Manoj Asked on - May 14, 2024 Hi Sir, I'm 42 years old targeting 5 Cr in 10 years. I'm investing as 75K annual in LiC jeevan saral from last 15 years, 15k in parag Parikh flexi cap from 2 years, 10k in Sbi small cap, 5k each in NIPPON small, mid and large cap, 5k in quant infrastructure.

Ans: Your commitment to long-term investing is commendable and reflects a forward-thinking approach to securing your financial future. By starting early and diversifying your portfolio across different asset classes and fund categories, you're laying a solid foundation for wealth creation over the next 15 to 20 years.

Remember, investing is a journey, not a sprint. Stay patient and disciplined, and resist the temptation to make impulsive decisions based on short-term market fluctuations. Instead, focus on the underlying fundamentals of your investments and the power of compounding to grow your wealth over time.

As you navigate the ups and downs of the market, continue to educate yourself, stay informed about economic trends, and periodically review your portfolio to ensure it remains aligned with your long-term goals.

With perseverance, prudent decision-making, and a well-diversified portfolio, you're well-positioned to achieve your financial aspirations and build a brighter future for yourself. Keep up the good work!

Ans: Achieving a 5 Crore Target: Strategic Investment Advice
Current Portfolio Overview
Your current investments demonstrate a commendable commitment to securing your financial future. Investing 75K annually in LIC Jeevan Saral for 15 years shows your discipline. Additionally, your SIPs in various mutual funds highlight your diversified approach.

Evaluating Your Current Investments
LIC Jeevan Saral:

Traditional insurance plans offer moderate returns with insurance benefits.
Consider whether the returns meet your aggressive 10-year goal.
Insurance-cum-investment schemes
Insurance-cum-investment schemes (ULIPs, endowment plans) offer a one-stop solution for insurance and investment needs. However, they might not be the best choice for pure investment due to:
• Lower Potential Returns: Guaranteed returns are usually lower than what MFs can offer through market exposure.
• Higher Costs: Multiple fees in insurance plans (allocation charges, admin fees) can reduce returns compared to the expense ratio of MFs.
• Limited Flexibility: Lock-in periods restrict access to your money, whereas MFs provide more flexibility.
MFs, on the other hand, focus solely on investment and offer:
• Potentially Higher Returns: Investments in stocks and bonds can lead to higher growth compared to guaranteed returns.
• Lower Costs: Expense ratios in MFs are generally lower than the multiple fees in insurance plans.
• Greater Control: You have a wider range of investment options and control over asset allocation to suit your risk appetite.
Consider your goals!
• Need life insurance? Term Insurance plans might be suitable.
• Focus on growing wealth? MFs might be a better option due to their flexibility and return potential.

Equity Mutual Funds:

Your choices include diversified equity funds and sector-specific funds.
Equity funds generally provide higher returns over the long term.
Strategic Adjustments for Better Returns
To achieve your 5 crore target in 10 years, consider the following adjustments and strategies:

Increase Equity Exposure:

Equities tend to outperform other asset classes over the long term.
Consider increasing your SIP amounts in high-performing equity funds.
Diversify Across Fund Categories:

Continue with diversified funds but also consider balanced advantage funds.
Balanced funds offer a mix of equity and debt, reducing risk while aiming for growth.
Review Sectoral Funds:

Sector-specific funds can be volatile. Regularly review their performance.
Consider shifting to more stable, diversified funds if needed.
Additional Investment Strategies
Systematic Transfer Plan (STP):

If you have a lump sum amount, use STP to invest gradually into equity funds.
This strategy can help mitigate market volatility.
Top-up SIP:

Increase your SIP contributions annually by at least 10-15%.
This helps in compounding your returns significantly over time.
Focus on High-Performing Funds:

Regularly review your mutual fund portfolio.
Shift investments from underperforming funds to those with consistent track records.
Risk Management and Contingency Planning
Emergency Fund:

Ensure you have an emergency fund equivalent to 6-12 months of expenses.
This safeguards against unforeseen financial needs.
Adequate Insurance Coverage:

Maintain sufficient health and life insurance coverage.
This protects your investments and family’s financial security.
Tax Planning:

Utilize tax-efficient investment avenues.
Consider Equity-Linked Savings Schemes (ELSS) for tax benefits under Section 80C.
Monitoring and Reviewing Your Portfolio
Regular Portfolio Review:

Review your portfolio performance at least semi-annually.
Make adjustments based on market conditions and personal financial goals.
Consultation with a Certified Financial Planner:

Seek advice from a CFP to ensure your investments align with your goals.
A professional can provide tailored advice and timely adjustments.
Conclusion
Achieving a target of 5 crores in 10 years requires disciplined investing and strategic adjustments. By increasing your equity exposure, diversifying your investments, and regularly reviewing your portfolio, you can enhance your chances of meeting this ambitious goal. Remember, consistent and informed investing, coupled with prudent risk management, is key to financial success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are investing Rs. 40,000 per month across various mutual funds. This disciplined approach is commendable. At 45, your goal to accumulate Rs. 2 crore by 60 is achievable. Let’s evaluate your portfolio and optimise it to align with your goal.

Strengths of Your Investments
Diversification Across Market Caps: Your portfolio includes small-cap, large-cap, and multi-cap funds.
Sectoral Exposure: The inclusion of a pharma fund offers specific growth potential.
Blend of Strategies: Value and growth strategies are present, providing balance.
Consistency: A monthly SIP for two years reflects financial discipline.
Areas That Need Improvement
1. Overlapping Funds
Many funds in your portfolio have similar objectives.
This results in unnecessary duplication and reduces efficiency.
2. Sectoral Overexposure
The pharma fund increases sector-specific risks.
Sectoral funds should be a minor part of a balanced portfolio.
3. Lack of Focus on Goal Alignment
The portfolio lacks a clear connection to your Rs. 2 crore goal.
Optimising fund selection is necessary to stay on track.
4. Limited Allocation to Large-Cap Funds
Large-cap funds provide stability and consistent growth.
Your current allocation to large-caps is inadequate.
5. Tax-Efficiency Awareness
New tax rules for mutual funds need consideration.
Restructuring may help minimise tax liabilities in the future.
Recommendations for Portfolio Optimisation
1. Streamline Your Portfolio
Reduce overlapping funds to improve returns.
Retain 5-7 funds that cover all market caps and investment styles.
2. Increase Focus on Large-Cap Funds
Large-cap funds offer lower volatility and steady growth.
Increase allocation to ensure a balanced portfolio.
3. Minimise Sectoral Funds
Limit sectoral funds to 5-10% of your portfolio.
Diversify across sectors instead of focusing on one.
4. Add a Balanced or Hybrid Fund
Hybrid funds provide stability during market downturns.
Consider allocating a portion of your investment here.
5. Target Your Rs. 2 Crore Goal
Increase SIP contributions if possible.
Factor in inflation to ensure the corpus retains its value.
6. Review Your Portfolio Regularly
Monitor fund performance every 6-12 months.
Replace underperforming funds with guidance from a Certified Financial Planner.
7. Opt for Regular Funds Through a CFP
Regular funds offer professional advice and support.
This helps in managing your portfolio effectively.
Key Insights on Direct Funds and Actively Managed Funds
Disadvantages of Direct Funds:

Requires extensive market knowledge.
Lack of professional guidance increases risk.
Time-intensive for monitoring and decision-making.
Benefits of Regular Funds via CFP:

Get expert advice for fund selection and rebalancing.
Avoid emotional investment decisions.
Align investments with financial goals.
Actively Managed Funds vs Index Funds:

Actively managed funds can outperform benchmarks over the long term.
Fund managers adjust portfolios for changing market conditions.
Index funds lack flexibility and may deliver lower returns.
Additional Steps to Strengthen Your Finances
1. Emergency Fund
Ensure 6-12 months’ expenses are saved in liquid funds.
This provides a financial cushion during emergencies.
2. Adequate Insurance Coverage
Have term insurance with Rs. 1 crore coverage.
Maintain health insurance for yourself and your family with Rs. 20 lakh coverage.
3. Plan for Post-Retirement Income
Invest in balanced funds or SWP for steady income post-retirement.
Avoid products with low returns like annuities.
4. Tax Efficiency
Keep ELSS funds for tax-saving under Section 80C.
Review fund taxation under the new capital gains rules.
5. Focus on Goal-Based Investing
Define clear financial goals for retirement and other needs.
Allocate investments to each goal for better clarity and planning.
Final Insights
Your current investment strategy shows great discipline. However, reducing overlapping funds and sectoral overexposure will optimise returns. Adding large-cap and hybrid funds will balance growth and stability. Increase your SIP or invest surplus funds to meet your Rs. 2 crore target comfortably. Seek professional advice to align your portfolio with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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