PRAKASH Asked on - Apr 12, 2024 Hello Sir. I'm 38 years old.I am investing via SIP in SBI SMALL CAP FUND (2500 pm)since 2023 . Now i have got extra salary 6000/- Rs for month .so I want invest this amount via sip.Please Give me suggestions some good funds .

Ans: Dear Prakash,

It's commendable that you're actively investing in mutual funds through SIPs to build wealth for your financial goals. Let's explore some suitable options to efficiently deploy the additional funds you have available.

Assessing Risk Profile

Before selecting new funds, it's crucial to reassess your risk profile and investment objectives. Considering your existing investment in SBI Small Cap Fund, which typically falls under the high-risk category due to its exposure to smaller companies, it's essential to ensure that the new funds complement your overall portfolio and align with your risk tolerance.

Diversification Strategy

Diversifying your investment portfolio across different asset classes and fund categories can help mitigate risk and enhance long-term returns. Here's a suggested approach for deploying the additional funds:

Equity Funds: Since you're already invested in a small-cap fund, you may consider diversifying into other equity categories such as large-cap, multi-cap, or thematic funds. These funds offer exposure to companies of varying market capitalizations and investment themes, providing a well-rounded portfolio.

Debt Funds: To add stability to your portfolio and reduce overall risk, consider allocating a portion of the additional funds to debt funds. Debt funds invest in fixed-income securities such as government bonds, corporate bonds, and money market instruments, offering steady income with lower volatility compared to equity funds.

Selecting Suitable Funds

Here are some fund categories you may consider for your additional SIP investment:

Large-Cap Equity Funds: These funds invest in established companies with a large market capitalization, offering stability and moderate growth potential.

Multi-Cap Equity Funds: Multi-cap funds provide flexibility to invest across companies of different sizes, allowing the fund manager to capitalize on opportunities across market segments.

Thematic or Sector Funds: Thematic funds focus on specific sectors or themes such as technology, healthcare, or infrastructure. While these funds may carry higher risk due to their concentrated exposure, they can offer the potential for outsized returns if the chosen theme performs well.

Short-Term Debt Funds: Short-term debt funds invest in fixed-income securities with shorter maturities, offering relatively higher returns than traditional savings instruments while maintaining lower interest rate risk.

Conclusion

By diversifying your investment portfolio across different asset classes and fund categories, you can enhance risk-adjusted returns and achieve your financial goals more effectively. It's essential to regularly review your investment portfolio and make adjustments as needed to stay aligned with your evolving financial objectives.

Remember to consult with a certified financial planner or investment advisor to tailor your investment strategy to your unique financial situation and goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in