Should I Invest 40 Lakhs in These Mutual Funds?

Hello Sir, I have 40 Lakhs that I want to invest in lumpsum and then around 1 lakh SIP/month.I choose the below MF's to invest considering my risk appetite. [Moderate to high] HDFC Flexicap Direct plan Growth Nippon Multicap Fund Direct Growth Bandhan Small Cap Fund Direct Growth Edelweiss Midcap Direct Plan Growth SBI Contra Direct Plan Growth My Plan for Lumpsum: Invest 20 lakhs distributing it in above 5 funds (4 lakh each) Use another 20 Lakhs, put it in liquid fund and do STP to the above MF Hold for 10 years Plan for SIP of 1 Lakh: Hdfc Flexicap Direct plan Growth- 15K Nippon Multicap Fund Direct Growth- 15K Sbi Contra Direct Plan Growth -15K Quant Active Fund direct growth- 15K Bandhan Small Cap Fund Direct Growth- 20K Edelweiss Midcap Direct Plan Growth- 20K Question: Please help review the above plan for lumpsum and SIP and guide if there is any major flaw in it or need changes.

Ans: Your plan shows thoughtful diversification and allocation across categories. Let’s review the lumpsum, SIP, and fund selection strategies in detail.

Lumpsum Investment Plan
Diversification Across Categories: Your allocation of Rs 20 lakhs among large-cap, mid-cap, small-cap, and contra funds ensures good diversification.

Strategic Use of STP: Allocating Rs 20 lakhs into a liquid fund and initiating a systematic transfer plan (STP) is a prudent move. It reduces the risk of market volatility and ensures disciplined deployment of funds over time.

Room for Refinement: Ensure you align the STP duration with your risk appetite. A 6-12 month STP works for moderate-to-high risk investors. For a conservative approach, consider extending this to 18 months.

SIP Investment Plan
Balanced SIP Allocations: The monthly SIP of Rs 1 lakh is well-distributed across different fund categories. Allocating more to mid-cap and small-cap funds (20% each) aligns with your moderate-to-high risk profile.

Long-Term Focus: SIPs over 10 years will help you average market fluctuations. This approach aligns well with wealth-building goals.

Scope for Fine-Tuning: Consider reducing overlap in fund strategies. Some of your funds may invest in similar sectors or companies, leading to portfolio redundancy.

Evaluation of Fund Categories
1. Flexi Cap Funds
Flexi cap funds provide exposure to large, mid, and small-cap stocks.
They adjust dynamically based on market opportunities, balancing risk and returns.
2. Multicap Funds
Multicap funds must maintain a minimum of 25% allocation in large-cap, mid-cap, and small-cap stocks.
This ensures exposure to various market segments while limiting extreme risks.
3. Mid-Cap and Small-Cap Funds
These funds offer higher growth potential but come with greater volatility.
Ideal for long-term goals, but monitor performance every 1-2 years.
4. Contra Funds
Contra funds follow a contrarian investment strategy, focusing on undervalued stocks.
While offering unique opportunities, they require patience for results.
Key Areas for Improvement
Review Overlap in Portfolio:

Check the overlap between the flexi cap, multi-cap, and contra funds.
Too much overlap might dilute diversification benefits.
Add a Debt Component:

A small debt fund allocation, beyond the liquid fund, can help balance your portfolio.
This acts as a cushion during equity market corrections.
Active Fund Management:

Since you’ve chosen direct funds, ensure regular monitoring.
Investing through a Certified Financial Planner (CFP) ensures ongoing guidance and portfolio review.
Tax Implications
Lumpsum and STP Gains:

Any gains from the liquid fund during STP are subject to your income tax slab.
Ensure you plan for tax liabilities while making withdrawals.
Equity Mutual Funds:

LTCG above Rs 1.25 lakh is taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.
Tax Efficiency with SIPs:

Each SIP instalment has its own holding period. This means gains are taxed individually.
Risk Management
Volatility in Small- and Mid-Cap Funds:

While these categories offer higher returns, they also have greater volatility.
Avoid reallocating funds during market corrections to maximise compounding benefits.
Regular Reviews:

Perform yearly reviews of fund performance and category suitability.
Replace funds that consistently underperform benchmarks over 3-4 years.
Final Insights
Your investment plan is robust, aligning well with your risk appetite and long-term goals. The use of lumpsum and STP is commendable, and the SIP allocations show a focus on disciplined investing.

However, focus on reducing portfolio overlap and adding a debt component for better risk management. Monitor fund performance regularly, and consider engaging a CFP for periodic reviews to ensure your portfolio stays aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Your commitment to steady SIPs is very good.
You track your performance with care.
You show patience and long-term thinking.
This discipline builds strong wealth.
Your long journey also shows deep faith in equity.
That faith will reward you over time.

Your SIPs run across large cap, large and mid cap, flexi cap, mid cap and small cap.
You also hold three lump sum funds in different areas.
Your spread is wide.
Your base is strong.
You also ask valid concerns about low-return funds.
And you want to place money in better performing places.
I will cover all these points step by step.

» Your Current Portfolio Shape

Your SIP covers five categories.
That reduces risk.
This protects you during market swings.
Your mix also supports long-term growth.
You have long-running SIPs.
They create deep compounding.
You also started some new SIPs recently.
These new SIPs need time.

Your lump sum part sits in three equity areas.
These areas offer stable and cyclical growth.
So your portfolio works like a full basket.
Some parts grow fast.
Some parts grow slow.
But together they create balance.

Your idea to review poor-performing SIPs is normal.
Most investors feel this at some point.
But decisions need clear analysis.
Not emotion.
Not short-term fear.
Not short-term disappointment.

» Why Some SIPs Show Low Returns Today

Three SIPs are worrying you.
They are small cap and mid cap oriented.
These categories behave differently.
They run in cycles.
Their gains rise sharply in some cycles.
They fall sharply in others.
This is normal for these categories.

Your SIP start dates are also very recent.
Some are only a few months old.
One is just around one year.
One is around one and half years.
Such short periods don’t show true performance.
They only show temporary market mood.

Small caps need long periods.
At least five years.
Sometimes seven years.
Sometimes even more.
Mid caps need patience as well.
New SIPs don’t show real power early.

Your low returns now do not mean poor fund quality.
They show only market phase.
Phases change.
Returns shift fast.
Small and mid caps often jump after weak phases.

So please don’t judge these new SIPs now.
Give them more time.
They started in a volatile cycle.
And that is the only reason returns look low.

» Should You Shift These SIPs to Your Stronger Funds?

You are thinking to move these SIPs into your stable performers.
Your stable performers include large cap, long-running flexi cap, large and mid cap, and long-running small cap.
They show strong long-term returns.
They also have long histories with you.

But shifting now can break your asset mix.
If you move money away from mid and small caps, your portfolio will tilt heavy to large caps.
This reduces long-term return potential.
Large caps are stable but slow.
Small and mid caps add speed in long-term compounding.
If you remove them now, the future growth reduces.

Also, shifting at low returns locks your loss temporarily.
This reduces your recovery scope.
Equity demands patience.
Shifts should happen only for category change or goal change.
Not due to early low return.

Your existing stable funds are strong.
But your new SIPs are young.
They must complete a cycle.
Give them time.
Let them build track record.
Let them grow into their natural cycle.

So shifting is not needed now.
Holding is better.
This protects your asset spread.
This protects your future upside.

» What You Can Do Instead of Shifting

– Keep the SIP amounts running in all categories.
– Do not stop a SIP only because returns look low.
– Give new SIPs time to settle.
– Keep your existing strong funds as anchors.
– Let the new SIPs grow slowly with the cycle.

This approach keeps your long-term path strong.
Your risk stays balanced.
Your return potential stays high.
Your peace remains intact.

» Your Large Cap SIP

Your large cap SIP shows stable long-term return.
Large caps protect you during market shocks.
They give consistent strength.
This SIP can stay as it is.
Your amount here is healthy.

Large caps will never give small cap-style jumps.
But they give backbone strength.
You already enjoy that.
So no change needed here.

» Your Large and Mid Cap SIP

This category is good for balanced growth.
It gives both stability and speed.
Your return is strong due to long holding period.
This SIP is a pillar in your mix.
You can continue this SIP.

This category sometimes outperforms large caps.
Sometimes mid caps inside it push growth.
So it gives a smooth growth curve.

» Your Long-Term Flexi Cap SIP

A flexi cap fund adjusts allocation based on market cycles.
This gives natural balance.
Your return shows good long-term compounding.
This SIP is valuable for long-term wealth.
Keep this running as well.

Flexi cap gives freedom to move across market caps.
This helps during tough cycles.
This helps during opportunity cycles.

» Your Earlier Small Cap SIP With Good Return

Your long-running small cap SIP is solid.
The return shows full cycle benefit.
This proves that small caps need time.
You have seen both low and high phases.
And it rewarded you well.
This is the best example for your new SIPs.

This SIP also gives high long-term power.
Small caps grow faster when held long.
This SIP should continue.
It strengthens your return potential.

» Your Three New SIPs With Low Returns

These SIPs look weak now.
But they are too new.
They cannot show long-term truth yet.
Please wait.
Please continue.
They will settle.
They will show their cycle strength later.

Stopping now may disturb your mix.
Stopping now may cut your chance for higher future returns.

So I advise to continue them.
Let them complete three to five years.
Then review again.

» Your Lump Sum in PSU Theme

Your PSU-themed lump sum works like a cyclical idea.
It grows well during reform cycles.
It grows during strong government policy cycles.
You hold it for a short time now.

The return is decent for a short period.
But this category is not stable always.
It moves in waves.
So you must keep moderate expectations.
Don’t expect smooth returns here.
Hold it medium term.
Do not add more now.
Let it run on its own.

Review after three years.
Keep it as a satellite portion of your total.

» Your Lump Sum in Flexi Category

This fund gives broad market coverage.
Your return is good.
Flexi cap works well when markets shift directions.
Hold this for long term.
It suits broad-based wealth creation.

No need to redeem.
No need to shift.
Let it stay and grow steady.

» Your Lump Sum in Emerging Category

This category grows when domestic and global cycles favour growth-oriented companies.
Your return is strong.
This shows the category is working well.

Hold it for long term.
Do not disturb it.
Allow more compounding.
It can support high capital appreciation.

» Why Active Funds Give Better Scope Than Index Funds

Index funds track the market.
They cannot beat the market.
They cannot avoid weak companies inside the index.
They cannot manage risk actively.
They cannot adjust during market shocks.
They cannot shift between sectors based on cycle.

Active funds can do all these.
Active funds can remove weak stocks.
Active funds can allocate more to strong sectors.
Active funds can reduce risk quickly.
Active funds can capture opportunities early.
Active funds give better long-term power.
So your active fund choices are suitable.

» Why Regular Plans Are Better Than Direct Plans

Regular plans come with guidance.
They give you clarity.
You get support in reviews.
You get a Certified Financial Planner’s view.
You get timely corrections.
You get emotional support in volatile cycles.

Direct plans give no such support.
Direct plans leave you alone during tough times.
Direct plans become risky without guidance.

So regular plans are better for your long-term journey.

» Cash-Flow Comfort and Mental Comfort

Your SIP size is strong.
Ten thousand rupees across many categories builds big wealth.
But make sure it fits your cash flow.
You should not feel pressure.
Your SIP should feel natural.
Not heavy.
Not stressful.

Mental comfort is important.
If you worry too much about short-term returns, you may take wrong actions.
Please see equity as a long-term partner.
Short-term pain is normal.
But long-term gain is powerful.

» Risk Spread Across Your Portfolio

Your portfolio is spread well across five categories.
Large cap gives stability.
Flexi cap gives balance.
Large and mid cap gives smooth growth.
Mid cap gives speed.
Small cap gives high compounding.
PSU gives exposure to government-linked sectors.
Emerging category gives future growth trends.

This spread supports your long-term safety.
This gives you a full 360-degree structure.
This helps you handle all cycles.

» How to Review in Future

Review once a year.
Not every month.
Not every quarter.
One year gives clear signals.
Short periods give noise.

Check only category-level changes.
Do not react to short-term low returns.
Do not shift during weak phases.
Shift only when your goals or risk levels change.

» Finally

Your portfolio is strong.
Your commitment is strong.
Your categories are balanced.
Your lump sum part is fine.
Your weak SIPs only look weak because they are new.
They need time.
Do not shift them now.
Let all your SIPs continue.
This will build wealth in the long run.
You are on the right direction.
Stay steady.
Stay patient.
Stay invested.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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