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Ramalingam Kalirajan |11455 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 20, 2026

Ramalingam Kalirajan has over 26 years of experience in MF distribution and wealth management. He holds an MBA in Finance from the University of Madras and is a CFP (Certified Financial Planner) credentialed professional. He is the Director of Holistic Investment, a Chennai-based AMFI-registered Mutual Fund Distribution (ARN-4188) and APMI-registered PMS Distribution firm (APRN07386), helping clients build long-term wealth through mutual funds and other investment solutions.... more

Asked by Anonymous - Aug 03, 2026

Hello For a very long term 20 plus year wealth creation horizon which portfolio combination would you recommend? ( my current portfolio through direct and I plan on only doing my sips through direct.with 40 k per month) Also is the below combination a good construct? Parag Parikh Flexi Nippon multicap Edelweiss mid cap Bandhan small cap Kotak nifty next 50 Franklin us equity OR The same above portfolio by replacing Edelweiss mid cap.with invesco mid cap? Thanks Jeetu

Ans: You have chosen a very long investment horizon.

That is the biggest strength of your plan.

For 20+ years, I would focus on simplicity first.

Your proposed portfolio has good diversification.

But six equity funds are more than necessary for Rs.40,000 monthly SIP.

The bigger concern is overlap.

» Your current structure

Your proposed categories are broadly:

– Flexi-cap

– Multi-cap

– Mid-cap

– Small-cap

– Large-cap index-based

– International equity

This gives exposure across different segments.

However, there can be meaningful overlap between flexi-cap and multi-cap.

Mid-cap and small-cap also bring higher volatility.

The international allocation adds useful geographic diversification.

So, the structure is good, but it can be made cleaner.

» What I would change

For a 20+ year goal, I would prefer four core buckets.

– One flexi-cap actively managed fund

– One mid-cap actively managed fund

– One small-cap actively managed fund

– One international equity allocation

The multi-cap fund is not compulsory.

The large-cap index-based allocation is also not necessary.

This would make monitoring much easier.

It also reduces the chance of having many similar holdings.

» Active management versus the index-based allocation

The large-cap index-based fund gives passive market exposure.

It is simple and usually low-cost.

However, it follows the underlying index.

It cannot actively avoid every expensive or weaker company.

An actively managed fund can change holdings based on valuations and business prospects.

That flexibility can be useful over a 20+ year period.

So, for your stated preference, I would favour actively managed funds.

» Flexi-cap and multi-cap together

This is the area I would question most.

Both categories can invest across large, mid and small companies.

Therefore, the two funds may own many similar businesses.

Owning both does not automatically improve diversification.

It can simply create more funds with similar exposure.

One strong diversified core fund is enough.

» Mid-cap choice

Between the two mid-cap options, I would not select one only from recent returns.

For a 20+ year holding period, check:

– Fund manager stability

– Investment philosophy

– Portfolio quality

– Risk control

– Consistency across market cycles

– Downside behaviour during weak markets

The better fund is the one you can hold through several market cycles.

You do not need to change based on one or two years of performance.

» Small-cap allocation

Small-cap is suitable for a long horizon.

But it can be quite volatile.

Your 20+ year horizon makes this easier to handle.

Still, I would keep the allocation controlled.

Do not make small-cap the largest part of the portfolio.

Continue the SIP even during market corrections.

That discipline can be valuable over many years.

» International allocation

Your international allocation is useful.

It provides exposure outside India.

It also reduces dependence on one country's economy.

However, I would keep it as a supporting allocation.

Your main wealth creation can remain India-focused.

» About your direct-plan decision

You want to continue with direct plans.

Direct plans generally have lower expense ratios.

They also have the same underlying fund structure.

The cost saving can compound over a long period.

However, direct plans require more responsibility from you.

You need to monitor:

– Asset allocation

– Fund selection

– Portfolio overlap

– Rebalancing

– Goal-based changes

– Exit decisions

If you can manage these properly, direct investing can work.

But poor decisions can easily cost more than the expense saving.

» My preferred structure

For your Rs.40,000 monthly SIP, I would keep the framework simple.

A reasonable model allocation could be:

– 40% in flexi-cap

– 25% in mid-cap

– 15% in small-cap

– 20% in international equity

This is only a model allocation.

Your existing portfolio must also be considered.

The SIP should not be planned separately from your total portfolio.

» About replacing the mid-cap fund

I would not switch simply because another fund has recently performed better.

Both options belong to the same broad category.

The decision should depend on quality and consistency.

If your current mid-cap fund is strong, continuing it can be sensible.

Frequent switching can hurt long-term discipline.

» 360-degree portfolio view

With a 20+ year horizon, finding six perfect funds is not the main goal.

Building a portfolio you can hold for two decades is more important.

I would focus on:

– Four or fewer core equity funds.

– Controlled small-cap exposure.

– Limited international exposure.

– Minimal overlap.

– Annual portfolio review.

– Increasing SIP as income rises.

– Rebalancing when allocations move materially.

This is more important than chasing recent winners.

» Final Insights

Your current portfolio is not bad.

But I would simplify it.

My preference is one diversified core fund, one mid-cap fund, one small-cap fund and one international allocation.

I would avoid unnecessary overlap between flexi-cap and multi-cap.

I would also avoid making the index-based allocation a core recommendation.

Between the two mid-cap choices, select based on long-term consistency.

Do not select only on recent returns.

For direct plans, continue only if you are comfortable managing the portfolio yourself.

For 20+ years, simplicity, discipline and regular review matter most.

Best Regards,

K. Ramalingam, MBA, CFP,

AMFI-Registered MFD – ARN 4188

www.holisticinvestment.in/

https://www.linkedin.com/in/ramalingamcfp/

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