Hello I'm Shiva, I'm 37 yrs old and getting 1.25 L per month. I invest 35000 in EPF n VPF, 25000 in PPF n wife's PPF, 5000 in NPS.10000 in New startups. Is my portfolio good & How can I change my protfolio for secured and higher returns in short time .?

Ans: Your plan seems to be reasonable to achieve your target of Rs 5 Cr in 25 year's time. But given that the total allocation of mid-small-caps (i.e. non-large-caps) will be more than 50% in this portfolio, it must be understood that this is a portfolio suitable for a sufficiently high-risk appetite. If this is in line with what your understanding is then it is fine, else, consider increasing allocation to largecaps as well.

Note (Disclaimer) - As a SEBI RIA, I cannot comment on specific schemes/funds that are provided or asked for in the questions in the platform. And the views expressed above should not be considered professional investment advice or advertisement or otherwise. No specific product/service recommendations have been made and the answers here are for general educational purposes only. The readers are requested to take into consideration all the risk factors including their financial condition, suitability to risk-return profile and the like and take professional investment advice before investing.

Ans: Evaluating Your Current Investment Portfolio

Your effort to save and invest is commendable. Saving for the future is crucial for financial stability and growth. Let's evaluate your current portfolio and provide suggestions for improvements.

Insurance Policies Assessment

Insurance is important for financial security. However, combining insurance with investment might not always be the best strategy. Your portfolio includes several life insurance policies with investment components. While these policies offer a mix of protection and savings, they often come with higher costs and lower returns compared to pure investment options.

SIP Investments Overview

Your SIP investments are diversified across different sectors. This diversification helps in spreading risk. However, the concentration in small-cap and sector-specific funds can lead to higher volatility.

Recommendation for Balanced Diversification

Consider adding more large-cap and multi-cap funds to your portfolio. These funds tend to be less volatile and can provide more stability. Balancing your portfolio with a mix of small-cap, mid-cap, and large-cap funds is advisable.

Infrastructure Funds Analysis

You have invested significantly in infrastructure funds. While these funds can offer good returns during economic growth, they can be cyclical and volatile. Reducing exposure to sector-specific funds and increasing investment in more diversified equity funds can provide better risk-adjusted returns.

Equity and Debt Fund Balance

You have a good mix of equity and debt through the equity and debt fund. This balance is essential for managing risk and ensuring steady returns. Maintaining a proportion of your portfolio in balanced funds can help in achieving long-term financial goals.

SIP Discipline

Your commitment to SIPs is impressive. Regular investments through SIPs help in averaging costs and reducing market timing risk. Continue with this disciplined approach for sustained growth.

Health Insurance Coverage

Health insurance is crucial for managing medical emergencies. It’s good that you have health insurance in place. Ensure that the coverage is adequate to meet potential healthcare costs.

Flexibility and Liquidity

Ensure that your investments offer some liquidity. While long-term investments are important, having access to funds for emergencies is equally crucial. Consider maintaining an emergency fund in liquid instruments.

Certified Financial Planner Advice

Consulting a Certified Financial Planner (CFP) can provide personalized advice tailored to your financial situation. A CFP can help you align your investments with your financial goals and risk tolerance.

Investment Goals and Time Horizon

Your investment choices should align with your financial goals and time horizon. For long-term goals, equity investments are suitable. For short-term goals, consider safer instruments like debt funds or fixed deposits.

Assessing the Overall Portfolio Health

Your portfolio has a strong foundation, but some adjustments can enhance its performance. Diversifying across different asset classes and reducing sector-specific exposure can improve risk management.

Surrendering Insurance Policies

Considering the higher costs and lower returns of your current insurance policies, it might be beneficial to surrender them. By doing this, you can reinvest the proceeds into mutual funds, which typically offer higher returns over the long term. This approach can optimize your investment returns while ensuring sufficient life insurance coverage through term insurance policies.

Summary of Recommendations

Diversify your SIP investments with large-cap and multi-cap funds.

Reduce exposure to sector-specific funds like infrastructure funds.

Maintain a balance between equity and debt investments.

Ensure liquidity for emergencies by keeping some investments in liquid instruments.

Surrender current insurance policies and reinvest in mutual funds.

Regularly review and adjust your portfolio based on market conditions and financial goals.

Consult a Certified Financial Planner (CFP) for personalized advice and ongoing financial planning support.

Continued Financial Education

Stay informed about financial markets and investment strategies. Continuous learning and adapting your portfolio will help in achieving financial success.

You have taken significant steps towards financial planning. Continue with your disciplined approach and make necessary adjustments. Your financial future looks promising with the right strategies.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your commitment to saving and investing is commendable, especially after recognizing the need for financial planning. Let’s evaluate your portfolio and suggest improvements for a healthier financial future.

Current Portfolio Assessment
Insurance Policies
You have allocated significant funds to various insurance-cum-investment products. These plans often offer low returns compared to other investment options. However, since you cannot stop these policies, it's crucial to focus on optimizing your other investments.

SIP Investments
Your SIP investments are diversified across small cap, infrastructure, and hybrid funds. Small cap funds can provide high returns but come with higher risk. Infrastructure funds are sector-specific and can be volatile. A mix of equity and debt funds is good, but let's refine it further.

Diversification and Risk Management
Diversification is vital for risk management. While you have diversified across various funds, it's important to balance high-risk and low-risk investments. Ensure you have a mix of large cap, mid cap, and small cap funds. This will help in balancing the risk and returns.

High-Risk Investments
Small Cap Funds: These can yield high returns but are also risky. Limit exposure to these funds to manage risk.

Sector-Specific Funds: Infrastructure funds can be volatile. Consider reducing exposure to these funds and reallocating to more stable options.

Moderate-Risk Investments
Equity Hybrid Funds: These funds balance between equity and debt, providing moderate risk and returns. Increasing allocation to such funds can stabilize your portfolio.
Low-Risk Investments
Debt Funds: Adding debt funds can provide stability and reduce overall portfolio risk. They offer lower returns but are safer.
Regular vs. Direct Funds
Investing through a Certified Financial Planner can provide valuable guidance. Regular funds come with expert advice, helping you navigate market complexities. Direct funds might save on costs but lack professional guidance, which can be critical for long-term success.

Health Insurance
Your health insurance with no return is a prudent choice. It’s essential for financial protection against medical emergencies. Ensure the coverage is adequate for your needs.

Recommendations for Improvement
Rebalance SIP Investments

Reduce small cap and sector-specific fund exposure.

Increase allocation to equity hybrid funds for balanced growth.

Add debt funds for stability and risk reduction.

Emergency Fund

Ensure you have an emergency fund equivalent to six months of expenses. This should be in a liquid, low-risk investment.
Retirement Planning

Start a dedicated retirement fund if not already in place. This could be a mix of PPF, EPF, and equity funds.
Review and Adjust Regularly

Regularly review your portfolio to ensure it aligns with your financial goals and risk tolerance.

Make adjustments as needed with the guidance of a Certified Financial Planner.

Conclusion
Your initiative to save and invest is a great step towards financial security. By rebalancing your portfolio and managing risks, you can achieve a healthier financial future. Regular reviews and adjustments with professional guidance will ensure you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in