Hi Samraat, ( My goal - 1 CR in next 10-15 year) As a beginner, I have been making SIP's since last 5 months in ( Parag P Flexi 2k Pm, Axis Small cap 2.5kPm, Motilal oswal midcap 1.5K, ICICI Pru Value Discovery 1 K ) total @7000 per month. returns are reasonable and good. (step up 30% every year). (Thanks for your earlier advice on these) . Going forward, >> Now for lumpsum I have identified 1. Nippon India power and Infra , ( as i want to invest in Power sectoral funds) 2. Canara Robeco Bluechip Equity fund ( Direct Growth @ 10000 initially) , I plan to add 5k Quarterly ntil i reach a reasonable lumpsum amount. Please share your valuable suggestions on my plan. Thanks,

Ans: Hello Meghnaa and thanks for writing to me. Assuming your portfolio grows at around 12% every year, the present value of your Rs.50 Lakh after 20 years is around Rs.5.20 Lakh.

As you want to make a large lumpsum investment, you can consider investing equal amounts in:

1-ICICI Prudential Multi Asset Fund (Growth)
2-DSP Equity & Bond Fund (Growth)
3-Tata Balanced Advantage Fund (Growth)
4-UTI Flexi Cap Fund (Growth)

Periodic rebalancing and assessment is essential to ensure you achieve your goal.

Ans: It's great that you're investing your monthly surplus in SIPs to build your wealth.

You have a well-diversified portfolio and the funds in your portfolio are performing well in the current market scenario. In the finance planning of any portfolio, we consider many factors, including client age, risk profile, current asset allocation, etc.

All mentioned funds are performing well and have good potential in the long term.

However, for Nippon Power and Infra Fund - Sectoral funds focus on a specific sector or industry and it is difficult to predict which sector will perform and how long. Hence, we recommend going for diversified funds to avoid the concentration risk.

Ans: Your commitment to investing at such a young age is commendable. Achieving Rs 1 crore in the next 10-15 years is a realistic goal with your disciplined approach.

Current SIP Strategy

You have started SIPs in four diversified funds, totaling Rs 7,000 per month. This strategy, combined with a 30% annual step-up, is a strong foundation for growth.

Evaluating Your Fund Selection

Your chosen funds cover flexi-cap, small-cap, mid-cap, and value categories. This diversification is prudent, spreading risk and capturing growth across different market segments.

Lump Sum Investment Strategy

You plan to invest in sectoral and large-cap funds. These choices can add stability and sector-specific growth to your portfolio. Diversifying across sectors reduces risk and enhances potential returns.

Sectoral Fund Considerations

Investing in sectoral funds like power and infrastructure can be rewarding. However, these funds are highly volatile. Ensure they constitute a smaller portion of your portfolio to manage risk.

Large-Cap Fund Choices

Choosing between Canara Robeco Bluechip Equity and Mirae Asset Large Cap Fund is wise. Both funds are known for stability and steady growth. Allocating your lump sum and quarterly investments in these funds balances your portfolio.

Advantages of Actively Managed Funds

Actively managed funds offer professional management, adapting to market changes. This flexibility can result in higher returns compared to passive index funds, which simply track the market.

Disadvantages of Index Funds

Index funds mimic market indices and may not perform well in downturns. They lack the adaptability and professional oversight of actively managed funds, limiting potential returns.

Benefits of Investing Through a Certified Financial Planner

Investing through a Certified Financial Planner ensures tailored advice and professional management. They can help you make informed decisions and optimise your investment strategy.

Disadvantages of Direct Funds

Direct funds have lower expense ratios but lack professional guidance. Investing through a certified planner provides expert oversight, ensuring your portfolio aligns with your goals.

Periodic Review and Rebalancing

Regularly review your portfolio's performance. Rebalancing ensures your investments stay aligned with your financial goals and market conditions. This approach optimises returns and manages risks effectively.

Creating a Comprehensive Financial Plan

In addition to mutual funds, consider other financial aspects like emergency funds, insurance, and tax planning. A holistic financial plan ensures a secure and well-rounded approach to wealth creation.

Monitoring Market Trends

Stay informed about market trends and economic factors. This knowledge helps you make timely adjustments to your investments, maximising returns and mitigating risks.

Conclusion

Your disciplined investment strategy and diversified portfolio are commendable. With regular review and professional guidance, you can achieve your goal of Rs 1 crore in the next 10-15 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: The funds you have chosen for your SIPs have a good mix of mid-cap and flexi-cap exposure, which can be suitable for a long-term investment horizon like yours (8-10 years). Here's a breakdown of your questions:

Suitability of existing SIP funds for lump sum investment:

While your SIP funds focus on mid-cap and flexi-cap, the lump sum investment options you've chosen lean more towards large-cap. This creates a more balanced portfolio across market capitalisations. However, directly suggesting specific funds for a lump sum investment is difficult due to regulatory restrictions.

Here's what you can do:

• Maintain asset allocation: Consider the overall asset allocation you want for your portfolio (mid-cap, large-cap weightage). Look for funds within those categories that complement your existing SIP choices.
• Research the new funds: Do your research on the Canara Robeco Bluechip Equity Fund, Mirae Asset Large Cap Fund, and Nippon India Power and Infra Fund. Check their past performance, investment philosophy, expense ratio etc.

Stepping up SIPs by 30%:

This is a good strategy to increase your investment amount gradually and benefit from rupee-cost averaging. It helps you invest more when the market is low and potentially less when it's high.

Additional tips:

• Stay Invested: Don't panic and redeem your investments based on market fluctuations. Focus on the long term.
• Review Portfolio: Regularly review your portfolio performance (once a year) and rebalance if needed to maintain your desired asset allocation.

Please remember that this is not financial advice. It's crucial to do your research and potentially consult a registered financial advisor for personalised investment plans.

Ans: Your plan shows thoughtful diversification and allocation across categories. Let’s review the lumpsum, SIP, and fund selection strategies in detail.

Lumpsum Investment Plan
Diversification Across Categories: Your allocation of Rs 20 lakhs among large-cap, mid-cap, small-cap, and contra funds ensures good diversification.

Strategic Use of STP: Allocating Rs 20 lakhs into a liquid fund and initiating a systematic transfer plan (STP) is a prudent move. It reduces the risk of market volatility and ensures disciplined deployment of funds over time.

Room for Refinement: Ensure you align the STP duration with your risk appetite. A 6-12 month STP works for moderate-to-high risk investors. For a conservative approach, consider extending this to 18 months.

SIP Investment Plan
Balanced SIP Allocations: The monthly SIP of Rs 1 lakh is well-distributed across different fund categories. Allocating more to mid-cap and small-cap funds (20% each) aligns with your moderate-to-high risk profile.

Long-Term Focus: SIPs over 10 years will help you average market fluctuations. This approach aligns well with wealth-building goals.

Scope for Fine-Tuning: Consider reducing overlap in fund strategies. Some of your funds may invest in similar sectors or companies, leading to portfolio redundancy.

Evaluation of Fund Categories
1. Flexi Cap Funds
Flexi cap funds provide exposure to large, mid, and small-cap stocks.
They adjust dynamically based on market opportunities, balancing risk and returns.
2. Multicap Funds
Multicap funds must maintain a minimum of 25% allocation in large-cap, mid-cap, and small-cap stocks.
This ensures exposure to various market segments while limiting extreme risks.
3. Mid-Cap and Small-Cap Funds
These funds offer higher growth potential but come with greater volatility.
Ideal for long-term goals, but monitor performance every 1-2 years.
4. Contra Funds
Contra funds follow a contrarian investment strategy, focusing on undervalued stocks.
While offering unique opportunities, they require patience for results.
Key Areas for Improvement
Review Overlap in Portfolio:

Check the overlap between the flexi cap, multi-cap, and contra funds.
Too much overlap might dilute diversification benefits.
Add a Debt Component:

A small debt fund allocation, beyond the liquid fund, can help balance your portfolio.
This acts as a cushion during equity market corrections.
Active Fund Management:

Since you’ve chosen direct funds, ensure regular monitoring.
Investing through a Certified Financial Planner (CFP) ensures ongoing guidance and portfolio review.
Tax Implications
Lumpsum and STP Gains:

Any gains from the liquid fund during STP are subject to your income tax slab.
Ensure you plan for tax liabilities while making withdrawals.
Equity Mutual Funds:

LTCG above Rs 1.25 lakh is taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.
Tax Efficiency with SIPs:

Each SIP instalment has its own holding period. This means gains are taxed individually.
Risk Management
Volatility in Small- and Mid-Cap Funds:

While these categories offer higher returns, they also have greater volatility.
Avoid reallocating funds during market corrections to maximise compounding benefits.
Regular Reviews:

Perform yearly reviews of fund performance and category suitability.
Replace funds that consistently underperform benchmarks over 3-4 years.
Final Insights
Your investment plan is robust, aligning well with your risk appetite and long-term goals. The use of lumpsum and STP is commendable, and the SIP allocations show a focus on disciplined investing.

However, focus on reducing portfolio overlap and adding a debt component for better risk management. Monitor fund performance regularly, and consider engaging a CFP for periodic reviews to ensure your portfolio stays aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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