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42 Year Old Aims for 10 Crores in 15 Years: Is His Investment Strategy Aligned?

Ramalingam Kalirajan |7367 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 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 Nikhilesh on Jun 05, 2024Hindi

Hi Vivek.. I am 42 years old.. Have accumulated around 1.3 Crores as of today in MF(51.5 L), PPF/SSY (36 L) and EPF(46 L). Target is to reach around 10 crores in the next 13-15 years. I am a High Risk investor. I am investing in the below mutual funds for a minimum tenure of another 13 years.. UTI Nifty 50 Index (13k), Mirae Asset Large and Midcap (3k), UTI Nifty 200 Momentum 30 (18k), Quant Midcap (35k), Invesco India Midcap (35k) , Axis Small Cap (18k), Parag Parikh Flexicap (20k) and Quant Flexicap (20k) and Mirae Asset MidSmall400 Momentum Quality 100 ETF FoF (18k). Apart from this will continue investing in PPF (1.5 L yearly), Sukanya Samriddhi Yojana (1.5 L yearly) and EPF (3.4 L yearly). Am I aligned to reach the goal with the funds selected or any changes needs to be done. Pls. suggest.

Ans: Assessment of Current Portfolio

You've done a commendable job of accumulating Rs. 1.3 crores across mutual funds, PPF, SSY, and EPF. Your goal of reaching Rs. 10 crores in the next 13-15 years is ambitious yet achievable given your high-risk appetite and consistent investment strategy. Let's break down your portfolio and investment strategy to see if you're on the right track.

Mutual Fund Investments

Your mutual fund investments are diversified across various categories:

Large-cap funds for stability
Mid-cap and small-cap funds for higher growth potential
Flexi-cap funds for a balanced approach
This diversification is crucial for managing risk and optimizing returns. However, there are a few points to consider:

High Allocation to Mid-cap and Small-cap Funds: While mid-cap and small-cap funds offer higher growth potential, they are also more volatile. Ensure that you are comfortable with this level of risk, especially since a significant portion of your investments is in these categories.

Momentum Funds: Momentum funds can offer good returns during bullish markets but can be risky in volatile markets. Monitor these investments closely and be prepared to rebalance if needed.

Flexi-cap Funds: These funds provide flexibility in allocation and can adjust according to market conditions, which is beneficial. Keep a close eye on the fund managers' performance to ensure they are capitalizing on this flexibility effectively.

Disadvantages of Index Funds and Direct Funds

Index Funds: While index funds are low-cost and provide market-average returns, they lack the potential for outperformance. Actively managed funds, like the ones you have, can potentially deliver higher returns due to active stock selection and market timing.

Direct Funds: Direct funds may save on expense ratios but lack the professional advice and guidance provided by mutual fund distributors (MFDs) with CFP credentials. Regular funds, through an MFD, offer ongoing advice, market insights, and portfolio reviews, which are invaluable for long-term financial planning.

PPF, SSY, and EPF Investments

Your continued investments in PPF (Rs. 1.5 lakhs yearly), SSY (Rs. 1.5 lakhs yearly), and EPF (Rs. 3.4 lakhs yearly) provide a solid foundation of safe and tax-efficient returns. These instruments offer guaranteed returns and tax benefits, which are essential for risk management and ensuring a stable portion of your portfolio.

Suggestions for Improvement

Review Fund Performance Regularly: Actively review the performance of your mutual funds. Ensure they consistently outperform their benchmarks and peers. If a fund underperforms over an extended period, consider switching to a better-performing alternative.

Consider Professional Advice: Engage with a Certified Financial Planner (CFP) to review your portfolio periodically. They can provide personalized advice, help you navigate market volatility, and make informed decisions.

Rebalance Your Portfolio: Regularly rebalance your portfolio to maintain your desired asset allocation. This ensures you are not overexposed to any single asset class and helps in managing risk.

Emergency Fund: Ensure you have an adequate emergency fund in place. This should cover at least 6-12 months of your expenses. It provides a safety net during unforeseen circumstances without disturbing your investment strategy.

Final Insights

You have a well-diversified portfolio aligned with your high-risk tolerance and long-term goals. Your disciplined approach to investing in mutual funds, PPF, SSY, and EPF is commendable. Regular reviews, professional advice, and portfolio rebalancing will help you stay on track to achieve your goal of Rs. 10 crores in the next 13-15 years.

Stay focused and keep monitoring your investments to ensure they continue to meet your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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.