Should I Continue Long-Term Investments in These MFs? - An Advisor's Perspective

Ans: I’ll give you a structured and detailed analysis of your mutual fund holdings based on a long-term investment perspective.

Portfolio Overview
Your current mutual fund portfolio includes:

Two Small-Cap Funds
One Large & Mid-Cap Fund
One Mid-Cap Fund
One ELSS (Tax-Saving) Fund
One Gold Fund
This mix suggests a high-risk, aggressive strategy. It focuses more on small and mid-cap investments.

Your portfolio lacks large-cap stability and proper diversification. While small and mid-cap funds offer high growth potential, they also come with high volatility.

Analysis of Each Category
Small-Cap Funds
Small-cap funds provide high returns in the long run.
They are highly volatile and can take longer to recover in bear markets.
Holding two small-cap funds may cause overlap. This can reduce efficiency.
Consider keeping only one small-cap fund and shifting the other to a more stable category.
Large & Mid-Cap Fund
This category offers a balanced mix of growth and stability.
The fund selection should be based on its performance consistency.
If the fund has underperformed its benchmark, consider switching.
Mid-Cap Fund
Mid-cap funds offer higher growth than large-cap funds but are less risky than small-cap funds.
A single mid-cap fund is a good allocation.
Ensure it has a strong track record compared to its peers.
ELSS (Tax-Saving) Fund
ELSS is a great option for tax saving under Section 80C.
If this is your only tax-saving investment, continue investing.
Check if the fund has consistently outperformed its benchmark and category.
Gold Fund
Gold funds are for hedging against inflation and economic uncertainty.
They do not generate high long-term returns like equity funds.
If gold is more than 10% of your portfolio, consider reducing it.
Potential Issues in Your Portfolio
Overexposure to Small and Mid-Cap Stocks

Small and mid-cap stocks can be highly volatile.
A market downturn can impact your portfolio significantly.
Reduce exposure by adding a large-cap or flexi-cap fund.
Lack of Large-Cap Stability

Large-cap funds provide stability in market downturns.
Your portfolio will benefit from at least 20-30% allocation in large-cap funds.
Gold Fund Allocation

Gold funds do not provide high compounding benefits.
If gold allocation is high, consider reducing it to below 10%.
Overlapping Funds

Holding multiple small-cap and mid-cap funds can lead to overlapping stocks.
Too many funds do not always mean better diversification.
Reduce redundancy by choosing the best performer in each category.
Suggested Portfolio Adjustments
? Keep one strong small-cap fund instead of two. Shift the other to a flexi-cap or large-cap fund.

? Retain the large & mid-cap fund if it has performed well. Otherwise, switch to a top-performing flexi-cap fund.

? Continue with the mid-cap fund if its returns and consistency are good.

? Check the ELSS fund’s performance. If it underperforms, switch to a better tax-saving fund.

? Limit gold investment to 5-10% of the portfolio. Sell excess holdings and reinvest in equity.

? Add a large-cap fund to bring stability and balance to the portfolio.

? Consider a flexi-cap fund to allow fund managers to adjust investments across market caps.

Final Insights
Your portfolio is aggressive and focused on small and mid-caps.
It lacks large-cap stability, which is crucial for long-term wealth creation.
Too many similar funds may lead to overlap, reducing diversification benefits.
Gold allocation should not exceed 10% of the portfolio.
Adding a large-cap or flexi-cap fund will balance risk and returns.
A well-diversified portfolio should have a mix of large-cap, mid-cap, and flexi-cap funds. This will ensure stability during market fluctuations while still capturing growth.

Review your funds every 6-12 months and adjust as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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