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44-Year-Old Investor Seeks Advice on 18 Mutual Funds: How to Improve Portfolio Performance?

Ramalingam Kalirajan |7634 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 25, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Pradeep on Dec 25, 2024Hindi

Sir Namaste, I have been investing 20000 in almost Funds approx 18 funds, and in some funds 1 Lakhs total investments value is 25 Lakhs, few are performing well and few are under performing, I'm 44 years old,,, Large, Mid And Small Funds with ratio of 40% - 50%- 10%..

Ans: At age 44, having Rs. 25 lakhs invested in mutual funds is commendable. However, managing 18 funds may create unnecessary complexity. Below is a detailed evaluation of your portfolio and suggestions to optimise it for better performance and alignment with your goals.

Strengths of Your Portfolio
Significant Investment Corpus
You have built a sizeable corpus, which is a strong financial base.

Diversification Across Market Caps
Allocating 40% to large-cap, 50% to mid-cap, and 10% to small-cap is balanced.

Focus on Long-Term Investing
Staying invested for the long term helps in compounding wealth.

Areas for Improvement
1. Over-diversification

Holding 18 funds may result in overlapping stocks and reduced diversification benefits.
Tracking and managing so many funds can be challenging.
Recommendation

Consolidate your portfolio to 5-7 funds across large-cap, mid-cap, and small-cap categories.
2. Underperforming Funds

Some funds in your portfolio are not performing well.
Continuing with such funds may drag down overall returns.
Recommendation

Review the 3-year and 5-year performance of each fund against its benchmark.
Replace consistently underperforming funds with better-performing ones.
3. Small-Cap Allocation

Small-cap funds have higher growth potential but also higher volatility.
A 10% allocation may not significantly impact overall returns.
Recommendation

Increase small-cap exposure to 15%-20% if you can handle moderate risk.
4. Fund Overlap

Multiple funds in similar categories (e.g., large-cap or mid-cap) may hold the same stocks.
This limits the benefits of diversification.
Recommendation

Use fund analysis tools to identify overlapping holdings.
Retain funds with distinct investment strategies.
Optimised Portfolio Allocation
Here is a suggested allocation for better management:

Large-Cap Funds (40%-50%): Stable returns with low volatility.
Mid-Cap Funds (30%-40%): High growth potential with moderate risk.
Small-Cap Funds (15%-20%): Higher returns for long-term goals.
Steps to Optimise Your Portfolio
1. Consolidate Funds

Retain 2 large-cap, 2 mid-cap, and 1 small-cap fund.
Add a flexi-cap fund for dynamic allocation across market caps.
2. Increase SIP Contributions

If feasible, increase monthly SIP amounts to enhance long-term corpus.
Prioritise funds with consistent performance and low expense ratios.
3. Rebalance Annually

Review your portfolio once a year to align with market conditions.
Rebalance to maintain your desired asset allocation.
4. Focus on Actively Managed Funds

Actively managed funds can outperform the market in India.
Avoid index funds or ETFs as they limit flexibility and adaptability.
5. Monitor Performance Regularly

Track fund performance against benchmarks and peers.
Consult a Certified Financial Planner for detailed insights.
Tax Considerations
Equity mutual funds attract LTCG tax of 12.5% for gains above Rs. 1.25 lakh.
Short-term gains are taxed at 20%.
Recommendation

Avoid frequent redemptions to minimise tax liabilities.
Redeem funds strategically to maximise tax efficiency.
Final Insights
Your portfolio shows strong financial discipline and focus on long-term goals.

Consolidating your funds will simplify management and improve returns.

Focus on high-performing funds while maintaining diversification across market caps.

Rebalancing annually will help in staying aligned with your financial objectives.

Stay invested with discipline to achieve your financial milestones.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.