Dear Mr. Ramalingam, Hope this email finds you in good health. I am a regular reader of your posts and thank you for sharing that knowledge and insight across. However, given financial management is such a personal thing, I was wondering if you can help me by reviewing my portfolio and sharing your optimization tips and suggestions to improve the same. Sharing some of the details from my end below.
Background :
38 year Old IT professional living with my mother, wife and 9 year old daughter
Primary Goals :
Daughter's higher education (8 years away) : Current Cost 25 Lakhs
Retirement : Looking to work till 48 (10 years away); Current Monthly Expense : 1 Lakh per Month
Current Portfolio:
EPF : 23.00 Lakhs
PPF: 15.50 Lakhs
Superannuation : 4.80 Lakhs
NPS : 8.80 Lakhs
Equity Mutual Funds : 56.50 Lakhs
Debt Mutual Fund : 10.00 Lakhs (Kept for Emergency Purposes)
Fixed Deposits : 7 Lakhs
Monthly Investment Breakdown:
EPF and VPF : 40,000
Superannuation: 15,000
NPS: 20,000
Mutual Funds :
DSP Mutual Fund: Small Cap Fund - Reg - G has a current value of ?244,176.20, with a cost value of ?69,000.00, appreciating by ?175,176.20 at an annualized XIRR of 19.50%.
Bandhan Sterling Value Fund-(Reg Pln)-Gr has a current value of ?20,037.84, with a cost value of ?20,000.00, appreciating by ?37.84 at an annualized XIRR of 0.42%, with an existing SIP of ?2,000.00.
Bandhan Multi Asset Allocation Fund Reg-Growth has a current value of ?30,914.51, with a cost value of ?30,000.00, appreciating by ?914.51 at an annualized XIRR of 6.81%, with an existing SIP of ?3,000.00.
Kotak Emerging Equity Fund-Gr has a current value of ?48,896.33, with a cost value of ?45,000.00, appreciating by ?3,896.33 at an annualized XIRR of 21.38%, with an existing SIP of ?4,000.00.
Kotak Flexicap Fund - Reg Gr has a current value of ?1,552,600.54, with a cost value of ?859,000.00, appreciating by ?693,600.54 at an annualized XIRR of 16.83%, with an existing SIP of ?1,000.00.
HSBC Mutual Fund: HSBC Value Fund - Regular Growth has a current value of ?348,463.60, with a cost value of ?125,000.00, appreciating by ?223,463.60 at an annualized XIRR of 20.72%.
HDFC Manufacturing Fund Regular Growth has a current value of ?26,033.70, with a cost value of ?25,000.00, appreciating by ?1,033.70 at an annualized XIRR of 6.44%.
HDFC Multi Cap Fund Regular Growth has a current value of ?41,356.01, with a cost value of ?40,000.00, appreciating by ?1,356.01 at an annualized XIRR of 7.58%, with an existing SIP of ?4,000.00.
HDFC Mid-Cap Opportunities Fund-Gr has a current value of ?42,564.66, with a cost value of ?40,000.00, appreciating by ?2,564.66 at an annualized XIRR of 14.54%, with an existing SIP of ?4,000.00.
HDFC Hybrid Equity Fund-Growth has a current value of ?501,477.98, with a cost value of ?247,999.69, appreciating by ?253,478.29 at an annualized XIRR of 14.08%.
SBI Mutual Fund: SBI Blue Chip Fund Reg Plan-G has a current value of ?311,649.64, with a cost value of ?168,058.01, appreciating by ?143,591.63 at an annualized XIRR of 15.86%.
Parag Parikh Flexi Cap - Reg Plan has a current value of ?42,257.55, with a cost value of ?40,000.00, appreciating by ?2,257.55 at an annualized XIRR of 12.75%, with an existing SIP of ?4,000.00.
Parag Parikh Flexi Cap - Dir Plan has a current value of ?25,136.45, with a cost value of ?25,000.00, appreciating by ?136.45 at an annualized XIRR of 3.30%, with an existing SIP of ?5,000.00.
ICICI Prudential Value Discovery Fund - Growth has a current value of ?148,361.65, with a cost value of ?124,000.00, appreciating by ?24,361.65 at an annualized XIRR of 21.32%, with an existing SIP of ?10,000.00.
ICICI Prudential Multi-Asset Fund - Growth has a current value of ?41,141.35, with a cost value of ?40,000.00, appreciating by ?1,141.35 at an annualized XIRR of 6.37%, with an existing SIP of ?4,000.00.
ICICI Prudential Balanced Advantage Fund Growth has a current value of ?112,828.74, with a cost value of ?88,000.00, appreciating by ?24,828.74 at an annualized XIRR of 14.62%.
ICICI Prudential Value Discovery Fund - Growth has a current value of ?20,492.30, with a cost value of ?20,000.00, appreciating by ?492.30 at an annualized XIRR of 5.48%, with an existing SIP of ?2,000.00.
Axis Bluechip Fund - Growth has a current value of ?172,699.36, with a cost value of ?131,993.29, appreciating by ?40,706.07 at an annualized XIRR of 16.85%.
Mirae Asset Emerging Bluechip Fund has a current value of ?1,739,836.71, with a cost value of ?987,960.10, appreciating by ?751,876.61 at an annualized XIRR of 20.58%, with an existing SIP of ?18,000.00.
Mirae Asset Multi Asset Allocation Fund has a current value of ?30,981.90, with a cost value of ?29,998.51, appreciating by ?983.39 at an annualized XIRR of 7.08%, with an existing SIP of ?3,000.00.
Nippon India Multi Cap Fund has a current value of ?41,231.79, with a cost value of ?39,997.80, appreciating by ?1,233.99 at an annualized XIRR of 6.55%, with an existing SIP of ?4,000.00.
Nippon India Growth Fund has a current value of ?42,780.93, with a cost value of ?39,997.03, appreciating by ?2,783.90 at an annualized XIRR of 14.77%, with an existing SIP of ?4,000.00.
Quant Active Fund has a current value of ?38,186.47, with a cost value of ?39,997.47, depreciating by ?1,811.00 at an annualized XIRR of -9.84%, with an existing SIP of ?4,000.00.
Quant Small Cap Fund has a current value of ?40,281.20, with a cost value of ?39,997.79, appreciating by ?283.41 at an annualized XIRR of 1.53%, with an existing SIP of ?4,000.00.
Sundaram Mutual Fund: Sundaram Short Duration Fund has a current value of ?1,018,820.07, with a cost value of ?999,949.97, appreciating by ?18,870.10 at an annualized XIRR of 7.49%.
The total current value of all MF investments is ?6,683,207.48, with an existing SIP of ?80,000.00.
It would be really helpful if you can please guide me on how I can optimize my investments and re-construct the same (e.g. Stopping some SIPs, Starting new ones, Alter amounts etc.) in order to improve the overall financial well being. Also, I am open to listen to any other general suggestions and recommendations which can help me in my financial investment journey. Please let me know your thoughts and comments. Looking forward to hearing from you. Thank you again.
Ans: Your disciplined approach to investing is impressive. Let us explore optimization strategies and actionable suggestions tailored to your goals.
Current Financial Snapshot
Strengths:
Diversified portfolio across EPF, PPF, NPS, mutual funds, and fixed deposits.
Regular monthly investments of Rs. 1,75,000 into a mix of equity and debt instruments.
Emergency corpus in debt mutual funds and fixed deposits ensures liquidity.
Clear goals for higher education and early retirement.
Areas of Improvement:
Overlapping mutual fund categories dilute returns and complicate tracking.
Suboptimal returns in certain funds.
Lack of clarity on inflation-adjusted goal amounts.
Goal Analysis
1. Daughter's Higher Education (8 Years Away):
Target cost: Rs. 25 lakhs at present. Adjusted for inflation (7%), the future cost will be around Rs. 43 lakhs.
Current allocation to equity mutual funds is aligned with the long-term nature of this goal.
2. Retirement (10 Years Away):
Current monthly expense: Rs. 1 lakh. Future expense at 6% inflation: Rs. 1.79 lakhs/month.
Retirement corpus required to sustain expenses post-retirement is approximately Rs. 6-7 crores.
Mutual Fund Portfolio Assessment
Key Observations:
You have multiple funds with similar objectives, leading to inefficiency.
Some funds show lower XIRR or minimal appreciation.
Active SIPs need better alignment with goal timelines.
Action Plan:
Consolidate overlapping funds into 4-5 high-performing, diversified funds.
Focus on flexi-cap, mid-cap, and small-cap funds for higher growth potential.
Exit underperforming funds, such as those with XIRR below 7%, and redirect SIPs.
Recommendations for Monthly Investments
1. EPF, VPF, and Superannuation Contributions:
Continue these for their tax benefits and steady growth.
Ensure you review the EPF interest rates annually.
2. NPS Contributions:
NPS Tier-I contributions are ideal for retirement due to tax benefits.
Allocate 75% to equity for the next 7-8 years to maximize growth.
3. SIP Realignment:
Increase SIPs in funds with consistent high XIRR.
Focus Rs. 80,000 SIP allocation toward goal-specific funds.
4. Emergency Corpus:
Maintain 6-12 months of expenses in liquid instruments.
Debt mutual funds and fixed deposits are sufficient.
Tax Efficiency
Equity Mutual Funds: Long-term gains above Rs. 1.25 lakhs are taxed at 12.5%. Plan partial redemptions in phases post-retirement to optimize taxes.
Debt Mutual Funds: Gains are taxed as per your slab. Ensure their primary purpose remains liquidity.
NPS Withdrawals: Invest 40% in annuities (mandatory) post-retirement, and the rest can be withdrawn tax-free within limits.
Suggestions for Overall Portfolio Management
1. Monitor Inflation Impact:
Regularly adjust goal amounts for inflation.
Use annual reviews to tweak asset allocation.
2. Diversify Without Overlap:
Avoid holding multiple funds within the same category (e.g., small-cap funds).
Opt for funds managed by reputed fund houses with a track record of consistent performance.
3. Increase Retirement Focus:
Shift a larger percentage of monthly investments toward equity funds with a 7-10 year horizon.
Use balanced advantage or hybrid funds to reduce volatility closer to retirement.
4. Review Insurance Needs:
Ensure adequate life and health insurance coverage for your family.
If underinsured, consider term insurance for Rs. 1-2 crore.
Final Insights
You are on the right track with a strong investment base. Streamlining and realigning your mutual fund portfolio will improve efficiency and returns. Inflation-adjusted goals should guide your investments.
Continue your disciplined approach and conduct annual reviews with a Certified Financial Planner to ensure progress.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Rohith on Nov 23, 2020Hindi
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