieve your goal, from age 47 to 60. You’re currently investing Rs 66,500 per month, and you also increase your SIPs by Rs 5,000 to Rs 8,000 annually.

Considering an average return of 10-12% per year from your mutual funds, and taking into account your step-up plan, you should comfortably achieve your Rs 5 crore target by age 60. But to ensure consistent growth, your portfolio should be well-diversified and structured.

Projections:

Your current SIPs, along with annual step-ups, should grow your corpus significantly over the next 13 years.
You’re likely on track for your Rs 5 crore goal, assuming stable market conditions and continued step-up.
Assessing Portfolio Diversification
1. Overlap in Funds

You hold several mid-cap and multicap funds, which could lead to overlap. For example, your Mirae Midcap and HDFC Midcap funds might hold similar stocks. It’s important to avoid too many funds in the same category to prevent redundancy and excessive risk exposure.

Suggested Action: Trim the number of overlapping funds. Keep one or two solid midcap funds instead of multiple, and the same for flexicap/multicap funds.

2. Excessive Exposure to Small Caps?

You have Rs 9,000 in small-cap funds (Canara Robeco Small Cap and DSP Small Cap). Small caps are more volatile and can swing widely based on market conditions. While small-cap funds have high growth potential, they also carry higher risk.

Suggested Action: Keep a balance between small, mid, and large caps. Limit small-cap exposure to no more than 10-15% of your total portfolio to reduce volatility risk.

Step-Up Strategy: Continue or Adjust?
Your current step-up of Rs 5,000 to Rs 8,000 per year is an excellent strategy. It ensures that your investments grow in line with your income and inflation. I suggest continuing this step-up approach as it will help you reach your Rs 5 crore goal faster.

Portfolio Simplification and Trim
With 11 funds in your portfolio, there is room to streamline for better management and performance tracking.

Suggested Action: Reduce your portfolio to around 6-8 funds. You don’t need to hold too many funds. Focus on the best performers across categories like large-cap, mid-cap, and flexi-cap.

Tax Efficiency and Fund Management
When selling mutual funds in the future, keep the tax implications in mind:

Long-Term Capital Gains (LTCG): Above Rs 1.25 lakh is taxed at 12.5% for equity mutual funds.
Short-Term Capital Gains (STCG): Are taxed at 20%.
Given your long-term horizon, focus on funds that offer strong long-term growth potential and avoid frequent churn to minimize tax impact.

Active Management vs Passive Funds
Since you haven’t mentioned index or direct funds, let me briefly explain why actively managed funds are preferable in your case.

Active Funds: Offer potential for better returns as fund managers actively pick stocks.
Passive Funds: Like index funds, simply track the index and may underperform during market downturns.
Stick with actively managed funds, especially those overseen by experienced fund managers, to give your portfolio a better chance of outperforming the market.

Term Insurance and Other Investments
While it wasn’t mentioned, if you don’t have a term insurance plan, consider getting one. Term insurance provides financial protection for your family in case of any unfortunate event and is cost-effective.

Suggested Action: Secure a term insurance plan if you don’t already have one. Avoid mixing insurance with investments like ULIPs, as they don’t offer optimal returns.

Additional Recommendations
Diversify Across Asset Classes: Consider adding some debt or hybrid mutual funds to your portfolio. These will act as a cushion during market downturns and provide stability.

Emergency Fund: Keep at least 6-12 months of living expenses in a liquid or short-term debt fund as an emergency fund. This ensures you won’t need to redeem your equity investments during market corrections.

Final Insights
Your current portfolio is on the right track to achieve the Rs 5 crore target by age 60. However, simplifying the number of funds, balancing risk with diversification, and continuing your step-up strategy will help you stay on track. Focus on strong-performing funds, limit small-cap exposure, and ensure you have a balanced mix of large, mid, and multi-cap funds.

Lastly, keep an eye on market performance and review your portfolio annually to make adjustments if needed.

Best Regards,

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