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Investing Advice: How can I improve my investment portfolio?

Ramalingam Kalirajan |8098 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 04, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Feb 01, 2025Hindi

hi team, thank you for guiding on verious queries my current portfolio is distributed as below, can you please suggest for better improvement. Index funds 43.93% mid-cap 21.9% large & mid-cap 11.78% flexi cap 9.08% large-cap 7.07% sector technology 5.61% elss (tax savings) 0.3% global other 0%

Ans: Your portfolio has a good mix of equity funds. You have diversified across market caps. However, there is room for improvement. A structured approach can enhance returns and reduce risks.

Strengths of Your Portfolio
You have a strong allocation to mid-cap and flexi-cap funds. These have high growth potential.

Large-cap funds provide stability in your portfolio.

A sectoral fund can give additional growth in specific market cycles.

ELSS investment provides tax benefits. Even though allocation is low, it helps in tax savings.

Areas for Improvement
High Exposure to Index Funds
Index funds make up 43.93% of your portfolio. This is too high.

Index funds do not outperform the market. They only match it.

Actively managed funds give better returns over time.

Fund managers adjust holdings based on market trends. Index funds lack this flexibility.

Reducing index fund allocation can help improve returns.

Mid-Cap and Large & Mid-Cap Allocation
Mid-cap funds are 21.9% of your portfolio.

Large & mid-cap funds are 11.78%. This combination gives good growth.

These funds need long-term holding for better returns.

You can continue holding them, but periodic review is necessary.

Low Allocation to Large-Cap Funds
Large-cap funds are only 7.07%.

Large-cap stocks provide stability in downturns.

You may increase allocation to maintain a balanced portfolio.

Sectoral Fund Allocation
Technology sector fund is 5.61%.

Sectoral funds are high-risk. They perform well only in certain cycles.

If technology sector underperforms, it can drag your returns down.

Reducing exposure may help in risk management.

No Allocation to International Funds
Your portfolio has 0% in global funds.

International funds provide geographic diversification.

This helps in reducing risk from local market downturns.

A small allocation to international funds is recommended.

Suggested Portfolio Rebalancing
Reduce index fund exposure. Shift to actively managed funds.

Maintain mid-cap and flexi-cap allocations for long-term growth.

Increase large-cap allocation for better stability.

Reduce sectoral exposure to manage risk.

Add a small portion to international funds for diversification.

Risk Management and Portfolio Review
Equity investments need long-term commitment.

Review your portfolio every six months.

Rebalance if any fund underperforms consistently.

Ensure you have adequate health insurance for financial security.

Finally
Your portfolio is structured well, but small changes can improve returns.

Reducing index funds will enhance growth potential.

A better mix of large-cap and global funds can reduce risks.

Keep reviewing your investments and adjusting as needed.

A disciplined approach will help you achieve long-term financial goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.