Hello Sir, I am 31 years old and just started my investments 3 months back (SIP) and in the beginning I invested the following amounts in the below mutual funds and the total investments as of now are:

1) Quant Multi Asset Fund - 4000
2) Quant Absolute Fund - 4000
3) Edelweiss Balanced Advantage Fund - 4000
4) ICICI Prudential Balanced Advantage Fund - 4000
5) ICICI Prudential Medium Term Bond Fund - 4000
6) Aditya Birla Sun Life Digital India Fund - 3500
7) Tata Digital India Fund - 3500
8) ICICI Prudential Technology Fund - 3500
9) Axis Strategic Bond Fund - 3000

After reevaluating my above investments I realised that this is not the correct mix and as a result I am going to modify my portfolio with the following changes. My investments are for a long time as I need to accumulate wealth.

ELSS --> Quant Tax Plan Direct Growth - 10000
Flexi Cap --> Quant Flexi Cap Direct Growth - 5000
Mid Cap -- PGIM India Midcap Opportunities Direct Growth - 5000
ETMoney Genius -- > 5000

Apart from above I am also investing in US stocks with an amount of 2000 per month

Please let me know if my above investments are appropriate or not and if there is any rebalancing or changes that needs to be made. Also I am planning to buy a house in the next 2-3 years so considering that I would need to make a down payment (20 - 25 Lakh) what all will be the changes required?

Ans: Please continue

Ans: Hello Madan Rao. Looking at your portfolio. I would advice reconsider your schemes of AXIS Bluechip Fund, HDFC Top 100 Fund & Kotak Flexi cap Fund to better alternative peer schemes.

 

Ans: Your current investment portfolio appears to be diversified across different market segments, which is a good strategy for long-term growth. However, it's essential to consider the risk associated with each segment and ensure it aligns with your risk tolerance and investment goals. Reviewing your portfolio regularly and making adjustments as needed can help maintain a balanced approach and optimize returns over time. Consulting with a financial advisor can provide personalized guidance based on your individual circumstances and objectives.

Ans: Your disciplined approach to investing is commendable. A 25-year horizon with step-up SIP ensures compounding benefits. Let us evaluate your portfolio and suggest improvements.

Strengths of Your Current Portfolio
1. Diverse Asset Allocation
Investments include large-cap, mid-cap, small-cap, and flexicap funds.
This creates exposure to varied market capitalisation for balanced growth.
2. Focus on Momentum Investing
Momentum funds aim to capitalise on high-performing stocks.
Your choices reflect a growth-oriented strategy.
3. Regular Contributions
Monthly SIPs ensure disciplined investing.
The 10% annual step-up aligns with inflation-adjusted wealth creation.
4. Long-Term Perspective
Your 25-year investment horizon maximises compounding.
Market volatility will average out over time.
Key Areas for Improvement
1. Over-Dependence on Index Funds
Your portfolio heavily favours index funds.
Index funds mimic benchmarks and lack flexibility during market downturns.
Actively managed funds, guided by experts, may offer better returns.
2. Small Allocation to Flexicap Fund
Flexicap funds adjust allocation across market caps for stability.
Increasing this allocation can provide balanced growth and reduce volatility.
3. Sector and Style Overlap
Momentum strategies dominate your portfolio.
Momentum funds may underperform during market corrections.
Diversify to include value-based or balanced funds.
4. Limited Small-Cap Allocation
Small-cap funds are vital for long-term growth but carry higher risks.
Ensure you don’t overallocate beyond risk tolerance.
Suggested Changes
1. Increase Actively Managed Funds
Include funds with a proven track record in various market cycles.
Focus on funds managed by experienced fund managers.
2. Rebalance Between Active and Passive Funds
Reduce exposure to passive index funds.
Add actively managed multicap or equity funds for consistent performance.
3. Reassess Momentum Fund Exposure
Consider limiting momentum fund investments to 30%-40% of your portfolio.
This balances growth potential with risk management.
4. Add Balanced Hybrid Funds
Hybrid funds combine equity and debt, ensuring stability in volatile markets.
Allocate 15%-20% of your portfolio to such funds.
5. Increase Flexicap Fund Allocation
Raise flexicap allocation to at least 25% of your portfolio.
This brings flexibility and adaptability to market trends.
6. Regular Portfolio Review
Review the portfolio annually for performance and alignment with goals.
Adjust based on changes in financial goals or market dynamics.
Taxation Insights
1. Capital Gains Taxation
Equity fund LTCG above Rs 1.25 lakh is taxed at 12.5%.
STCG is taxed at 20%.
2. Minimise Tax Impact
Hold equity funds for at least one year to avoid higher STCG rates.
Use tax-loss harvesting to offset gains.
Final Insights
Your portfolio is structured well for long-term growth. However, reducing reliance on passive funds and adding diversification can optimise returns. A balanced allocation to active, hybrid, and flexicap funds will ensure stability and growth. Regularly review and rebalance your portfolio for continued success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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