Hello Sir, I have invested 9lacs via 5k monthly SIP each in 3 MF, i.e., Franklin India Smaller companies, SBI magnum midcap and ABSL Pure value. Stopped these SIP in May 22, however planned for accumulated corpus of 9L to remain invested for next 18years in these funds. Secondly, I started 10K monthly sip in 3MF since Sept 2021, i.e., SBI Focused Equity, Kotak Small cap and UTI Flexi cap. I have planned to invest in these funds for next 18years. (Till 2040) Further, I want to start another monthly SIP for 30K for next 18years. Target is to have retirement corpus close to 9Cr., by 2040. I am unable to decide between NIFTY 50 index fund or small cap fund. Request you to suggest. Thanks.

Ans: Axis Bluechip Fund – Growth is better Large cap option; sectoral fund can be avoided due to concentration risk; Canara Robeco Equity Hybrid Fund - Growth is better Aggressive Hybrid and Axis Mid Cap fund – Growth is better Mid cap Fund

Rest are fine.

Ans: For you to get to 2crs in 7yrs, assuming 12% xirr, your sip amount needs to be Rs1.5L
Generally i avoid flexi cap funds, instead you can go for the following categories for your sip:
Small cap
Mid cap
Large and mid
Thematic - Consumption
Multicap
Focused

For Lumpsum you can select the same funds where you are having your sip's and the STP can be 15-20 weeks starting today.

Please note that these suggestions are based on your stated goals and the information you provided. It is always a good idea to consult with a financial advisor in person to better understand your risk tolerance, time horizon, and specific financial goals.

Ans: Building a Portfolio for Education and Retirement Goals

At 34, planning for your children's education and your retirement is a prudent step towards securing your family's future. Let's review your proposed SIP portfolio and suggest potential adjustments to align with your financial objectives.

Assessment of Proposed Portfolio

Your proposed SIP portfolio consists of investments in various mutual funds:

Index Funds:

Motilal S&P 500 Index Fund
ICICI Nifty Next 50 Index Fund
UTI Nifty 50 Index Fund
Motilal Oswal Nifty Midcap 150 Index Fund
Nippon India Nifty Smallcap 250 Index Fund
Active Funds:

SBI Bluechip Fund
SBI Large and Midcap Fund
Parag Parikh Flexi Cap Fund
Analysis and Suggestions

While index funds offer low-cost exposure to broad market indices, they come with certain limitations compared to actively managed funds:

Limited Scope for Outperformance: Index funds aim to replicate the performance of market indices, resulting in limited potential for outperformance compared to actively managed funds. Active fund managers have the flexibility to select investments based on market conditions and research, potentially generating higher returns over the long term.

Inability to Capitalize on Market Opportunities: Index funds follow a passive investment approach, mirroring the composition of their respective indices. In contrast, active fund managers can capitalize on market opportunities by making strategic investment decisions, potentially enhancing portfolio returns.

Risk of Tracking Error: Index funds may experience tracking error, which is the deviation in performance from the underlying index. Factors such as fund expenses, liquidity constraints, and dividend reinvestment may contribute to tracking error, impacting the fund's ability to replicate index returns accurately.

Considering the advantages of active management and your investment horizon of 10-15 years, a blend of both index and actively managed funds can be beneficial. Here's a revised suggestion for your SIP portfolio:

Active Funds (70% Allocation):

SBI Bluechip Fund (Rs. 6,000)
SBI Large and Midcap Fund (Rs. 10,000)
Parag Parikh Flexi Cap Fund (Rs. 8,000)
Index Funds (30% Allocation):

Motilal S&P 500 Index Fund (Rs. 3,000)
ICICI Nifty Next 50 Index Fund (Rs. 4,000)
UTI Nifty 50 Index Fund (Rs. 4,000)
Motilal Oswal Nifty Midcap 150 Index Fund (Rs. 3,000)
Nippon India Nifty Smallcap 250 Index Fund (Rs. 2,000)
Recommended Action Plan

Diversification: Maintain a diversified portfolio across asset classes and market segments to manage risk effectively.
Regular Review: Monitor the performance of your portfolio periodically and rebalance as needed to ensure alignment with your financial goals and risk tolerance.
By incorporating both active and index funds in your SIP portfolio, you can optimize returns while mitigating risk over the long term, thereby building a substantial corpus for your children's education and your retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: For the next 10k, it's better to avoid index funds like Nifty Index 50 and Nifty Index 50 Equal Weightage. Index funds often offer average returns that track the market, which might not be ideal for long-term growth. Instead, focus on actively managed funds that a Certified Financial Planner can suggest, tailored to your risk appetite and financial goals. This can potentially offer better returns over the next 15 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in