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,...

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