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Investing in 9 different funds: Is this a smart strategy for my daughter's long-term education?

Ramalingam Kalirajan |8104 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 12, 2025

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

Asked by Anonymous - Feb 07, 2025Hindi

I am planning to invest monthly 10,000 in nifty ETF, 10,000Motilal Oswal NASDAQ 100 ETF, 8000 in Axis Midcap fund, 6,000 in Tata small cap Fund, 3,000 in SBI innovation Fund, 3000 in Tata consumer fund, 3,000 in Tata nifty 200 alpha 30 fund and 2,000 in Motilal oswal nifty 500 momentum 50 fund. I am planning to invest for next 25 years for my daughter's education and marriage. My risk appetite is high. Is above strategy or funds are good for maximum return? I am planning to deploy more whenever market corrects and hold investment for 25 years, will it work for maximize portfolio return over long run?

Ans: Your long-term investment plan is well-structured. It is good to see a disciplined approach.

Investing for 25 years can generate significant wealth. But fund selection and strategy must be optimized.

Let’s analyse your portfolio.

Investment Horizon and Risk Appetite
You plan to invest for 25 years. This is ideal for wealth creation.
Your risk appetite is high. This allows you to invest aggressively.
Long-term investing reduces market volatility impact.
Staying invested through market cycles is key.
Issues with ETF Investments
You plan to invest in Nifty and Nasdaq ETFs.
ETFs follow an index and lack active management.
No fund manager works to generate extra returns.
Active funds can outperform during different market cycles.
ETFs do not adjust to changing market conditions.
Expense ratio is low, but returns are also market-linked.
Actively managed funds have delivered better long-term returns in India.
Fund Selection Analysis
Your portfolio has midcap, small-cap, innovation, consumer, and factor-based funds.
Midcap and small-cap funds provide high growth. But they are volatile.
Innovation and sectoral funds focus on specific themes. These funds carry high risk.
Factor-based funds follow a strategy like momentum or alpha. Performance varies in different market conditions.
Portfolio lacks a strong large-cap or flexi-cap fund. These provide stability.
Diversification and Balance
Portfolio is highly tilted towards high-risk funds.
Lack of a flexi-cap fund may impact risk-adjusted returns.
Large-cap funds give stability in market downturns.
A mix of large, mid, and small-cap funds creates a balanced portfolio.
Too many thematic and factor-based funds increase unpredictability.
Market Timing Strategy
Deploying more in corrections can increase returns.
But market corrections are unpredictable.
Staggered investments through SIPs and STPs work better.
Avoid lump sum investments unless valuations are very attractive.
Portfolio Optimisation Recommendations
Reduce exposure to index ETFs. Shift to actively managed large-cap or flexi-cap funds.
Keep midcap and small-cap allocation but balance with a flexi-cap fund.
Reduce allocation to thematic and factor-based funds. These should be only 10-15% of your portfolio.
Ensure a strong large-cap or flexi-cap presence for stability.
Maintain liquidity for market corrections, but do not try to time the market aggressively.
Final Insights
Your investment horizon and discipline are strengths.
Portfolio needs better balance between growth and stability.
Actively managed funds can generate better long-term returns than index ETFs.
Midcap and small-cap exposure should be paired with large-cap stability.
Market timing should be done cautiously to avoid overexposure in corrections.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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