I want to make an investment (SIP) for my son age 25 years in the following MFs @ Rs 1000/- pm in each fund. Request your advice

1. HDFC Top 100 fund

2. HDFC Hybrid equity fund

3. Mirae asset tax saver fund

4. Axis long term equity fund

5. Axis blue chip fund – direct

6. SBI magnum multi cap - direct growth

7. SBI equity hybrid fund -Reg plan growth

Also, I am a retired person. I have invested my retirement corpus in the following funds as lump sum investments:

1. Debt MF

• Axis Banking and PSU debt (G)
• Franklin - India liquid fund super Ins (G)
• ICICI Pru - savings fund (G)
• Kotak low duration fund std (G)
• Mirae asset savings fund Reg (G)

2. Equity MF

• Axis - mid cap (G)
• ICICI Pru - blue chip fund Reg (G)
• Mirae asset emerging blue chip fund Reg (G)

Please confirm whether I should continue in the above funds or switch over to some other funds.

Name of the Fund	Category	RankMF Star Rating
Birendar Yadav
1. HDFC Top 100 fund	Equity - Large Cap Fund:	3
2. HDFC Hybrid equity fund	Hybrid - Aggressive Hybrid Fund	5
3. Mirae asset tax saver fund	Equity - ELSS	4
4. Axis long term equity fund	Equity - ELSS	5
5. Axis blue chip fund – direct	Equity - Large Cap Fund:	5
6. SBI magnum multi cap - direct growth	Equity - Multi Cap Fund:	4
7. SBI equity hybrid fund -Reg plan growth	Hybrid - Aggressive Hybrid Fund	5
1. Debt MF
Axis Banking and PSU debt (G)	Debt - Banking and PSU Fund	3
Franklin - India liquid fund super Ins (G)	Debt - Liquid Fund	5
ICICI Pru - savings fund (G)	Debt - Low Duration Fund	4
Kotak low duration fund std (G)	Debt - Low Duration Fund	5
Mirae asset savings fund Reg (G)	Debt - Low Duration Fund	3
2. Equity MF
Axis - mid cap (G)	Equity - Mid Cap Fund:	4
ICICI Pru - blue chip fund Reg (G)	Equity - Large Cap Fund:	2
Mirae asset emerging blue chip fund Reg (G)	Equity - Large & Mid Cap Fund	4

Ans: Axis Bluechip Fund – Growth is better Large cap option; sectoral fund can be avoided due to concentration risk; Canara Robeco Equity Hybrid Fund - Growth is better Aggressive Hybrid and Axis Mid Cap fund – Growth is better Mid cap Fund

Rest are fine.

Ans: You may continue with 4 & 5-Star rated ones and rest can be relooked. Avoid Equity - Sectoral Funds 

Midcaps: Suitable options considering quality and value for money are:

• Motilal Oswal Midcap 30
• DSP Midcap
• Kotak Emerging Equity Fund

Ans: Funds are good, please continue, don’t increase funds; if you need to top up, do in the existing schemes.

Ans: Your current portfolio shows a solid mix of funds across various categories. You have SIPs in Flexi Cap, Large & Mid Cap, Emerging Equity, Small Cap, and Active funds. Additionally, you have lump sum investments in Large Cap, Index, Short Term, and Mid Cap funds. This diversification strategy is commendable as it balances risk across different market segments.

However, there are a few areas that could be optimized for better returns and lower risk, especially considering your 10-year retirement goal.

Disadvantages of Index Funds
You've invested a lump sum in an Index Fund. Index Funds track a specific benchmark, usually the Nifty 50 or Sensex. While they have lower expense ratios, they also lack the flexibility to adapt to market changes.

Active funds, on the other hand, allow fund managers to pick stocks that can outperform the market. In the long term, this can result in higher returns. Therefore, considering your retirement goal, shifting from the Index Fund to an actively managed fund might be more beneficial.

Regular Funds vs. Direct Funds
You haven’t specified whether your investments are in regular or direct funds. If you are considering direct funds, it’s important to know their limitations. Direct funds have lower expense ratios, but they don’t come with professional advice.

Certified Financial Planners (CFP) provide guidance, periodic reviews, and help in rebalancing your portfolio based on market conditions and your financial goals. Investing through a CFP ensures your portfolio is always aligned with your objectives.

Evaluation of Your SIPs
Flexi Cap Fund: This is a good choice, providing flexibility to invest across market caps. However, it might be wise to ensure your exposure isn't overly concentrated in any single market cap.

Large & Mid Cap Fund: This fund offers a balance between stability (large caps) and growth potential (mid caps). Continue this SIP as it aligns with your retirement goals.

Emerging Equity Fund: Mid and small caps tend to be more volatile. Consider reviewing this SIP annually to ensure it meets your risk tolerance.

Active Fund: Active funds can outperform benchmarks if managed well. Continue this SIP, but keep track of the fund’s performance.

Small Cap Fund: Small caps can offer high growth but with higher risk. Given your retirement goal, ensure this SIP doesn’t exceed 20% of your total SIPs, as it could add unnecessary volatility to your portfolio.

Assessment of Lump Sum Investments
Large Cap Fund: Large Cap funds are relatively stable, providing consistent returns. This should be a cornerstone of your portfolio.

Index Fund: As discussed, consider switching this to an actively managed fund for better returns.

Short Term Fund: This is a conservative choice, good for parking funds temporarily. However, for long-term growth, these funds may not be ideal.

Flexi Cap Fund: Diversification is key here, and the fund’s flexibility is advantageous. Continue to monitor its performance.

Mid Cap Fund: This fund offers growth potential but with some risk. Ensure this investment complements your overall portfolio strategy without overexposing you to mid-cap volatility.

Increasing Your SIP
Increasing your SIP by Rs 10,000 is a wise decision. Here’s how you might allocate it:

Allocate Rs 5,000 to a Balanced Advantage Fund: This will add stability to your portfolio by balancing equity and debt exposure. It’s a conservative choice that can offer better risk-adjusted returns.

Allocate Rs 5,000 to a Focused Equity Fund: This can potentially offer higher returns as the fund manager focuses on a limited number of high-conviction stocks.

Portfolio Rebalancing and Monitoring
Rebalancing your portfolio regularly is crucial. Markets can be unpredictable, and what works today might not work tomorrow. Review your portfolio every six months to ensure it’s aligned with your risk tolerance and retirement goals.

Final Insights
Your portfolio is well-diversified, but there are opportunities to optimize it further. By shifting from index funds to actively managed funds, and considering the guidance of a Certified Financial Planner, you can potentially achieve better returns. Increasing your SIP is a positive step towards securing your retirement, but make sure to allocate it wisely across different fund categories.

In summary:

Consider shifting from Index Fund to an actively managed fund.

Evaluate your exposure to small caps and ensure it aligns with your risk tolerance.

Invest the additional SIP amount in balanced and focused equity funds.

Regularly rebalance your portfolio and seek guidance from a CFP.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in