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Samraat

Samraat Jadhav  |2096 Answers  |Ask -

Stock Market Expert - Answered on Jun 03, 2024

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more
Sadik Haidry Question by Sadik Haidry on Jun 01, 2024Hindi
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Sir my port folio consist of (shares/rupees)BEL 50/183, Kalyan jewellers 50/364, IND HOTEL 50/572, TVS MOTORS 22/1917, RVNL100/223, IRCON 55/ 183, TATA MOTERS 50/ 901, HIMADARI SPL CHEMICAL80/350, IOCL 50/158, NTPC50/364, L&T 10/3370, HCL 51/1431, APOLLO TYRES 60/474, BANK OF MAHARASHTRA 200/59.31 PLZ REVIEW SIR ...NEED ANY CHANGES AS PLAN TO KEEP FOR LONG TERM

Ans: other than Kalyan jewelers, all are good for long term
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.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 07, 2024

Money
Dear Sir.. DPVN aged 43 investment in MF as follows 1. Kotak Multicap 5000pm since 2018 2. Canrobecco emerging equity 5000 pm since Jan 2022 3. DSP equity opportunity Rs 1000 pm since 2018 4. LIC large& Mid cap 2000 pm since 2018 5. LIC large cap Rs 2000 since 2018 6. SBI focussed equity 1000 pm 7. SBI blue chip 1000 pm 8 sbI magnum mid cap 1000 pm 9. SBI small & mid cap 1000 pm Last 4 years Should I review, continue? How would rate this folio. Please advice. DPVN 5
Ans: Dear DPVN,

Thank you for sharing the details of your mutual fund investments. I appreciate your commitment to securing your financial future. Let's carefully review your portfolio and explore opportunities for improvement. Your dedication to investing consistently is commendable and shows a strong commitment to your financial goals.

Reviewing Your Current Portfolio

Your portfolio includes a diverse mix of mutual funds. These funds span various categories, such as multicap, large cap, mid cap, and focused equity funds. This diversity helps spread risk across different market segments.

Here's a summary of your current investments:

Kotak Multicap Fund: Rs 5000 per month since 2018
Canara Robeco Emerging Equity Fund: Rs 5000 per month since January 2022
DSP Equity Opportunity Fund: Rs 1000 per month since 2018
LIC Large & Mid Cap Fund: Rs 2000 per month since 2018
LIC Large Cap Fund: Rs 2000 per month since 2018
SBI Focused Equity Fund: Rs 1000 per month
SBI Blue Chip Fund: Rs 1000 per month
SBI Magnum Mid Cap Fund: Rs 1000 per month
SBI Small & Mid Cap Fund: Rs 1000 per month
Diversification and Overlap

Your portfolio demonstrates good diversification across different fund categories. However, it's essential to assess if there's any overlap in the underlying assets. Having too many funds within the same category can lead to redundancy, which may not provide additional diversification benefits.

For example, your investments in multiple large cap and mid cap funds could result in overlapping holdings. Evaluating each fund's portfolio can help determine if they're holding similar stocks. If significant overlap is found, consolidating these investments might simplify your portfolio without compromising diversification.

Performance Evaluation

Regularly reviewing the performance of your investments is crucial. Let's look at the historical performance of these funds since you started investing. Consistently underperforming funds should be reassessed.

Kotak Multicap Fund: Multicap funds offer flexibility to invest across market capitalizations. Reviewing its performance relative to its benchmark and peers will provide insights.
Canara Robeco Emerging Equity Fund: Emerging equity funds can be volatile but offer growth potential. Since you started in 2022, it's essential to monitor its performance closely.
DSP Equity Opportunity Fund: This fund's performance since 2018 should be reviewed. Equity opportunity funds aim for growth by investing in companies with potential.
LIC Large & Mid Cap Fund and LIC Large Cap Fund: Large and mid cap funds balance growth and stability. Reviewing their returns will indicate their performance.
SBI Focused Equity Fund: Focused funds hold a limited number of stocks, aiming for higher returns. Assess its performance for consistency.
SBI Blue Chip Fund: Blue chip funds invest in established companies. Evaluate its performance against other large cap funds.
SBI Magnum Mid Cap Fund and SBI Small & Mid Cap Fund: Mid and small cap funds can offer high growth but are riskier. Review their performance since inception.
Risk Assessment

Each fund category carries different levels of risk. Large cap funds tend to be more stable, while mid and small cap funds are more volatile but offer higher growth potential. Your portfolio's risk profile should align with your risk tolerance and investment horizon.

Given your age (43), you likely have a mix of medium and long-term financial goals. Balancing risk and growth is key. Assess if your current mix aligns with your risk tolerance. If any funds seem too risky, consider reallocating to more stable options.

Expense Ratios and Fund Management

Expense ratios impact your returns. Lower expense ratios mean more of your money is working for you. Comparing the expense ratios of your funds with peers can identify cost-efficient options.

Actively managed funds, like those in your portfolio, involve fund managers making investment decisions. Evaluating the fund managers' track records can provide insights into their performance consistency.

Tax Efficiency

Tax efficiency is another important factor. Long-term capital gains tax (LTCG) applies to equity mutual funds held for over a year. Monitoring your portfolio's tax efficiency ensures you're optimizing returns while minimizing tax liabilities.

Benefits of Active Management

Actively managed funds aim to outperform the market through strategic stock selection. While they come with higher fees compared to index funds, they offer potential for higher returns. Active fund managers can navigate market volatility, making informed decisions based on research and analysis.

Disadvantages of Index Funds

Index funds track a market index and aim to match its performance. While they have lower fees, they also limit the potential for outperformance. They can't adapt to market changes or economic shifts. For investors seeking higher returns, actively managed funds offer better opportunities, despite higher costs.

Assessing Direct vs. Regular Funds

Direct mutual funds have lower expense ratios as they don't involve intermediaries. However, regular funds, invested through a Certified Financial Planner (CFP), provide professional guidance. This advice can help in selecting the right funds and managing your portfolio effectively.

Direct funds may seem cost-effective, but the expertise of a CFP can lead to better-informed decisions. Regular funds ensure your investments are aligned with your financial goals and risk tolerance. The additional cost of regular funds is justified by the personalized advice and management.

Rebalancing Your Portfolio

Periodic rebalancing aligns your portfolio with your investment strategy. Over time, some funds may perform better than others, skewing your allocation. Rebalancing ensures you're not overly exposed to any particular asset class.

Review your investments annually or semi-annually. This helps in making necessary adjustments based on market conditions and your financial goals. Selling overperforming assets and reinvesting in underperforming ones can help maintain your desired risk level.

Investment Strategy Moving Forward

To optimize your portfolio, consider the following steps:

Performance Review: Regularly review the performance of each fund. Replace consistently underperforming funds with better alternatives.

Reduce Overlap: Consolidate funds with significant overlap. This simplifies management and ensures better diversification.

Risk Alignment: Ensure your portfolio's risk profile aligns with your risk tolerance and financial goals. Adjust allocations if necessary.

Expense Ratios: Compare expense ratios and opt for cost-efficient funds. Lower expenses contribute to higher net returns.

Professional Guidance: Leverage the expertise of a Certified Financial Planner for informed decisions and strategic planning.


It's understandable to feel overwhelmed with managing multiple investments. Your diligence in saving and investing is praiseworthy. A structured approach will simplify management and enhance returns. Regularly reviewing and adjusting your portfolio ensures you're on track to achieve your financial goals.

Final Insights

Your commitment to investing regularly in mutual funds is commendable. A strategic review and rebalancing of your portfolio will enhance its performance. Consolidating overlapping funds and ensuring alignment with your risk tolerance are key steps.

Regularly monitor your investments and seek professional guidance when needed. Your financial journey is unique, and tailored advice will help you navigate it effectively. With careful planning and periodic reviews, you're well-positioned to achieve your financial aspirations.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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