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Sanjeev Govila  |192 Answers  |Ask -

Financial Planner - Answered on Jun 16, 2023

Asked by Anonymous - Jun 09, 2023

Hello, I have a portfolio of Mutual fund with majority 65% towards small cap ( SBI Small Cap, Axis Small Cap and HSBC Small cap earlier L&T emerging business fund) and 20% in Mid cap (Axis Midcap, Kotak Emerging Business & HSBC mid cap fund) and 15% in Large Cap funds. This is purely long term plan( my retirement) and I don't need any fund as of now as I have FD's for my emergency need. I am also invested directly in stocks mainly large caps. This investment for me in all is more than 1.5 Cr. I want to invest another 50 lakhs purely for my child future educational needs which I would be requiring after 15 years. I would like to understand should I go ahead with mutual funds or I can try PMS services.

Ans: First of all, you have a good portfolio but it is very risky and a little over-diversified. You have invested in 3 funds for each category which is more than I would recommend to anybody.

Regarding your query on investment options to accumulate the amount for Children’s education need, both - mutual funds and PMS services - can be good option for investing your money. However, there are some key differences between the two that you should consider before making a decision.
• Cost: Mutual funds are typically less expensive than PMS services since mutual funds have a lower expense ratio, which is the fee that is charged to investors to cover the costs of managing the fund. However, PMS have a heterogeneous charge structure that can vary on the basis of performance, or fixed charge structure irrespective of performance, that may or may not justify/align to your requirement/objective.
• Incidence of Tax – In Mutual Funds, all the transactions that the fund manager does - whether he buys or sells any stock, are not liable to be taxed to you. It doesn't affect your tax liability. You are liable to capital gains tax only when you actually redeem your money invested in the fund. But in the case of PMS, all transactions done by the fund manager will be treated as your own transactions and will be liable to capital gains tax.
• Flexibility and liquidity: Mutual funds offer more flexibility than PMS services. This is because mutual funds can be bought and sold easily and generally carry no lock in. PMS services might have lock-in periods and exit loads if exited before 1 - 2 years depending on the fund.
You could invest your money in a low-cost, diversified mutual fund that is designed for long-term growth. This would provide you with the potential for growth over time, while still minimizing your risk. Risk management is equally important when it comes to critical life goals.

There are various mutual funds available for educational reasons, such as the Children's Gift Fund (Mutual Fund) and even a well-diversified regular MF portfolio. You can use those to meet your long-term educational objectives.

• I have just no idea about your age, future financial goals, your risk profile, other investments and whether you would have the nerves to not get unduly perturbed if stock markets go temporarily down.
• Hence, please note that I am answering your question in absolute isolation to other parameters which should definitely be considered when answering a question of this type.
• I recommend you to also consult a good financial advisor who would look at your complete profile in totality before you act on this advice given by me.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Hardik Parikh  |106 Answers  |Ask -

Tax, Mutual Fund Expert - Answered on May 03, 2023

Kapil Padha: Kindly give your expert opinion regarding my monthly mutual fund investments of Rs. 28000 (all SIPs) I have been doing for the last 4 years. I am 39 yr old. I want to create a corpus of around 2 Crore in the next 15 years. Your expert opinion will be appreciated. 1. HDFC Children's Gift Fund - (Lock-in) - Regular Plan - Rs. 10000. 2. ICICI Prudential Midcap Fund - Growth - Rs. 5000 3. ICICI Prudential Multicap Fund - Growth - Rs. 2000 4. Axis Bluechip Fund - Regular Growth - Rs. 4500 5. Axis Focussed 25 Fund - Regular Growth - Rs. 2000 6. SBI Focussed Equity Fund - Regular Growth - Rs. 4500 Are the funds mentioned above good? Or do I have to change to some other funds?
Ans: Dear Kapil,

I appreciate your proactive approach towards building wealth for the future. I must say that you have chosen a diversified set of mutual funds which is a good start towards achieving your financial goals.

To begin with, your investment of Rs. 28,000 per month towards mutual funds is a commendable step towards wealth creation. Assuming a yearly growth rate of 12%, you can potentially reach your target of 2 Crore in the next 15 years.

Coming to your mutual fund portfolio, the HDFC Children's Gift Fund has a lock-in period of five years, which is ideal if you are investing for your child's education or marriage. However, you may consider shifting your investments to the HDFC Hybrid Equity Fund or HDFC Equity Fund, which have delivered good returns historically and have a lower lock-in period.

The ICICI Prudential Midcap Fund and ICICI Prudential Multicap Fund are excellent choices for investing in mid-cap and multi-cap funds, respectively. The Axis Bluechip Fund is a good option for investing in blue-chip companies, while the Axis Focused 25 Fund and SBI Focused Equity Fund are suitable for investing in focused portfolios.

Overall, your mutual fund portfolio seems to be well diversified, and you may consider making minor tweaks to it based on your risk appetite and investment goals. As always, it's essential to consult with your financial advisor before making any investment decisions.

I hope this helps!
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.


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