I have made lump-sum investments in Feb'19 in below 2 funds:

1. ICICI Prudential Constant Maturity Gilt Fund - Growth
2. SBI Magnum Constant Maturity Gilt Fund - Growth

The NAV of these funds has been reducing rapidly since Jan'21. Shall I continue with these funds or else please suggest other options.

Ans: Too many funds, please consolidate it in 4 to 5 funds

Ans: You may please continue with 4 and 5 star schemes; for the rest you can consider these:

Equity - Value Fund:

• Tata Equity P/E Fund (Growth Option)
• UTI Value Opportunities Fund- Growth Option
• L&T India Value Fund Growth Option

Equity Multi Cap:

• Motilal Oswal Multi Cap 35 – Growth
• UTI Equity Fund – Growth

Ans: Investing in the Right Mix for Your Retirement

Your current investment strategy reflects a thoughtful approach. Diversifying across multiple funds and investing during market corrections is wise. As you are 62 years old, balancing growth with capital preservation is crucial. Let's assess your current investments and explore whether you should continue adding to them.

Assessing Your Current Investments

Your portfolio includes balanced, equity, multi-asset, small-cap, and contra funds. This diversity helps in spreading risk. Each type of fund serves different purposes and offers unique benefits.

Balanced Advantage and Equity-Debt Funds

Balanced advantage and equity-debt funds invest in both equity and debt instruments. They provide growth potential with reduced volatility. These funds are suitable for investors seeking stability along with capital appreciation. Given your age, having such funds in your portfolio is beneficial. They help in managing risk while still aiming for reasonable returns.

Opportunities and MNC Funds

Opportunities and MNC funds focus on specific themes or sectors. They can deliver high returns if the chosen theme performs well. However, they come with higher risk due to concentration. These funds are suitable for investors with a higher risk appetite. At 62, you might want to limit exposure to such funds to avoid excessive risk.

Value Discovery and Contra Funds

Value discovery and contra funds invest in undervalued stocks. They aim to generate high returns by identifying mispriced opportunities. These funds require patience as value investing can take time to yield results. Including these funds in your portfolio adds a contrarian element, which can enhance returns if the market favours these stocks.

Multi-Asset and Flexicap Funds

Multi-asset and flexicap funds offer diversification within a single fund. They invest across various asset classes and market capitalizations. These funds provide flexibility and adaptability to market conditions. They can balance risk and reward effectively. Such funds are particularly beneficial for investors seeking a balanced approach to growth and risk management.

Small-Cap Funds

Small-cap funds invest in smaller companies with high growth potential. These funds can deliver substantial returns but come with higher volatility. They require a longer investment horizon to mitigate risks. At your age, it is important to carefully consider the proportion of small-cap funds in your portfolio to avoid excessive risk.

Evaluating the Need for Continued Investment

Considering your age, risk tolerance, and investment goals, here are some factors to evaluate whether to continue investing in the same funds:

Risk Tolerance and Time Horizon

Your risk tolerance decreases as you approach retirement. It is crucial to protect your capital while aiming for growth. Balanced advantage, equity-debt, and multi-asset funds provide a safer approach. Limiting exposure to high-risk funds like small-cap and sectoral funds can reduce volatility in your portfolio.

Diversification and Rebalancing

Your portfolio is already well-diversified. However, periodic rebalancing is essential to maintain the desired risk-reward ratio. Rebalancing involves adjusting your investments based on market performance. It ensures that your portfolio remains aligned with your financial goals and risk tolerance.

Income Generation Needs

At 62, generating a steady income might be a priority. Balanced advantage, equity-debt, and multi-asset funds can provide regular income through dividends and interest. Consider focusing more on these funds to ensure a steady income stream during retirement.

Consulting a Certified Financial Planner

A Certified Financial Planner (CFP) can provide personalized advice based on your unique situation. They can help you evaluate your current investments and suggest adjustments. CFPs assist in creating a tailored investment strategy that aligns with your retirement goals and risk tolerance.

Considering Other Investment Options

While your current portfolio is diversified, consider adding funds that offer capital preservation and income generation. Here are some options:

Debt Funds

Debt funds invest in fixed-income securities like bonds and debentures. They provide stable returns with lower risk compared to equity funds. Including debt funds can enhance capital preservation and provide regular income. They are suitable for conservative investors nearing retirement.

Hybrid Funds

Hybrid funds invest in both equity and debt instruments. They offer a balanced approach to growth and income. These funds are less volatile and can provide steady returns. Adding hybrid funds can enhance stability in your portfolio.

Systematic Withdrawal Plan (SWP)

A Systematic Withdrawal Plan (SWP) allows you to withdraw a fixed amount regularly from your investments. It provides a steady income stream during retirement. Consider setting up an SWP from your balanced advantage or multi-asset funds to meet your income needs.

Conclusion

Your current investments reflect a thoughtful and diversified strategy. To ensure continued growth and capital preservation, focus on balanced advantage, equity-debt, and multi-asset funds. Limit exposure to high-risk funds and consider adding debt and hybrid funds for stability. Regularly review and rebalance your portfolio to maintain alignment with your goals. Consulting a Certified Financial Planner can provide personalized guidance and help you achieve a secure and comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello Brij and thanks for writing to me. UTI Flexicap fund is a good fund and you can continue to invest in it.

If you share your objectives for investing and risk appetite, I may recommend other schemes.

Ans: Your portfolio consists of SIPs and lump sum investments in mutual funds across multiple categories. You have exposure to small-cap, multi-cap, balanced advantage, technology, large-cap, infrastructure, commodities, and PSU equity funds.

Observations on Your Portfolio
High Exposure to Small-Cap Funds

You have three small-cap funds in SIP and three in lump sum.

Small-cap funds are highly volatile and take time to deliver returns.

Overexposure can lead to sharp fluctuations.

Sectoral and Thematic Funds

You hold technology, infrastructure, commodities, and PSU equity funds.

These funds depend on sector-specific performance.

Sectors go through cycles of growth and slowdown.

High allocation to sectoral funds increases risk.

Balanced Advantage Fund

This fund aims to balance equity and debt.

It reduces volatility but may not generate high growth.

Large-Cap and Multi-Cap Exposure

Your portfolio has only one large-cap fund and one multi-cap fund.

Large-cap funds provide stability, but exposure is low.

Multi-cap funds help diversification, but allocation is limited.

Why Your Portfolio Value is Declining
Market Volatility

Small-cap and sectoral funds react sharply to market movements.

A temporary decline does not mean a permanent loss.

Sector-Specific Performance

Technology, commodities, and infrastructure sectors may be underperforming.

These funds perform well only in favorable market conditions.

Economic and Global Factors

Interest rates, inflation, and global market trends impact sectoral funds.

A broad-based correction affects small-cap and thematic funds first.

Steps to Improve Your Portfolio
1. Reduce Small-Cap Exposure
Limit small-cap funds to one or two funds only.

Redeploy part of the funds into flexi-cap or large-cap funds.

Keep SIP in only one small-cap fund instead of two.

2. Reduce Sectoral Fund Dependence
Exit or reduce allocation in sectoral funds if they exceed 20% of your total portfolio.

Consider moving funds to diversified equity funds.

Retain sectoral funds only if you can handle volatility.

3. Increase Large-Cap and Multi-Cap Allocation
Large-cap funds offer stability and consistent returns.

Multi-cap funds adjust allocation dynamically across market caps.

Add or increase SIP in large-cap or flexi-cap funds.

4. Maintain Balanced Asset Allocation
Include a mix of equity, debt, and hybrid funds for stability.

Balanced advantage funds provide some protection in volatile markets.

Consider increasing exposure to hybrid funds for risk management.

5. Stick to Long-Term Investing
Markets move in cycles, and temporary declines are normal.

Continue your SIPs without panic.

Monitor performance but avoid frequent changes.

6. Review and Rebalance Every Year
Check fund performance annually.

Exit funds that consistently underperform their category.

Shift funds based on market trends and your risk tolerance.

Final Insights
Your portfolio is high-risk due to small-cap and sectoral fund exposure.

Reducing allocation in small-cap and thematic funds will lower volatility.

Increasing large-cap and multi-cap allocation will bring balance.

Staying invested for the long term will help you recover losses.

Avoid frequent fund switches, and review your portfolio annually.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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