I'm trying out non ELSS mutual funds for the first time. The goal is to generate a corpus of upto 5 lakhs for my car's down payment. The goal duration is 5 years with low to moderate risk profile. I've shortlisted few mutual funds. Please review my portfolio 2k in Canara Robecco Bluechip Equity Fund 2k in HDFC Balanced Advantage Fund 1k in Quant Midcap Fund 500rs in Motilal Oswal Midcap Fund 1k in Nippon India Small Cap Fund

Ans: Hi Jaskaran. Your current investment portfolio shows that 80% of your investments are in one AMC i.e. HDFC. Hence, I would suggest that AMC-wise diversification is required in your portfolio. In addition, I recommend you to add large & mid , and small cap categories in your future investments with proper allocations.

Ans: Your portfolio appears to have a mix of large-cap, balanced advantage, mid-cap, and small-cap funds, offering diversification across market segments. However, it's crucial to assess your risk tolerance and ensure your portfolio aligns with your investment horizon and goals. Consider reviewing the funds' historical performance, expense ratios, and investment strategies to ensure they fit your risk profile and financial objectives. Additionally, monitor your portfolio regularly and make adjustments as needed to stay on track towards achieving your target corpus.

Ans: Hello Ravi & thanks for writing to me.

I see too many funds in your portfolio, which I believe can dilute your returns.

Given your age & objective, you may want to reconsider your investments in the Balanced Advantage Funds & Multi Asset Funds & instead start allocating to a multi cap fund.

I also notice investments in a PSU Equity Fund. While the PSU funds have given good returns recently, as thematic funds, you must not have a large chunk of your portfolio in them. Investing in thematic funds can generate alpha but thematic funds can also underperform.

If you can provide a percentage breakup of the investments, I may make other recommendations.

Ans: You have allocated funds across different categories.

Your focus is on equity and hybrid funds.

You have avoided pure debt funds for tax efficiency.

Your goal is for seven years, which is a medium-term horizon.

Concerns with Index Funds
Index funds follow the market, but they lack active management.

They cannot outperform during market corrections.

Actively managed funds can generate better returns.

They offer better stock selection and risk management.

Index funds may not provide downside protection.

Concerns with Direct Plans
Direct plans do not offer advisor support.

You need to track and rebalance yourself.

Market conditions change, requiring timely portfolio adjustments.

Investing through an MFD with CFP helps with strategy.

Expert guidance ensures risk is managed well.

Portfolio Allocation Analysis
Index funds make up 40% of your portfolio.

Flexi-cap fund brings diversification and active management.

Hybrid funds balance risk with equity and debt mix.

Balanced Advantage Fund adjusts asset allocation dynamically.

Aggressive Hybrid Fund has a mix of equity and debt.

Potential Issues with Your Portfolio
High exposure to index funds may limit returns.

No pure debt component increases market risk.

Hybrid funds offer stability, but allocation needs review.

Active funds can provide better long-term returns.

A mix of equity, hybrid, and debt ensures better risk control.

Suggested Portfolio Adjustments
Reduce index fund exposure and increase active equity funds.

Ensure diversification across large, mid, and small-cap stocks.

Keep hybrid funds, but review their performance regularly.

A small portion in pure debt can provide stability.

Tax-efficient withdrawals should be planned carefully.

Tax Implications on Your Investments
Long-term capital gains over Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains are taxed at 20%.

Hybrid fund taxation depends on equity allocation.

Proper tax planning can reduce your tax burden.

A systematic withdrawal plan (SWP) can help manage taxes.

Final Insights
Your asset allocation needs better balance.

Active funds can offer better risk-adjusted returns.

Hybrid funds help, but pure debt adds more stability.

Reviewing funds regularly ensures your goal is met.

A certified financial planner can help optimize your portfolio.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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