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Should I switch from Edelweiss Mid Cap to Kotak Emerging Equity?

Ramalingam

Ramalingam Kalirajan  |8927 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 11, 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 - Apr 10, 2025Hindi
Money

Hi I wanted a opinion of my portfolio So I have the following funds based on market cap diversification and Style diversification Nippon india small cap - For small cap exposure and good track record. It is focused on aggressive growth style of investing Parag parikh flexi cap - For good track record and it focuses on value style of investing which complements nippon growth style of investing Uti nifty 200 momentum 30 fund - invest in momentum style of investing I have Edelweiss mid cap in my portfolio and it is for mid cap exposure and it focuses on quality/growth style of investing. So I am also viewing kotak emerging equity fund which focuses on pure quality style of investing. So overlap of kotak emerging equity fund with momentum fund is 17% compared to Edelweiss mid cap with momentum which is 25. Also as I mentioned again it focuses on pure quality style of investing But already I have made many changes to my portfolio. So is Edelweiss that bad of a choice to switch to kotak or shall I stay with Edelweiss mid cap.

Ans: I’ll cover each aspect of your portfolio, your style mix, overlap concern, and guide you on whether switching from Edelweiss Mid Cap to Kotak Emerging Equity makes sense.

Let us evaluate this step by step, keeping it simple, professional, and actionable for you.

Portfolio Structure and Strategy
You have done solid homework on market cap and investment style diversification.

You have not overloaded one cap or style. That’s a good disciplined approach.

Small cap, mid cap, flexi cap and thematic fund – all bases are covered properly.

You have also mixed growth, value, momentum, and quality – this is smart thinking.

But, now the decision is not about fresh funds. It is about changing existing mid cap.

You are asking – is Edelweiss Mid Cap worth continuing or should I shift to Kotak?

Let us break this into focused sections for clarity and a full 360° evaluation.

Review of Mid Cap Exposure
Edelweiss Mid Cap is a growth and quality blend. It does not focus purely on quality.

Over long periods, it has performed reasonably, though not always top-ranked every year.

Its holdings may include a few cyclical stocks and aggressive bets occasionally.

But its volatility is within mid cap range and not unusually high.

Kotak Emerging Equity, on the other hand, is more strict about quality filters.

It avoids very cyclical names and avoids rapid sector rotation.

This helps during bear markets or sideways markets.

But during high growth cycles, Edelweiss may deliver higher upside.

So we need to assess from both – style complement and portfolio overlap.

Overlap with Momentum Fund
You already hold UTI Momentum 30 fund. It is based on past price action trends.

You rightly noticed Edelweiss Mid Cap has 25% overlap with Momentum Fund.

Kotak Emerging Equity has lower overlap – around 17%. This is a good sign.

Lower overlap helps you diversify style and sector risk better.

Momentum and growth styles tend to get crowded. Overlap here can increase risk.

Quality style helps reduce correlation and adds downside protection.

So on this angle alone, Kotak Emerging Equity scores higher than Edelweiss.

Complementing Other Funds
You already have a small cap fund focused on aggressive growth.

Your flexi cap (Parag Parikh) is value-driven and more conservative.

UTI Momentum is high beta and short-term trend oriented.

So a mid cap fund with strict quality filters complements well here.

It brings in predictability and consistency to an otherwise aggressive mix.

Edelweiss Mid Cap is not bad, but overlaps more in growth/momentum areas.

So it doesn’t add enough new style flavour compared to Kotak.

Recent Portfolio Changes
You mentioned making many changes recently. That’s a fair concern.

Too many switches cause taxation issues and disrupt compounding.

So only switch when benefits outweigh costs clearly.

This switch seems justified based on your diversification goal.

Don’t switch for 1-year or 3-year performance ranking.

Switch because the style fit improves and overlap reduces.

Also, don’t panic if performance doesn’t instantly change after switching.

Every fund will have its season. Patience is key in equity mutual funds.

Actively Managed Funds vs Index Funds
You have chosen actively managed funds. That is a very thoughtful move.

Index funds often copy past trends. They don’t adapt to new cycles fast.

Momentum crashes, sector bubbles, and frothy valuations hurt index funds deeply.

Active funds, with skilled fund managers, take defensive calls in time.

Active funds also invest in IPOs, off-index picks and tactical allocations.

Index funds miss such high alpha opportunities.

Active management, when done with discipline, beats passive over long term.

Your portfolio is well structured with a mix of active style-based funds.

That is far better than just buying index products and hoping for best.

Why Regular Plan via MFD with CFP is Better
Many investors go for direct mutual funds without expert guidance.

But without CFP guidance, they don’t know when to switch or stay put.

Regular plan via MFD with CFP ensures you have proper review and handholding.

Even 0.5% wrong allocation in volatile sectors can hurt long term goals.

Regular plan offers accountability, annual portfolio audits and emotional support.

During market crash, most direct investors panic and sell low.

With a CFP-guided MFD, that emotional mistake is avoided.

Saving 1% in expense ratio does not always give better result than having a coach.

Think of it as having a personal trainer in a gym. DIY may lead to poor posture.

So always invest through a certified mutual fund distributor with CFP expertise.

Final Insights
Edelweiss Mid Cap is not a bad fund. But overlap with momentum fund is high.

Kotak Emerging Equity has lower overlap and adds quality focus.

In your current portfolio, Kotak’s approach fits better as a mid cap choice.

You don’t need too many changes now, but this one is worth considering.

Make the switch only if investment is held for more than 1 year.

If held for less than 1 year, check tax impact due to STCG at 20%.

If more than 1 year, only gains above Rs 1.25 lakh will be taxed at 12.5%.

Reinvest only through a regular plan with a trusted CFP-guided MFD.

Don’t rush to change for small performance gaps. Focus on style balance and goals.

Continue your SIPs with patience. Review portfolio every year, not every quarter.

Stick with your goal-based strategy. That is the best way to build long-term wealth.

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.
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Ramalingam

Ramalingam Kalirajan  |8927 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 30, 2024

Asked by Anonymous - May 30, 2024Hindi
Listen
Money
Hi Sir, I am investing since 8 yrs. I want to get review on my below portfolio. Please guide me. 1- Kotak Flexi Cap/10000Rs- Planning to exit and start in Parag Parikh Flexi Cap 2- Mirae Emerging Bluechip Fund 25000 3- Kotak Emerging Equity Fund 31000 4- Nippon India Small Cap 25000 5- Canara Rob Small Cap 10000- Just 1 yr before started but thinking to choose different strategy investing fund like Quant Small Cap Should I make these changes or continue same portfolio only or will you recommend some other fund. These all are for long term says 20-25 yrs. 6- HDFC Balanced Advantage Fund 5000 As Long term RD for 5 yrs only Please guide me
Ans: I appreciate your dedication to building a strong investment portfolio over the years. It is clear you have put considerable thought into your financial planning. Let’s assess your portfolio and the proposed changes. I’ll ensure the analysis is straightforward and tailored to your long-term goals.

Portfolio Evaluation
Your current portfolio includes a mix of large-cap, mid-cap, and small-cap funds. This diversified approach can be beneficial for long-term growth. Here's a detailed evaluation:

Flexi Cap Funds
You have Kotak Flexi Cap and plan to switch to Parag Parikh Flexi Cap. Flexi cap funds provide flexibility by investing across market capitalizations. This strategy helps in adapting to market changes. Parag Parikh Flexi Cap has a strong track record. However, before switching, consider if the new fund aligns with your risk tolerance and investment objectives.

Mid-Cap and Small-Cap Funds
Mid-cap and small-cap funds are more volatile but offer higher growth potential. Mirae Emerging Bluechip and Kotak Emerging Equity are robust mid-cap funds with good historical performance. Small-cap funds like Nippon India Small Cap and Canara Rob Small Cap are also included. It's wise to monitor their performance periodically and ensure they fit your risk profile.

Balanced Advantage Fund
The HDFC Balanced Advantage Fund provides a balanced exposure to equity and debt, reducing overall risk. This fund is suitable for moderate risk-takers seeking stability and growth.

Proposed Changes
Exiting Kotak Flexi Cap
Switching from Kotak Flexi Cap to Parag Parikh Flexi Cap is a strategic move. Parag Parikh Flexi Cap has shown consistent performance and a unique investment strategy. Ensure this fund complements your overall portfolio and aligns with your risk tolerance.

Small Cap Funds
You have two small-cap funds: Nippon India Small Cap and Canara Rob Small Cap. Small-cap funds are highly volatile and risky. Consolidating into one robust small-cap fund can reduce complexity and manage risk better. Quant Small Cap is known for its performance, so replacing Canara Rob with Quant could be a good decision.

Recommendations
Maintain a Diversified Portfolio
Diversification helps manage risk and enhance returns. Your current mix of flexi cap, mid-cap, and small-cap funds is well-diversified. Regularly review and rebalance your portfolio to stay aligned with your goals.

Regular Monitoring
Regular monitoring of your funds' performance is crucial. Assess the performance of each fund against its benchmark and peers. This ensures your investments continue to meet your expectations.

Risk Tolerance
Ensure your portfolio aligns with your risk tolerance. Mid-cap and small-cap funds are more volatile, so be prepared for market fluctuations. Balanced advantage funds can provide stability and reduce overall portfolio risk.

Long-Term Strategy
Consistent Investing
Your long-term horizon of 20-25 years is ideal for equity investments. Continue your systematic investment plans (SIPs) to benefit from rupee cost averaging and compounding.

Review Annually
Annual portfolio reviews with a Certified Financial Planner can ensure your investments are on track. Adjustments based on life changes, market conditions, and financial goals can optimize your portfolio.

Conclusion
Your portfolio is well-structured with a mix of funds. The proposed changes can enhance performance and align with your long-term goals. Regular monitoring, diversification, and alignment with risk tolerance are key to successful investing.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8927 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 14, 2025

Asked by Anonymous - May 01, 2025
Money
Hi, Please review my portfolio and suggest if any change is required to attain ~14.87% CAGR in 6-7 years: Parag Parikh Flexi Cap Fund : 25.00% ICICI Prudential Equity & Debt Fund : 20.00% SBI Contra Fund : 20.00% Motilal Oswal Large and Midcap Fund : 12.50% Edelweiss Mid Cap Fund : 7.50% Bandhan Small Cap Fund : 7.50% quant Small Cap Fund : 7.50% A few questions - should I switch from Motilal Oswal Large and Midcap Fund to Motilal Oswal Midcap Fund for better alpha, but one should consider higher overlap between Edelweiss Mid Cap Fund and Motilal Oswal Midcap Fund. Is Kotak Emerging Equity Fund is a better choice and can replace Motilal Oswal Large and Midcap Fund in my portfolio without disrupting the balance and diversity and without increasing the overlap? Thanks in advance!
Ans: You have built a well-diversified equity allocation across categories. Let us now review your portfolio thoroughly and assess the possible changes to align better with your target of 14.87% CAGR over 6–7 years.

I will analyse your portfolio step by step using a 360-degree approach.

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Current Fund Allocation Assessment

You have selected seven funds from different categories.

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You have 25% in a Flexi Cap Fund. This is a core fund. It offers flexibility.

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You have 20% in a Hybrid Equity & Debt Fund. This adds stability. But can reduce long-term returns.

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SBI Contra Fund forms 20%. This is a value/contrarian style fund. This needs patience.

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Motilal Oswal Large and Midcap Fund is 12.5%. This is a category mix fund.

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You have three mid and small cap funds. Each has 7.5% weightage.

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The three are: Edelweiss Mid Cap, Bandhan Small Cap and Quant Small Cap.

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Your allocation tilts heavily toward equity. Very minimal stability component is present.

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You are aiming for high returns. That needs high-risk tolerance. Keep that in mind.

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There is low duplication. Fund category diversification looks decent.

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However, some category weights and style biases can be optimised.

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Let us now look at each aspect in more detail.

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Flexi Cap Fund – 25% Weightage

This is a good anchor fund. It offers diversified exposure.

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Fund managers can move between large, mid and small cap.

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25% is a strong core allocation. No change is required here.

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This helps manage market cycles. Continue investing here.

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Flexi cap works well as a foundation for your portfolio.

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Hybrid Fund (Equity + Debt) – 20% Weightage

This adds downside protection. But limits your upside.

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You are targeting 14.87% CAGR. This fund can lower overall return.

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Such funds are better for conservative or nearing-retirement investors.

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You may reduce the allocation to 10%. Use freed-up amount in equity funds.

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Or, if your risk appetite allows, remove this from growth portfolio.

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For safety, use PPF or high-quality debt funds separately.

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Contra Fund – 20% Allocation

Contra or value funds take contrarian calls. They do well in some cycles.

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But they may underperform during momentum phases.

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20% is a heavy allocation. You can reduce to 10-12% to reduce volatility.

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Shift balance to a consistent multi-cap or flexi-cap fund.

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This reduces concentration risk from single style.

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Large and Mid Cap Fund – 12.5% Allocation

This is a hybrid of large and mid cap stocks.

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You asked whether to switch to a midcap fund.

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You must check for overlap with your existing midcap fund.

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Motilal Oswal Midcap has some common stocks with Edelweiss Midcap.

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Too much overlap reduces real diversification.

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Kotak Emerging Equity is a better midcap choice for low overlap.

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It also has a strong performance history and wide sector spread.

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So, yes, consider replacing Motilal Oswal Large & Midcap with Kotak Emerging Equity.

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But confirm overlap using a fund overlap tool before making switch.

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Mid and Small Cap Allocation – 22.5% Across 3 Funds

This is a good mix for higher returns.

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Each fund has 7.5%. Total weight is around 22.5%.

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That is reasonable for a 6–7 year goal with high return target.

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Quant Small Cap is aggressive. But needs close monitoring.

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Keep exposure limited unless you can track the portfolio regularly.

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Bandhan and Edelweiss are relatively more stable in mid and small cap.

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Ensure funds are not holding similar stocks or sector weight.

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Use a portfolio overlap checker online to confirm this.

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Fund Style Analysis

Your overall portfolio has strong growth bias.

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It includes value via Contra Fund. But that allocation is high.

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Try balancing growth and value styles more equally.

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Sector spread should cover banking, pharma, tech, infra, consumer and auto.

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Check sector overlaps and make adjustments if needed.

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Suggested Portfolio Reallocation

Keep Flexi Cap Fund at 25%.

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Reduce Hybrid Equity + Debt Fund to 10%.

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Reduce Contra Fund to 10%.

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Remove Motilal Oswal Large & Midcap Fund.

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Replace it with Kotak Emerging Equity Fund or another diversified midcap fund.

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Retain Edelweiss Mid Cap at 7.5%.

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Retain Bandhan Small Cap at 7.5%.

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Keep Quant Small Cap at 7.5% only if you can track it often.

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Expected Return and Risk Alignment

Aiming for ~14.87% CAGR is possible. But not guaranteed.

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This target needs 65–75% in midcap and smallcap focused funds.

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That means high volatility. You must have long holding power.

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Stay invested through cycles. Don’t react to short-term losses.

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Use SIPs to invest regularly. Don’t time the market.

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Taxation and Rebalancing Considerations

Long Term Capital Gains (LTCG) above Rs 1.25 lakh taxed at 12.5%.

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Short-Term Capital Gains taxed at 20%.

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Debt mutual funds are taxed as per income slab.

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You must rebalance your portfolio once every year.

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Shift from over-performing categories to under-performing ones.

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Rebalancing helps you book profits and manage risk.

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Additional Portfolio Enhancements

Avoid investing in direct plans if you are not experienced.

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Regular plans via MFD with CFP credential offer guided support.

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Regular funds have higher cost. But better handholding and discipline.

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Also avoid index funds or ETFs. They have many drawbacks.

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Index funds blindly follow index. No active fund manager role.

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They fall during market crashes with no downside control.

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Active funds manage risk better and outperform in long term.

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Emergency Fund and Insurance Check

Before investing more, build 6 months of expenses as emergency fund.

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Ensure you have term insurance. Minimum 15–20 times of annual income.

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Ensure health insurance for all family members is in place.

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Without these, portfolio growth can be disrupted anytime.

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SIP Strategy Suggestion

Divide monthly SIPs into 5–6 well-chosen funds.

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Follow your new asset allocation plan.

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Review every 6 months. Adjust based on performance.

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Don’t stop SIPs during corrections. That’s when wealth builds.

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Finally

Your fund selection shows strong research and goal orientation.

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A few optimisations will reduce risk and improve return probability.

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Reduce Hybrid and Contra weight. Exit Large & Midcap.

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Replace with better midcap fund. Maintain SIP discipline.

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Track fund style and sector overlap once a year.

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Have emergency and insurance cover as backup.

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Stick with regular plans via a Certified Financial Planner.

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Avoid index funds, ETFs or direct funds without guidance.

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Keep your target in mind. But remain flexible with returns.

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Stay invested and allow time to do its magic.

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Best Regards,
?
K. Ramalingam, MBA, CFP,
?
Chief Financial Planner,
?
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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