Confused About My Existing Funds - Should I Continue or Switch?

Ans: Your existing investments show a good diversification strategy. They span equity, mid-cap, small-cap, and thematic funds.

Let us assess these funds to identify gaps, overlaps, or potential for improvement.

Strengths of Your Portfolio
1. Diversification Across Market Segments

Investments include mid-cap, small-cap, and equity-diversified funds.
This reduces risk and ensures participation in broader market growth.
2. Focus on Emerging Opportunities

Investments in thematic funds add potential for long-term growth.
These align well with higher growth expectations over time.
3. Consistent Investment Approach

Regular SIPs promote disciplined investing.
This is crucial for building wealth over time.
Key Concerns Identified
1. High Overlap Between Funds

Multiple funds in similar categories lead to redundant investments.
This might dilute returns due to overlapping holdings.
2. Index Fund in the Portfolio

Index funds lack flexibility in volatile markets.
Actively managed funds can generate higher alpha through fund manager expertise.
3. Limited Exposure to Defensive Strategies

A defensive allocation like balanced or hybrid funds could enhance stability.
This is important to balance high-growth segments.
4. Uneven Time Frames Across Investments

Some funds have been held for shorter durations.
This may not allow the compounding benefits to materialise.
Recommendations for Portfolio Restructuring
1. Retain Well-Performing Funds

Funds with consistent performance should be continued.
Retain funds offering strong growth potential aligned with your goals.
2. Replace Redundant or Subpar Funds

Switch funds with overlapping objectives to avoid redundancy.
Consider diversified equity and mid-cap funds with proven performance records.
3. Exit Index Fund

Redeem your investment in the index fund.
Invest in actively managed funds for better long-term returns.
4. Add Hybrid or Balanced Funds

Introduce balanced advantage funds to stabilise your portfolio.
These funds provide a mix of equity growth and debt stability.
5. Focus on Regular Fund Investments Through CFP

Shift from direct funds to regular funds with CFP-guided investments.
This ensures expert monitoring and tailored portfolio adjustments.
Suggested Strategies for Long-Term Investments
1. Long-Term Wealth Creation Through Equity

Equity-oriented funds are ideal for higher returns over 7+ years.
Prioritise funds with a mix of large-cap and multi-cap exposure.
2. Stability Through Debt Allocation

Include debt-oriented funds for consistent returns in volatile times.
Aim for stability in case of market downturns.
3. Tactical Allocation for Emerging Opportunities

Allocate a smaller percentage to thematic or sectoral funds.
Limit exposure to manage risks effectively.
4. Periodic Portfolio Review

Assess your portfolio every 6 months to a year.
Adjust allocations based on market trends and fund performance.
Tax Considerations for Your Investments
LTCG above Rs 1.25 lakh on equity funds attracts 12.5% tax.
STCG is taxed at 20% for equity funds.
Tax-efficient planning ensures optimal returns from your investments.
Final Insights
Your portfolio is well-diversified but can be optimised for efficiency. Reducing redundancies, exiting index funds, and introducing hybrid strategies will add value. Work with a Certified Financial Planner for customised guidance and portfolio monitoring.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment