Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |2677 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

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

Question by MALA on May 07, 2024Hindi

Thank you sir. I choosen Quant small cap fund, motilol mid cap fund and quant flexi cap fund. I plan to choose Motilal oswal nifty microcap 250 index fund. Generally how many funds should be needed for better growth. I already taken 3 funds. If its needed then I go for Motilal oswal nifty microcap 250 index fund otherwise I don't choose. In my portfolio any found is needed to shift then I'll shift. Please suggest me. I'm in confusion. Thank you in advance.

Ans: It's commendable that you're considering your investment portfolio and seeking guidance to make informed decisions. Let's address your concerns:
1. Number of Funds for Better Growth: The number of funds needed for better growth depends on various factors such as your investment goals, risk tolerance, and portfolio diversification. As you've already chosen three active funds (Quant Small Cap Fund, Motilal Oswal Mid Cap Fund, and Quant Flexi Cap Fund), you've established a diversified portfolio with exposure to different market segments. Adding more funds may not necessarily lead to better growth, as it could potentially increase complexity and overlap in your portfolio.
2. Considerations for Adding Motilal Oswal Nifty Microcap 250 Index Fund: While index funds offer low-cost exposure to market indices, they may not always outperform actively managed funds. One disadvantage of index funds is their inability to actively select stocks based on market conditions or company fundamentals, potentially limiting their ability to generate alpha (excess returns) compared to actively managed funds. Additionally, investing in a microcap index fund like Motilal Oswal Nifty Microcap 250 Index Fund may introduce higher risk due to the inherently volatile nature of microcap stocks. As such, it's essential to carefully evaluate the risk-return profile of this fund and consider whether it aligns with your investment objectives and risk tolerance.
3. Reviewing and Shifting Funds: Periodically reviewing your investment portfolio is crucial to ensure it remains aligned with your financial goals and risk tolerance. If you're considering adding or shifting funds, evaluate each fund's performance, consistency, and fund manager track record. If any fund consistently underperforms or deviates from its investment mandate, it may be prudent to consider replacing it with a better-performing alternative. However, avoid making frequent changes to your portfolio based on short-term market fluctuations, as this can disrupt your long-term investment strategy.
Ultimately, the decision to add Motilal Oswal Nifty Microcap 250 Index Fund or make any changes to your portfolio should be based on a thorough assessment of your investment goals, risk tolerance, and the merits of the available investment options. Consider seeking advice from a Certified Financial Planner (CFP) or financial advisor who can provide personalized guidance based on your specific financial situation and objectives. Remember to stay focused on your long-term investment strategy and avoid making impulsive decisions based on market noise or external factors.

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.