Request you to kindly review my portfolio and advise if I shall continue with the same.

I have been investing in mutual funds through SIP 50000 per month since Nov 2017.

Here is the list of funds I'm investing.

1.Kotak Standard Multicap Fund

2.L&T Emerging Businesses Fund.

3.Motilal Oswal Multicap 35 Fund.

4.HDFC Hybrid Equity Fund.

5.Principal Emerging Bluechip Fund.

>Recently I have stopped my SIPs in

1.L&T Emerging Businesses Fund.

2.Motilal Oswal Multicap 35 Fund.

And switched to:

1.Axis bluechip fund direct growth
2.DSP midcap direct growth

Please advise the fund selection and if I shall continue with the same.

Ans: Your proactive approach towards securing financial independence and planning for your children’s education is commendable. At 39, you have a robust salary, structured expenses, and disciplined investments. Let's examine your financial standing, assess your goals, and outline strategies for optimal growth and security.

Current Financial Overview
Monthly Income: Rs 2.25 lakh

Home Loan EMI: Rs 60,000 (new loan of Rs 30 lakh)

Household Expenses: Rs 50,000

Monthly SIP in Mutual Funds: Rs 35,000 (split across large, mid, small-cap, and debt funds)

You have taken significant steps with a home purchase and ongoing SIPs. Let’s optimise these resources to achieve financial independence and build a corpus for your children’s education.

Goal-Based Financial Planning
1. Higher Education Corpus for Children
Education expenses rise significantly due to inflation, particularly for quality higher education.

With your sons aged 8 and 3, plan for their higher education in 10-15 years.

To achieve this, increase your SIPs in equity-focused funds. Equities provide inflation-beating returns over the long term.

Maintain a systematic approach, with SIPs focused on growth-oriented funds (large and mid-cap funds are ideal).

Regularly review this corpus every 2-3 years to ensure it aligns with educational costs.

2. Financial Independence
Early financial independence requires strategic savings and investment growth.

Aim to build a corpus that covers at least 25 times your annual expenses.

At present, Rs 50,000 monthly expenses indicate a future goal corpus of Rs 1.5-2 crore, adjusting for inflation.

Your current SIPs are a great start, but gradually increase SIPs to achieve a sizeable retirement fund.

Consider adding more equity exposure for growth and inflation protection, while adding debt as retirement nears.

Debt Management and EMI Strategy
Home loan EMI is Rs 60,000, a significant commitment for 20 years. This can limit cash flow for other investments.

Aim to prepay your loan when possible to reduce interest outflow and loan tenure.

You may consider setting aside a small portion of bonuses or salary hikes for periodic prepayments.

Reducing debt earlier will provide more cash flow to focus on investments.

Optimising Your SIP Strategy
Equity Allocation: Your SIP allocation is split 40:30:20:10 across large, mid, small, and debt categories.

Large-cap funds offer stability, while mid and small caps drive growth. The debt allocation provides balance but may be increased as you approach retirement.

Avoid Index Funds: Index funds, while popular, lack active management, which can be limiting. Actively managed funds adjust to market conditions, providing a higher potential for returns. Certified Financial Planners (CFP) can guide you on the best funds for your goals, particularly with growth in mind.

Consider Regular Funds Over Direct: Regular funds provide personalised guidance, performance reviews, and rebalancing through Certified Financial Planners, which direct funds lack. Regular investments managed by certified experts offer better long-term growth.

Building Contingency and Protection
1. Emergency Fund
Ensure an emergency fund covering 6-12 months of expenses (about Rs 4-6 lakh), kept in easily accessible accounts like liquid funds.

This fund will protect your long-term investments in case of unexpected expenses.

2. Insurance Needs
Adequate life and health insurance are essential, especially with dependents and ongoing liabilities.

Life insurance should cover at least 10 times your annual income, which could be achieved with a simple term insurance policy.

Health insurance for the family is essential to avoid dipping into savings during medical emergencies. Ensure coverage is comprehensive to handle inflation in healthcare.

Tax Efficiency in Investments
New tax rules affect mutual fund capital gains. For equity funds, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%.

Debt mutual funds are taxed as per your income slab. Plan to withdraw strategically to minimise tax impact.

Periodic portfolio reviews and structured withdrawals can help reduce your tax liability.

Nurturing Long-Term Wealth Growth
PPF and Debt Instruments: PPF and debt mutual funds provide stability but may fall short on inflation-adjusted growth. Maintain debt instruments as a smaller part of your portfolio until retirement nears.

Equities for Wealth Accumulation: Equities remain ideal for long-term goals like retirement and education due to their inflation-beating growth.

Review your mutual fund choices periodically to ensure they are high-performing and aligned with your growth goals.

Final Insights
Achieving financial independence and funding your children’s education are achievable with disciplined investments, a focus on growth, and debt management. Regular monitoring, along with a Certified Financial Planner’s advice, will ensure you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner

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