I have just started investing in Mutual funds. Is it good to invest in different funds with Rs 10000 each or 1 or 2 funds with say Rs 100000 each. Please suggest.

Ans: It's generally advisable to diversify your investments across multiple mutual funds to spread risk. Consider allocating your investment across two or three mutual funds to achieve diversification. Look for funds with a track record of consistent performance, managed by reputable fund houses, and aligned with your risk tolerance and investment goals. Opt for a mix of equity and debt funds to balance risk and return potential. Consult with a financial advisor to identify suitable mutual funds based on your financial objectives, risk appetite, and investment horizon.

Ans: You are 59 years old and have invested Rs. 2 lakhs across 12 mutual funds. These funds are diversified across large-cap, small-cap, large & mid-cap, and thematic funds. While diversification is important, over-diversification can lead to a scattered portfolio that is difficult to manage and may not yield optimal returns.

Evaluating the Number of Funds
Investing in too many funds can dilute the benefits of diversification and make it harder to track performance.

Over-Diversification: Holding 12 mutual funds, especially with a relatively small corpus of Rs. 2 lakhs, might not be the most efficient strategy. Each fund may have overlapping stocks, reducing the overall diversification benefit.

Concentration Risk: By spreading your investment across too many funds, you may be inadvertently increasing your risk if these funds are not carefully selected to complement each other.

Simplifying Your Portfolio
A well-structured portfolio typically has a few carefully chosen funds that cover different segments of the market. Here’s how you can simplify:

Consolidate Funds: Consider reducing the number of funds. A portfolio with 3-5 funds can provide sufficient diversification without being overly complex.

Focus on Core Funds: Choose funds that have a strong track record and align with your risk tolerance and financial goals. Large-cap and large & mid-cap funds can form the core of your portfolio, providing stability and growth.

Thematic Funds: These can be a good addition but should be limited to a small portion of your portfolio due to their higher risk. Ensure they align with your long-term goals.

Rebalancing and Portfolio Review
At 59 years old, your investment strategy should also consider the proximity to retirement. It’s important to balance growth with safety.

Review Asset Allocation: Ensure your portfolio is aligned with your retirement goals. This might mean increasing your allocation to debt or hybrid funds to reduce risk.

Regular Monitoring: Keep an eye on the performance of your remaining funds. Periodic reviews will help you make informed decisions about rebalancing or further consolidation.

Final Insights
While diversification is crucial, over-diversification can lead to a diluted and hard-to-manage portfolio. Simplifying your investment by consolidating into a few well-chosen funds can provide better returns and easier management. As you approach retirement, ensure your portfolio is balanced to provide both growth and safety, aligning with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello and thanks for writing to me.

I am assuming you are investing with a goal for long term wealth creation and are fine with the volatility associated with equity. In such a case, you can consider investing in 2 funds, a multicap fund and a flexicap fund. A multi cap fund will ensure you have exposure to companies across market capitalizations while a flexicap fund can move across market capitalizations.

Do note that I am recommending the fund type without any other information about your objective or risk appetite. If you give me other details, I may recommend other type of schemes.

Ans: You have taken a solid step by investing in mutual funds. Let’s assess your portfolio for alignment with your Rs. 2 crore goal by 2035.

Analysing Fund Selection
Parag Parikh Flexi Cap Fund
A flexi cap fund is suitable for long-term growth.

It provides exposure to multiple market segments and geographies.

Tata Small Cap Fund
Small-cap funds can deliver high returns but carry high risk.

Keep exposure limited to control portfolio volatility.

Mirae Asset ELSS Tax Saver Fund
ELSS funds are excellent for tax-saving under Section 80C.

They also provide equity exposure with a lock-in period of 3 years.

PGIM India Midcap Opportunities Fund
Mid-cap funds balance growth potential and risk.

It fits well for wealth creation over 10+ years.

Quant Infrastructure Fund
Sectoral funds like infrastructure are highly volatile.

Limit their allocation to avoid concentrated risk.

Quant Small Cap Fund
Small-cap funds should be balanced with large-cap or flexi-cap funds.

Diversify further to mitigate risks.

Quant Active Fund
This multi-cap fund offers flexibility in stock allocation.

It can complement other diversified funds in your portfolio.

Quant Absolute Fund
Balanced funds can provide stability to a portfolio.

Use these for moderate growth with reduced risk.

Portfolio Observations
Strengths
Good mix of diversified equity funds and mid-cap options.

Includes ELSS for tax savings.

Concerns
High allocation to small-cap and sectoral funds increases portfolio risk.

Quant funds dominate, reducing diversification across fund houses.

Suggested Portfolio Adjustments
Reduce Small-Cap Exposure
Retain one small-cap fund, preferably Tata Small Cap.

Exit the Quant Small Cap Fund to reduce concentrated risk.

Diversify Fund Houses
Choose funds from varied AMCs for better risk distribution.

Avoid over-reliance on a single fund house like Quant.

Add Large-Cap Focus
Include a large-cap or large and mid-cap fund for stability.

These funds are essential for balancing risk.

Utilising the Additional Rs. 1 Lakh Annually
Lump Sum in Mutual Funds
Invest the amount in existing equity funds systematically.

Distribute it across balanced and large-cap funds.

Consider Hybrid Funds
Hybrid funds offer equity growth with debt stability.

Allocate Rs. 50,000 annually to a good hybrid fund.

Emergency Fund
Build an emergency fund covering 6-12 months of expenses.

Use liquid funds or fixed deposits for this purpose.

Health Insurance Top-Up
Increase health insurance coverage if necessary.

Ensure sufficient coverage for medical emergencies.

Tracking and Adjusting Your Investments
Annual Portfolio Review
Monitor fund performance regularly.

Exit consistently underperforming funds to optimise returns.

Rebalancing
Adjust your equity and debt exposure annually.

Maintain the desired asset allocation for your goals.

Tax Implications and Planning
ELSS Tax Benefits
Continue with ELSS investments for Section 80C deductions.

Redeem matured ELSS funds and reinvest to extend benefits.

Long-Term and Short-Term Capital Gains
LTCG above Rs. 1.25 lakh is taxed at 12.5%.

STCG is taxed at 20%. Plan withdrawals wisely to minimise taxes.

Estimating Rs. 2 Crore Corpus by 2035
Your Rs. 36,000 SIP is a significant step toward this goal.

Stay disciplined with investments to capitalise on compounding.

Use the additional Rs. 1 lakh annually to accelerate corpus growth.

Final Insights
Your portfolio needs minor adjustments for better risk management. Focus on diversification, balancing equity and debt, and tracking performance. Stay consistent with your SIPs, and your Rs. 2 crore target by 2035 is achievable.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Your commitment to investing Rs. 36,000 monthly at age 35 is admirable. The addition of Rs. 1 lakh annually indicates a strong focus on wealth creation. Let us analyse your portfolio and suggest improvements.

Portfolio Review
Flexi-Cap Fund (Rs. 7,500)
Flexi-cap funds provide the flexibility to invest across market capitalisations.
This flexibility ensures adaptability to changing market trends.
Retaining this allocation adds balance to your portfolio.
Small-Cap Funds (Rs. 2,500 and Rs. 4,000)
Small-cap funds are high-risk, high-reward investments.
Over a long horizon, they can deliver superior growth but may experience volatility.
Retain small-cap allocation but avoid excessive exposure to manage risks.
ELSS Tax Saver Fund (Rs. 5,000)
ELSS funds provide tax benefits under Section 80C with a 3-year lock-in.
They are a great tool for long-term wealth creation and tax planning.
Continue this SIP, as it aligns with your goals and tax-saving needs.
Mid-Cap Fund (Rs. 5,000)
Mid-cap funds strike a balance between growth and stability.
They are ideal for long-term investors with moderate risk tolerance.
Retain this allocation, as it complements your portfolio.
Infrastructure Fund (Rs. 3,500)
Infrastructure funds focus on the infrastructure sector.
These funds are concentrated and depend heavily on sectoral performance.
Consider reducing or reallocating this amount to more diversified funds.
Quant Small Cap and Active Funds (Rs. 3,500 each)
Having multiple funds in the same category can lead to overlap.
Consolidating funds can simplify management and improve portfolio efficiency.
Quant Absolute Fund (Rs. 5,000)
This fund's balanced approach offers exposure to equity and debt.
Retain this allocation, as it can provide stability during market corrections.
Suggestions for Portfolio Improvement
Simplify Your Portfolio
Holding too many funds increases overlap and complexity.
Retain one well-performing small-cap and multi-cap fund each.
Avoid over-diversification, which can dilute returns.
Focus on Core Categories
Stick to diversified categories like flexi-cap, mid-cap, and multi-cap funds.
These funds balance risk and reward effectively over the long term.
Reduce Sector-Specific Allocation
Infrastructure funds are risky due to their dependency on economic cycles.
Consider reallocating this amount to diversified equity funds.
Monitor Performance Annually
Review each fund’s performance over a 3-5 year period.
Replace consistently underperforming funds with better options.
Additional Rs. 1 Lakh Investment
Consider Balanced Approach
Divide Rs. 1 lakh between equity and debt for diversification.
Equity funds for growth and debt instruments for stability.
Allocate to Equity Funds
Invest in existing funds with proven long-term performance.
This will enhance the power of compounding in your portfolio.
Explore Debt Mutual Funds
Debt funds reduce portfolio volatility and offer predictable returns.
They are ideal for managing short-term goals or risk diversification.
Emergency Fund Allocation
Use part of this amount to build or enhance your emergency fund.
An emergency fund should cover 6–12 months of expenses.
Achieving Rs. 2 Crore Goal
SIP Continuation
Your Rs. 36,000 monthly SIP is aligned with your Rs. 2 crore target.
Consistency is key to achieving long-term goals.
Incremental Investments
Increase SIP amounts periodically with income growth.
This will help bridge any shortfall and accelerate corpus growth.
Avoid Frequent Changes
Stick to your strategy and avoid impulsive changes during market volatility.
A disciplined approach ensures better results over time.
Taxation Awareness
Gains above Rs. 1.25 lakh are taxed at 12.5%.
Plan withdrawals accordingly to minimise tax impact.
Final Insights
Your portfolio is well-structured but needs simplification to improve efficiency. Retain core funds, reduce sectoral exposure, and reallocate overlapping categories. Use the additional Rs. 1 lakh for equity and debt allocation to enhance diversification. Stay disciplined, monitor performance, and increase SIPs periodically to achieve your Rs. 2 crore goal by 2035.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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