Hello Dev, hope you’re doing good. I have the following MFs running (except SBI, all are barely 6 months old) for which I want your advice and guidance on change of scheme or reshuffling of amount or whatever. SBI Contra: 15k per month SBI Small Cap: 20k per month SBI Equity Hybrid: 5k per month Quant Small Cap: 25k per month Quant Mid Cap: 10k per month Quant Flexi Cap: 8k per month Tata Digital India Fund: 12k per month Nippon India Growth: 5k per month Nippon India Nifty Smallcap 250: 2.5k per month Parag Parikh Flexi Cap: 7k per month Motilal Oswal Nasdaq 100: 5k per month ICICI Technology: 5k per month ICICI Transportation & Logistics Fund: 2.5 k per month HDFC Transportation & Logistics Fund: 5k per month UTI Flexi Cap: 5k per month Total investment: 1.34 Lac per month My goal is to create a corpus of about 3 cr in next 7 yrs. please suggest if I’m on the right track. Recently I did the portfolio balancing and terminated Axis MF schemes as they were jot yielding good returns. Btw, my existing investments in MFs have already created a corpus of 30L.

Ans: Hello Dev,

It's great to see your dedication to building a strong investment portfolio. Your systematic approach and willingness to reassess your investments demonstrate a clear commitment to achieving your financial goals. Let’s review your current portfolio and provide guidance for reaching your target of Rs 3 crore in the next 7 years.

Current Portfolio Overview

Your current investments span a variety of mutual funds, focusing on different sectors and capitalizations. Here’s a brief overview of your monthly investments:

SBI Contra: Rs 15,000
SBI Small Cap: Rs 20,000
SBI Equity Hybrid: Rs 5,000
Quant Small Cap: Rs 25,000
Quant Mid Cap: Rs 10,000
Quant Flexi Cap: Rs 8,000
Tata Digital India Fund: Rs 12,000
Nippon India Growth: Rs 5,000
Nippon India Nifty Smallcap 250: Rs 2,500
Parag Parikh Flexi Cap: Rs 7,000
Motilal Oswal Nasdaq 100: Rs 5,000
ICICI Technology: Rs 5,000
ICICI Transportation & Logistics Fund: Rs 2,500
HDFC Transportation & Logistics Fund: Rs 5,000
UTI Flexi Cap: Rs 5,000
Your total monthly investment is Rs 1.34 lakh, with a current corpus of Rs 30 lakh.

Diversification and Allocation Analysis

Sectoral and Thematic Funds

You have invested in several sectoral and thematic funds such as Tata Digital India, ICICI Technology, and Transportation & Logistics funds. While these funds can offer high returns, they also come with higher risk due to their concentrated exposure. It’s essential to balance these with more diversified equity funds.

Small and Mid Cap Funds

Your portfolio has significant exposure to small and mid-cap funds through SBI Small Cap, Quant Small Cap, and Quant Mid Cap. These funds can deliver high growth but can be volatile. Ensure you have a long-term horizon for these investments to ride out market fluctuations.

Flexi Cap and Equity Hybrid Funds

You’ve chosen flexi cap funds like Parag Parikh Flexi Cap and UTI Flexi Cap, which provide flexibility to invest across market caps. These funds offer a balanced approach and are a good addition to your portfolio. The SBI Equity Hybrid Fund adds stability by investing in both equity and debt.

Evaluating Performance and Risk

Regular Review and Rebalancing

Regularly review your portfolio’s performance. Track each fund’s returns, risk-adjusted performance, and alignment with your goals. Consider reallocating from underperforming funds to those with consistent, strong performance.

Reducing Overlap

Ensure there’s no excessive overlap in your holdings. Multiple funds from the same category or sector can lead to redundancy. Diversify across different sectors and market caps to minimize risk and maximize returns.

Stepping Up SIP Contributions

Increase SIP Contributions

You have a substantial monthly investment, but increasing your SIP contributions annually can significantly boost your corpus. Consider stepping up your SIPs by 10-15% each year to harness the power of compounding.

Lumpsum Investments

If you have additional funds, consider lumpsum investments during market corrections. This strategy can enhance your overall returns by buying units at lower prices.

Sectoral and Thematic Fund Reassessment

Technology and Sectoral Funds

While sectoral funds like ICICI Technology and Tata Digital India can offer high returns, they are highly cyclical. Consider limiting your exposure to these funds to avoid over-concentration in a single sector.

Balance with Core Equity Funds

Rebalance your portfolio by increasing allocation to core equity funds, such as large-cap and flexi-cap funds. This approach can provide stability and steady growth.

Importance of Active Management

Actively Managed Funds

Actively managed funds can outperform passive index funds by leveraging market opportunities. Your choice of actively managed funds can help you achieve higher returns compared to passive funds.

Professional Guidance

Investing through a Certified Financial Planner (CFP) can provide personalized advice and professional oversight, ensuring your investments align with your goals and risk tolerance.

Avoiding Direct Funds

Disadvantages of Direct Funds

Direct funds have lower expense ratios but lack professional guidance. Investing through a mutual fund distributor with CFP credentials ensures informed decision-making and portfolio management.

Regular Fund Monitoring

Monitor your funds regularly to ensure they perform well and meet your expectations. Professional guidance can help make necessary adjustments based on market conditions and personal goals.

Creating a Balanced Portfolio

Diversify Across Asset Classes

Diversify your portfolio across different asset classes, such as equity, debt, and gold, to manage risk. This diversification can provide stability and enhance returns over time.

Emergency Fund and Insurance

Ensure you have an emergency fund and adequate insurance coverage. These financial safeguards protect you from unexpected events and allow you to continue your investment journey uninterrupted.

Long-Term Perspective

Patience and Discipline

Maintain a long-term perspective with patience and discipline. Markets can be volatile, but staying invested through market cycles can help you achieve your financial goals.

Regular Contributions

Regular contributions, combined with the power of compounding, can significantly grow your wealth over time. Stay consistent with your SIPs and consider increasing them as your income grows.

Conclusion

Your investment strategy is on the right track, but regular review and rebalancing are essential. Diversify your portfolio, reduce sectoral concentration, and increase SIP contributions to achieve your goal of Rs 3 crore in 7 years. Professional guidance from a Certified Financial Planner can ensure your investments align with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in