Sir i am new to investing in mutual fund. Should i invest in the same fund every month or should i keep changing my investment in various funds in sip

Ans: Hello Bharat. I would advice few changes in your portfolio, reconsider your schemes in ABSL AMC. You can consider categories such as Multi cap and mid cap funds.

Ans: It's great to see your proactive approach to investing, especially at the age of 36. Investing through SIPs in mutual funds is a smart way to build wealth over the long term. Let's assess your current investment strategy and see if any adjustments are needed.

Firstly, investing in nine mutual funds might be excessive and could lead to over-diversification. Managing too many funds can be challenging and may not necessarily lead to better returns. It's generally recommended to have a focused portfolio with a smaller number of well-chosen funds.

Secondly, your portfolio seems to have a tilt towards mid-cap and small-cap funds, which can be riskier compared to large-cap funds. While these funds have the potential for higher returns, they also come with increased volatility. It's essential to ensure that your portfolio aligns with your risk tolerance and investment goals.

As a Certified Financial Planner, I suggest streamlining your portfolio by consolidating your investments into fewer funds that cover a broader spectrum of the market. Consider retaining one or two well-performing funds from each category (large-cap, mid-cap, small-cap, etc.) to achieve diversification while keeping things manageable.

Regarding allocation, it's crucial to align your investments with your risk profile and financial goals. A common approach is to allocate a higher percentage to large-cap funds for stability and then allocate smaller portions to mid-cap and small-cap funds for growth potential. However, the exact allocation would depend on factors like your risk tolerance, investment horizon, and overall financial situation.

I recommend consulting with a Certified Financial Planner who can conduct a detailed analysis of your financial goals and risk profile to provide personalized advice on asset allocation and fund selection.

In conclusion, while your initiative to invest through SIPs is commendable, refining your portfolio and asset allocation can optimize your returns and reduce unnecessary complexity.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Ans: Evaluating Your Investment Strategy
Introduction
Congratulations on starting a disciplined investment journey. Investing ?25,000 per month and planning to increase it by 10% every six months shows a strong commitment.

Current Strategy Assessment
Investing in five different mutual funds each month is a diversified approach. However, consistency is key in mutual fund investments.

Benefits of Systematic Investment Plans (SIPs)
SIPs offer the advantage of rupee cost averaging and discipline. Sticking to a set of funds through SIPs ensures regular investments without market timing.

Diversification and Consistency
Diversification across different mutual funds is beneficial. However, investing in too many funds can lead to overlap and management challenges.

Recommended Approach
Stick to Consistent SIPs: Choose five well-performing funds and invest consistently in them via SIPs.

Review and Rebalance: Regularly review your funds' performance and rebalance if needed. This keeps your portfolio aligned with goals.

Fund Selection
Choose funds that align with your risk tolerance and financial goals. A mix of large-cap, mid-cap, and multi-cap funds can provide balanced growth.

Suggested Allocation
Large-Cap Fund: ?5,000
Mid-Cap Fund: ?5,000
Multi-Cap Fund: ?5,000
Balanced Advantage Fund: ?5,000
Debt Fund: ?5,000
This allocation provides exposure to different market segments, ensuring diversification and stability.

Increasing Investments
Your plan to increase investments by 10% every six months is excellent. It leverages the power of compounding and accelerates wealth creation.

Example
Starting with ?25,000 and increasing by 10% every six months can significantly boost your corpus over nine years.

Achieving the ?1 Crore Goal
Your goal of accumulating ?1 crore by age 56 is achievable with disciplined investing and regular reviews.

Estimated Returns
Assuming a moderate annual return of 12%, your increasing SIP strategy can help you reach your target. The key is consistency and regular increments.

Monitoring and Adjusting
Regularly monitor your portfolio's performance. Make adjustments based on market conditions and fund performance. Consulting a Certified Financial Planner (CFP) can provide personalized guidance.

Professional Advice
A CFP can help you navigate market complexities, select the right funds, and make necessary adjustments. They offer tailored advice aligning with your financial goals.

Conclusion
Sticking to a consistent SIP strategy with a mix of funds and increasing investments regularly is a prudent approach. Regular monitoring and professional advice can help you achieve your ?1 crore goal by age 56.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You've taken a great step towards securing your financial future by investing in mutual funds through SIPs. Consistency in investments like this is the key to building wealth over time. Let's delve into the specifics of your current investments and explore whether continuing with these funds or making adjustments aligns better with your long-term goals.

Analyzing Your Current Mutual Fund Investments
SBI Balanced Advantage Fund - Growth
Balanced Approach: This fund is a balanced advantage fund. It dynamically adjusts its allocation between equity and debt based on market conditions. This helps in managing risk while aiming for moderate growth.

Risk Management: Balanced funds are less volatile compared to pure equity funds. They offer stability during market downturns due to their debt component.

Growth Potential: By maintaining a balance between equity and debt, this fund seeks to provide steady returns. The equity part provides growth, while the debt part provides stability.

Three-Year Performance: Considering your three-year investment period, balanced advantage funds generally provide a smoother return trajectory. They protect you during market corrections while still participating in market rallies.

NIMF Flexi Cap Fund - Growth
Flexibility in Stock Selection: Flexi cap funds invest across large, mid, and small-cap stocks. This flexibility allows the fund manager to pick stocks from any segment, aiming to capitalize on opportunities across the market.

Diversification Benefits: By investing in companies of different sizes and sectors, flexi cap funds offer diversified exposure. This can reduce the impact of a downturn in any single sector or market cap segment.

Growth Potential: Flexi cap funds have the potential for higher returns due to their diversified equity exposure. They can tap into growth stories in both established and emerging companies.

Adapting to Market Conditions: These funds can adapt their portfolio based on market conditions and opportunities. This dynamic approach can enhance returns over the long term.

Evaluating Whether to Continue or Switch
Key Factors to Consider
Performance Consistency: Check the performance of these funds over the past three to five years compared to their benchmarks and peers. Consistent outperformance is a good indicator of a reliable fund.

Fund Management: The experience and strategy of the fund manager play a crucial role in a fund's success. Look for funds managed by experienced managers with a proven track record.

Risk Profile: Ensure the risk level of the funds matches your risk tolerance and financial goals. Balanced funds are more conservative, while flexi cap funds are suitable for moderate to high risk-takers.

Expense Ratio: Lower expense ratios mean more of your money is invested in the market rather than being spent on fees. Compare the expense ratios of your funds with others in the same category.

Investment Horizon: Align your funds with your investment horizon. For long-term goals, equity-oriented funds like flexi cap funds are ideal. For medium-term goals, balanced funds provide a good mix of growth and stability.

Deciding to Continue or Switch
SBI Balanced Advantage Fund:

If you seek moderate growth with reduced volatility, continuing with this fund is a sound choice. Its balanced nature provides a cushion against market swings.
However, if your goal is long-term and you can handle more risk, you might consider increasing allocation to pure equity funds for higher growth potential.
NIMF Flexi Cap Fund:

Given its diversified and dynamic equity exposure, this fund is well-suited for long-term growth. If it has performed well compared to its benchmark and peers, continuing is wise.
If you're looking for even higher growth and are comfortable with higher risk, you might explore other equity funds or even sector-specific funds for targeted exposure.
Exploring Additional Investment Options
Actively Managed Equity Funds
Large Cap Funds: These funds invest in large, established companies. They offer stability and moderate growth, suitable for conservative investors seeking steady returns.

Mid Cap Funds: Investing in medium-sized companies, mid cap funds have higher growth potential but come with increased volatility. They are ideal for investors with a higher risk appetite.

Small Cap Funds: Small cap funds target smaller companies with high growth potential. They can offer substantial returns but also carry significant risk and volatility.

Sector/Thematic Funds: These funds focus on specific sectors like technology, healthcare, or financial services. They provide targeted exposure but are riskier due to concentration in one sector.

Debt Funds for Stability
Short-Term Debt Funds: These funds invest in short-duration debt instruments. They are less sensitive to interest rate changes and provide stable returns with lower risk.

Corporate Bond Funds: Investing in high-quality corporate bonds, these funds offer higher returns than government securities while maintaining relatively low risk.

Dynamic Bond Funds: These funds actively manage their portfolio across various debt instruments based on interest rate movements. They aim to maximize returns through strategic allocation.

Hybrid Funds for Balanced Approach
Aggressive Hybrid Funds: These funds invest predominantly in equities but also have a significant debt component. They offer high growth potential with moderate risk.

Conservative Hybrid Funds: With a higher allocation to debt and a smaller portion in equity, these funds provide stability with some growth. They are suitable for conservative investors.

Leveraging Compounding and SIPs
Power of Compounding: Long-term investments benefit immensely from compounding. The returns generated on your investments are reinvested, generating additional returns over time. This exponential growth can significantly increase your wealth.

Systematic Investment Plans (SIPs): SIPs allow you to invest a fixed amount regularly, averaging out market volatility and cost. This disciplined approach helps build a substantial corpus over time without worrying about market timing.

Potential Challenges and How to Address Them
Market Volatility
Equity Market Swings: Equity investments are subject to market fluctuations. Staying invested through market cycles and avoiding panic selling during downturns is crucial for long-term success.

Balanced Funds Stability: Balanced funds provide a buffer during market volatility through their debt component. However, they might underperform in a strong bull market compared to pure equity funds.

Economic and Policy Changes
Impact on Debt Funds: Changes in interest rates and government policies can affect debt fund returns. Keeping an eye on economic indicators and adjusting debt fund allocations accordingly is important.

Sectoral Risks: Thematic and sector funds are exposed to risks specific to their focus areas. Diversifying across sectors or choosing broader equity funds can mitigate these risks.

Fund Management Changes
Manager Changes: The performance of actively managed funds depends significantly on the fund manager. Changes in the management team can impact the fund’s strategy and performance.

Regular Monitoring: It’s essential to review your fund’s performance periodically. Consider consulting with a Certified Financial Planner (CFP) for insights on whether to stay invested or switch funds.

Benefits of Consulting a Certified Financial Planner (CFP)
Expertise and Guidance: A CFP brings expertise and personalized advice tailored to your financial goals and risk tolerance. They help in selecting funds that align with your investment strategy.

Portfolio Optimization: CFPs provide ongoing support in reviewing and optimizing your portfolio. They help rebalance your investments to stay aligned with changing market conditions and personal goals.

Financial Planning: Beyond investment advice, a CFP offers comprehensive financial planning. They assist in budgeting, insurance planning, retirement planning, and achieving overall financial well-being.

Peace of Mind: Knowing that a professional is managing your investments provides peace of mind. It allows you to focus on other aspects of life while ensuring your financial goals are on track.

Final Insights
Your current investments in SBI Balanced Advantage Fund and NIMF Flexi Cap Fund show a good mix of growth and stability. Balanced funds offer safety during volatile times, while flexi cap funds provide growth through dynamic equity exposure.

Considering your goals, it’s important to regularly review these funds’ performance and alignment with your risk tolerance. If you seek higher growth and can handle more risk, exploring additional equity funds or reallocating to higher-performing funds may be beneficial.

Engaging with a Certified Financial Planner can offer invaluable guidance. They can help tailor your investment strategy, optimize your portfolio, and provide ongoing support to achieve your financial objectives. Your disciplined SIP approach and diversified fund selection set a solid foundation for long-term wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have done a good job by investing regularly through SIPs in different categories of mutual funds. Staying invested for five years shows patience and discipline. This habit is the real strength of wealth creation. Let us assess your portfolio in a structured way and explore what can be improved.

» Assessment of Your Current Portfolio

Your portfolio covers small-cap, mid-cap, and large-cap categories. This gives you exposure across different market segments. That is a positive start.

The large-cap fund brings stability. It invests in established companies that usually give steady growth.

The mid-cap fund offers a balance between growth and stability. It can grow faster than large-cap but has slightly higher risk.

The small-cap fund adds aggressive growth potential. It carries higher volatility but can deliver strong long-term gains.

Since you are 39, you have time on your side. The equity exposure you have taken through these funds is suitable for wealth creation over the long term.

» Performance and Holding Period Analysis

Five years is a decent period, but equity funds ideally need longer. Especially small-cap and mid-cap funds perform better when held for 7 to 10 years.

Your first two funds have completed about five years. You can start evaluating their performance against their respective benchmark indices and category averages.

If both are giving above-average returns compared to peers, continue them.

If any fund has underperformed for more than three years continuously, you can consider a gradual exit.

The last fund has been running only for 18 months. It is too early to judge. All equity funds go through short-term ups and downs. So, stay invested at least for 5 to 7 years before making any change.

» Importance of Staying Invested

Mutual fund SIPs work best through compounding and rupee-cost averaging. By continuing your SIPs, you buy more units when markets are down and fewer when markets are high. Over time, this smooths out the average cost.

Stopping or switching frequently disturbs this process. Equity wealth creation takes time. Even good funds need market cycles to prove their strength.

Therefore, do not be influenced by short-term volatility. Continue investing with patience unless your funds are consistently lagging behind their category peers.

» Portfolio Diversification and Overlap Check

Although you have selected three different categories, all are from one fund house. Having all schemes from the same AMC is not always ideal.

Each AMC follows its own investment style and risk approach. When all funds belong to one AMC, there may be portfolio overlap. The same stocks might appear in different schemes.

This reduces the benefit of diversification. A Certified Financial Planner can help check portfolio overlap and suggest diversification across different AMCs.

If the overlap is high, consider shifting one or two schemes to other reputed fund houses with consistent long-term track records. This helps reduce concentration risk.

» Reviewing Fund Allocation

Your risk capacity and financial goals decide how much you should allocate to large, mid, and small-cap funds.

If you need stability, increase the weightage of large-cap funds.

If you want long-term growth, keep some exposure to mid and small-cap.

Avoid overexposure to small-cap because it fluctuates sharply in volatile markets.

A balanced combination might look like this –
Large-cap 40%, Mid-cap 35%, Small-cap 25%.

However, this ratio must align with your personal goals, investment horizon, and risk tolerance.

» Rebalancing Strategy

Periodic rebalancing is important to control risk and capture gains. Over time, one fund category may grow faster and disturb your target ratio.

For example, if small-cap grows sharply, it can form a larger part of your portfolio. In such cases, shift some amount from small-cap to large-cap or mid-cap to maintain balance.

Rebalancing once a year is enough. It helps protect gains and ensures your portfolio remains aligned with your goals.

» Importance of Regular Funds and Role of Certified Financial Planner

You have invested in regular plans through a distributor. That is a wise move. Many investors think direct plans are cheaper. But they ignore the value of professional guidance.

Regular plans come with ongoing support, periodic reviews, and rebalancing help from a Certified Financial Planner.

Direct plans leave you alone. You have to track performance, do rebalancing, and handle taxation yourself.

Regular plans help avoid emotional decisions during market swings. The planner keeps your investments aligned with goals and risk profile.

Over time, the planner’s advice adds more value than the small expense difference between direct and regular plans.

» When to Switch Funds

Switching should not be based on short-term performance or market news. Switch only if –

The fund is consistently underperforming its category peers for more than three years.

The fund has a major change in management or investment philosophy.

The fund’s risk level no longer suits your profile.

Before switching, always consult a Certified Financial Planner. They can analyse the rolling returns, consistency, and risk-adjusted performance of each fund. This ensures your decisions are data-based, not emotional.

» Aligning SIPs with Your Goals

Every SIP should have a clear purpose. It could be for retirement, children’s education, or wealth creation. When goals are defined, you can decide how long to stay invested and what risk to take.

If your SIPs are not linked to specific goals, start doing that now. It gives you better clarity and helps you avoid premature withdrawals.

Also, the investment horizon for each goal should decide your fund category:

Short-term goals (less than 3 years): Keep in debt or liquid funds.

Medium-term goals (3 to 5 years): Use balanced or large-cap funds.

Long-term goals (above 5 years): Use mid-cap and small-cap funds.

» Taxation Aspect

Under the new rules, long-term capital gains from equity mutual funds above Rs 1.25 lakh per year are taxed at 12.5%. Short-term gains are taxed at 20%.

This makes it even more important to stay invested for longer. The longer you stay, the lower the tax impact on your returns due to compounding.

Avoid unnecessary redemptions or switches. Each transaction can trigger tax liability.

» Behavioural Discipline

One of the biggest success factors in mutual fund investing is behaviour. Most investors do not lose because of bad funds. They lose because of bad timing or panic selling.

When markets fall, continue your SIPs. You are buying units at cheaper prices. When markets recover, your gains multiply faster.

Keep emotions aside and stick to your plan. The market rewards patience and consistency.

» Role of Periodic Review

Review your portfolio once or twice a year. Do not check daily or weekly. That leads to unnecessary anxiety.

In each review, assess three things –

Fund performance compared to category average.

Asset allocation alignment with goals.

Any changes in your financial situation.

Based on this, make minor adjustments if needed. But do not overhaul your portfolio frequently.

» Benefits of Staying with Actively Managed Funds

Actively managed funds have professional fund managers who study companies, sectors, and valuations. They can make changes when markets shift.

In comparison, index funds only copy the index. They cannot react to market conditions. When the market falls, index funds fall equally. They also carry concentration risk because the top few stocks dominate the index weight.

Actively managed funds have the flexibility to hold cash, shift sectors, and protect downside risk. Over long periods, well-managed active funds often outperform index funds after tax.

So, staying with actively managed funds like yours is a better strategy for wealth creation.

» Market Outlook and Investment Tenure

Equity markets go through cycles. Sometimes they move sideways for a few years, and then deliver strong growth later.

Your small and mid-cap funds will need time to show their true potential. Historically, they outperform large-caps when held for 8 to 10 years.

Since you are 39, you can easily continue your SIPs for another 10 to 15 years. That will align well with long-term goals such as retirement or children’s education.

» Contingency and Liquidity Planning

Ensure you have an emergency fund of 6 to 9 months of expenses. Keep it in liquid or ultra-short-term funds.

This protects you from redeeming your equity investments during market corrections. Equity SIPs should never be used for short-term needs.

Having this buffer ensures your long-term investments grow undisturbed.

» Insurance and Protection Planning

Before continuing or increasing your SIPs, make sure your family is well protected.

Take adequate term life insurance.

Have health insurance for the entire family.

If you already have any investment-cum-insurance or ULIP policies, surrender them and reinvest in mutual funds for better returns and flexibility.

Pure protection plans are cost-effective and leave more money available for investments.

» Future Growth Approach

If your income increases, raise your SIPs by at least 10% every year. This step-up approach helps you build wealth faster.

Also, as you get closer to your goals, gradually move from small-cap and mid-cap to large-cap or balanced funds. This protects gains from market volatility.

Always plan these transitions with a Certified Financial Planner to ensure your portfolio remains goal-aligned and tax-efficient.

» Finally

Your investment journey has started on the right path. You have shown consistency and discipline. Do not lose that focus.

Continue your SIPs for more years, review annually, and avoid frequent switches. Diversify across AMCs if needed, and align each SIP with a goal.

Actively managed regular funds, reviewed and guided by a Certified Financial Planner, can help you achieve strong, steady, and tax-efficient long-term growth.

Stay patient, stay invested, and let time compound your wealth.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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