34 Year Old Aims for 10 Crore in 10 Years: Should They Increase SIP or Invest in More Mutual Funds?

Ans: Hi too many funds will not serve purpose of diversification. My suggestion is remove Franklin hdfc hybrid kotak flexi cap and add parag parikh flexi cap and and uti nifty 59 index fund

Disclaimer - its suggested portfolio and I and my clients can have holdings in them

Ans: Hello Prateek & thanks for writing to me. Assuming that you are able to generate an XIRR of 12%, you will be able to create a corpus of Rs.1 Crore in around 10 years.

As your time horizon is 10 years, I recommend you invest only in equity schemes which can potentially generate higher returns than hybrid schemes like a balanced advantage fund or dynamic asset allocation fund.

You can consider investing equally in:

1.Small Cap Scheme
2.Mid Cap Scheme
3.Flexi Cap Scheme
4. Multi Cap Scheme

Your 5th scheme can be a thematic scheme like a momentum fund or a special opportunities fund or a broader category like a special opportunities fund.

You can consider investing solely in equity schemes for the first 7 to 8 years and then change the asset allocation to have a mix of hybrid schemes like BAF/DAAF's, Multi Asset Funds and aggressive hybrid funds in the last 2-3 years of your 10 year horizon.

Ans: You have a well-diversified portfolio with exposure across various market segments – large-cap, mid-cap, flexi-cap, and small-cap funds. It's great that you started 4 years ago and are continuing your SIPs with a clear investment horizon of 5-6 more years.

Your current portfolio includes:

Axis Midcap Fund: Rs 2500 (mid-cap exposure)

HDFC Flexi Cap Fund: Rs 2500 (flexible across market capitalisations)

Kotak Emerging Equity Fund: Rs 3500 (mid-cap exposure)

Mirae Asset Large and Midcap Fund: Rs 2500 (blend of large and mid-cap stocks)

Nippon India Small Cap Fund: Rs 4000 (small-cap exposure)

Parag Parikh Flexi Cap Fund: Rs 3500 (flexi-cap exposure, some international exposure)

With your goal of accumulating Rs 50 lakhs in the next 5-6 years, it's important to optimise your investment strategy to balance both risk and return.

Evaluating Your Portfolio and Future Steps

Let’s break down your portfolio and assess whether you need to add another small-cap fund or increase your SIPs in existing funds.

1. Exposure to Small Cap and Mid Cap Funds
You already have a good chunk of your portfolio allocated to small and mid-cap funds:

Nippon India Small Cap Fund: Rs 4000
Axis Midcap Fund: Rs 2500
Kotak Emerging Equity Fund: Rs 3500
Small-cap and mid-cap funds offer the potential for higher growth, but they also come with greater volatility. Adding another small-cap fund might increase your risk level. Since you are already contributing Rs 4000 per month to a small-cap fund, it's better to avoid overloading this category.

Instead of adding another small-cap fund, you can consolidate and strengthen your position by increasing the SIP in existing funds that have a proven track record.

2. Increase SIP in Existing Funds
Your portfolio already has a diversified mix, and rather than complicating your investments with more funds, consider increasing your SIP in the existing funds. Since you have a mix of mid-cap, large-cap, and flexi-cap funds, this could balance your risk and returns more effectively.

Here's how you could increase your SIP amounts:

HDFC Flexi Cap Fund: Rs 2500 → You can consider increasing this. Flexi-cap funds offer flexibility to the fund manager to switch between large, mid, and small caps based on market conditions, which helps in reducing risk while ensuring growth.

Mirae Asset Large and Midcap Fund: Rs 2500 → This fund gives you exposure to both large-cap stability and mid-cap growth. Increasing your SIP here can give you a balanced mix of returns and reduce volatility.

Parag Parikh Flexi Cap Fund: Rs 3500 → Known for its value-based investing approach, this fund also includes some international exposure. You can increase your SIP in this fund for geographical diversification.

3. Risk Management and Portfolio Stability
With a time horizon of 5-6 years, it’s crucial to strike the right balance between risk and return. Mid-cap and small-cap funds can be volatile, especially over shorter periods. Flexi-cap and large-cap funds tend to be more stable, especially during market downturns.

Given the allocation you already have towards small-cap and mid-cap funds, adding another small-cap fund could increase the overall volatility of your portfolio. Since your goal is to build a Rs 50 lakh corpus, it's important to focus on stability as you approach the latter part of your investment horizon.

4. Consider the Option of Hybrid Funds or Balanced Advantage Funds
If you are open to adding a new category, you might want to consider hybrid or balanced advantage funds instead of another small-cap fund. These funds offer a balance of equity and debt, which can provide stability, especially when markets become volatile.

Hybrid funds automatically adjust the equity and debt exposure based on market conditions. This could act as a buffer and reduce the risk of sharp losses, particularly if market corrections happen during your investment tenure.

5. Setting Realistic Expectations for Corpus Target
Accumulating Rs 50 lakhs in 5-6 years is a good target, but keep in mind that the returns from equity-based funds are market-dependent. Based on your investment horizon and risk appetite, your current SIPs and potential increases should bring you closer to your goal.

However, market performance can fluctuate, and there is no guaranteed return. It's advisable to regularly review your portfolio, at least once a year, and make adjustments if needed.

6. Review Asset Allocation as You Approach Retirement
Since you have 5-6 more years of investment, consider gradually shifting a portion of your portfolio to lower-risk instruments as you get closer to your target date. This will protect your corpus from sudden market crashes or corrections as you approach your withdrawal phase.

Final Insights

Here’s a recommended strategy:

Avoid adding another small-cap fund as you already have enough exposure to this category.

Increase your SIPs in the HDFC Flexi Cap Fund, Mirae Asset Large and Midcap Fund, and Parag Parikh Flexi Cap Fund. These funds provide balanced growth opportunities with moderate risk.

If you want to add a new fund, consider hybrid or balanced advantage funds to introduce some stability and reduce portfolio risk.

Review your portfolio annually and adjust the allocation to ensure you stay on track towards your Rs 50 lakh goal.

Closer to the end of your investment horizon, consider shifting some funds to debt or safer options to lock in the gains and avoid any market downturn risks.

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