With a retirement goal of Rs 2 crore in the next 12 years. Myself Anita married with two daughters aged 18 and 15. I’m investing Rs 50,000 a month in SIPs. Do I need to increase my savings, or should I diversify?

Ans: 1. Estimate if Current SIP is Sufficient

Assuming a conservative annual return of around 10-12 per cent on equity-focused SIPs, your current investment of Rs 50,000 per month could potentially grow to between Rs 1.4 crore and Rs 1.6 crore over 12 years.

To reach Rs 2 crore, an additional monthly investment of approximately Rs 12,000-15,000 may be needed, depending on market performance.

2. Consider Increasing Savings Gradually

If feasible, gradually increasing your SIP amount every year by 10-15 per cent can help bridge the gap without a significant strain on your budget. For example, increasing your SIP by Rs 5,000 annually can contribute significantly over time.

3. Review Asset Allocation and Diversify as Needed

• Since retirement is 12 years away, a moderate to high equity exposure is reasonable to maximize returns. However, to reduce risk, consider introducing some diversification:

• Debt Funds or Fixed Deposits: Direct 20-25 per cent of your portfolio to debt funds or fixed deposits over the next few years. This will provide a cushion against equity market volatility as you approach retirement.

• Gold or REITs: A small allocation (5-10 per cent) to gold or real estate investment trusts (REITs) can add a layer of diversification and act as a hedge against inflation.

4. Use Step-Up SIPs to Enhance Growth Potential

Some mutual funds offer "step-up" SIP options where the investment amount increases each year. This method aligns with your income growth over time and may provide a smoother path to your Rs 2 crore goal.

5. Emergency Fund and Insurance

Ensure you have an emergency fund covering at least 6-12 months of expenses and adequate health and life insurance coverage for your family. These are essential for financial stability, especially with retirement goals in sight.

In summary, with a slight increase in your monthly SIP and a strategic approach to diversification, you can achieve your retirement target comfortably. Regularly reviewing your portfolio's performance will also help ensure you're on track.

Ans: You have done a very good job by starting your SIPs early and continuing them for two years. Many investors delay investing, but you have taken timely action. That discipline will give you a strong financial base for the future. It is also great that you are reviewing your progress and thinking about the next step carefully.

Let’s understand your current portfolio, analyse its position, and see the best way forward from a complete 360-degree perspective.

» Evaluating your present SIP portfolio

You are investing Rs 5,000 per month in four funds — two small-cap, one mid-cap, and one value-oriented fund. This mix focuses heavily on high-growth funds. Such funds can deliver high returns over time but also fluctuate sharply in the short term.

Your total invested amount of Rs 1,34,000 has grown to Rs 1,45,000. This is a fair outcome considering market movements in the last two years. It shows your funds are working fine and your SIP discipline is intact.

However, your portfolio is tilted toward aggressive categories. You need to add stability to balance the overall risk.

» Understanding the role of each fund type

– Small-cap funds invest in small companies with high growth potential but higher risk.
– Mid-cap funds invest in medium-sized companies, balancing risk and reward.
– Value funds invest in undervalued stocks, giving long-term growth when markets recognise their worth.

Your portfolio lacks large-cap or diversified exposure, which can provide steady returns and protect capital when markets are volatile.

» Why adding a flexi-cap fund can help

Adding a flexi-cap fund to your SIP is a smart move. A flexi-cap fund gives the fund manager freedom to invest across large, mid, and small companies depending on market conditions.

When small and mid-cap stocks are expensive or risky, the fund manager can shift more money into large-cap stocks for safety. During growth phases, they can increase mid and small-cap exposure for better returns.

This flexibility ensures smoother performance and reduces the overall volatility in your portfolio.

So, yes, you should add a flexi-cap fund, but don’t stop your existing SIPs. Instead, add this as a stabilising component.

» Deciding whether to increase SIP or diversify

You can do both — increase your total SIP and diversify.

If your income allows, raise your monthly SIP from Rs 5,000 to Rs 7,000 or Rs 8,000. Add Rs 2,000–3,000 into a good actively managed flexi-cap fund. This will balance risk and create a better long-term structure.

Continue your existing SIPs for long-term growth. Don’t stop or switch based on short-term performance. Compounding needs time.

If your salary rises in future, increase SIPs by at least 10% every year. This small habit will make a big difference in your final corpus after 15 years.

» Avoiding index funds for diversification

Some advisors may suggest switching to index funds. But index funds have key disadvantages. They simply follow the market index without any active decision. If the market falls, they also fall fully. There is no protection.

Actively managed funds, guided by skilled fund managers, adjust holdings based on valuation and market trend. They can protect downside better and capture opportunities faster.

For a government employee like you, who seeks long-term stability and consistent growth, actively managed funds are more suitable.

» Focusing on long-term vision

You have 15 years left in service, which is a strong time frame. Over such a long horizon, equity funds — especially a mix of flexi-cap, mid-cap, and small-cap — can build significant wealth.

The key is to stay invested through all market cycles. Don’t stop SIPs during short-term falls. Those times give you more units at cheaper prices, improving long-term returns.

Since you don’t have a pension, these investments will act as your retirement income source. Keep them growing systematically.

» Creating a balanced portfolio structure

You can plan your ideal structure like this:
– 40% in flexi-cap or large-cap funds for stability.
– 30% in mid-cap funds for moderate growth.
– 30% in small-cap and value funds for high growth.

This type of mix gives you both safety and long-term wealth creation. It ensures your portfolio grows smoothly without taking unnecessary risk.

A Certified Financial Planner can help you adjust this ratio based on your comfort and future changes.

» Importance of SIP duration and compounding

The biggest benefit of SIPs comes after 8 to 10 years. Compounding multiplies your returns faster in later years. So, don’t expect big results in the first few years. The early phase builds foundation.

After 15 years, your consistent Rs 8,000 monthly SIP can grow to a substantial corpus, provided you stay invested and avoid frequent changes.

» Managing other savings and safety net

Since you work in a government organisation, your job is stable, which allows steady investing. But still, build a separate emergency fund equal to 6 months of expenses in a liquid fund.

If you don’t have health insurance yet, please buy one soon. It protects your savings from unexpected medical expenses. Also, continue contributing to EPF or NPS for retirement safety.

These form your foundation. Once safety is ensured, all extra savings can go into mutual funds for wealth creation.

» Reviewing and rebalancing annually

Review your portfolio once every year. Check if your funds are performing consistently compared to their category average.

If any fund lags for two years continuously, you can replace it with a stronger one. Otherwise, continue with the same funds. Frequent switching reduces returns.

A Certified Financial Planner can handle this review for you and ensure your portfolio remains balanced and goal-oriented.

» Why investing through a Certified Financial Planner-backed Mutual Fund Distributor is better

Direct plans may seem cheaper, but they come with no monitoring or guidance. You must take all decisions alone.

When you invest through a Certified Financial Planner, you get professional tracking, portfolio review, and timely advice. They can suggest changes based on your risk, goals, and market trends.

The small cost difference is far less than the benefit of correct decisions and peace of mind. It’s like having a doctor for your financial health.

» Building towards financial freedom

Since you don’t have pension, your goal should be to create your own income stream after retirement.

Continue SIPs with discipline. Increase them as your salary grows. Maintain emergency fund and insurance cover. Avoid loans unless necessary.

If you keep investing regularly for 15 years, your mutual funds can become a solid retirement corpus. You can then set up a Systematic Withdrawal Plan (SWP) later to generate monthly income after retirement.

This approach builds both financial freedom and peace of mind.

» Staying emotionally disciplined

Markets may fluctuate. Don’t get worried if you see temporary falls in small or mid-cap funds. Those phases are part of the journey.

Focus on your long-term goals, not short-term returns. Compounding rewards patience. You will see the real growth after several years of consistency.

» Finally

You have started well and are on the right path. Continue your existing SIPs, add one flexi-cap fund for balance, and increase your total SIP amount gradually. Avoid switching to index funds or chasing trends.

Work with a Certified Financial Planner who can help you review, rebalance, and manage your portfolio from a 360-degree view — including insurance, taxation, and retirement planning.

With your steady job, disciplined investing, and long-term focus, you are building a secure financial future even without pension. Keep the same patience and discipline, and your money will take care of you later.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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