What are the best 2-3 mutual funds for SIP investment (total 20k pm) pm each for next 10 yrs as I want to make corpus of approx. Rs. 1 cr. Please guide me How much should be my share of investment among the following MFs- Large cap, Mid cap, small cap, flexi/multi cap, sectoral fund & L&M cap or any other good MFs for long term with good returns.

Ans: You may continue in 1,2,3 & 4 and for additional investment the below can be considered

a)   Axis ESG Equity Fund – Growth

b)  DSP Mid Cap Fund – Growth

Ans: For a long-term horizon of 8-10 years, your current selection of funds offers diversified exposure across market segments. Consider adding a large-cap or flexi-cap fund to enhance stability and potentially capture growth opportunities. Ensure the new fund aligns with your risk tolerance and investment goals. Regularly review your portfolio and make adjustments as needed to stay on track. Consulting with a financial advisor can provide personalized guidance tailored to your financial situation and objectives.

Best regards,
Ramalingam, MBA, CFP
Chief Financial Planner

Ans: Investing Rs 70,000 monthly in mutual funds for the next five years is a wise decision. Your financial stability and disciplined savings will help build a solid retirement corpus. With the right fund allocation and selection, you can maximise returns.

Below is a structured plan for your mutual fund investments to align with your retirement goal.

Investment Strategy and Allocation
A well-diversified portfolio will help achieve optimal growth and manage risk. Allocating funds to different categories of mutual funds will allow balanced growth and stability.

Suggested Allocation:

Large-Cap Funds: 40%
Large-cap funds invest in well-established, top-performing companies. These funds are relatively stable and offer steady growth, which aligns well with your retirement goal.

Flexi-Cap or Multi-Cap Funds: 30%
Flexi-cap or multi-cap funds invest across large, mid, and small-cap segments. They add growth potential by allowing flexibility in allocation based on market conditions. This helps balance risks and boosts returns.

Mid-Cap Funds: 20%
Mid-cap funds invest in mid-sized companies that have growth potential. While they carry slightly higher risk than large-cap funds, they can significantly enhance your returns.

Debt or Liquid Funds: 10%
Debt or liquid funds add stability and liquidity to your portfolio. These funds are less volatile, making them a safe place to park a portion of your funds. They provide easier access in case you need emergency funds during retirement.

By following this allocation, you can optimise growth while maintaining a level of safety in your portfolio.

Importance of Actively Managed Funds Over Index Funds
Investing in actively managed funds is beneficial, especially with retirement in mind. Actively managed funds have experienced managers who aim to beat the market, offering better returns than index funds, which merely mirror the market.

Disadvantages of Index Funds:

Lack of Flexibility: Index funds are bound to follow the index strictly. This limits growth during market fluctuations.

Missed Opportunities: Index funds cannot take advantage of market trends or opportunities, as they lack active management.

Limited Downside Protection: Actively managed funds provide some downside protection as managers can adjust portfolios based on market conditions.

Actively managed funds, managed by a qualified Mutual Fund Distributor (MFD) or Certified Financial Planner (CFP), can help you achieve your goals through better risk management and strategic portfolio adjustments.

Benefits of Choosing Regular Funds Over Direct Funds
While direct funds might appear attractive with lower expense ratios, regular funds often yield better results for investors. Investing through a CFP-backed MFD can provide significant advantages, especially if you are new to mutual funds.

Drawbacks of Direct Funds:

Lack of Guidance: Direct funds do not offer professional advice, which is essential for effective long-term investing.

Higher Risk for New Investors: Without guidance, new investors can struggle with fund selection and portfolio rebalancing, impacting returns.

Time-Intensive: Managing direct funds requires regular analysis and time. Regular funds, however, include expert oversight, ensuring adjustments are made as needed.

By investing in regular funds through a Certified Financial Planner, you gain both expertise and ongoing management, which can lead to higher returns and peace of mind.

Tax Implications on Your Mutual Fund Returns
Understanding the tax rules on mutual fund gains is essential for maximising post-tax returns. Let’s break down the key taxation rules for equity and debt mutual funds.

Equity Funds:
Long-term capital gains (LTCG) over Rs 1.25 lakh are taxed at 12.5%. Short-term gains (for holdings under one year) are taxed at 20%.

Debt Funds:
Gains from debt mutual funds are taxed as per your income tax slab for both long-term and short-term investments.

Planning with tax efficiency in mind will help maximise your retirement corpus. A certified financial planner can guide you on strategies to manage taxes while achieving your goals.

Estimating Future Investment Amount
To achieve a retirement corpus of Rs 2 crores, it’s important to consider factors like inflation, expected returns, and your time horizon. Based on your goal, a certified financial planner can provide personalised investment projections. While mutual funds are known for long-term growth, regular monitoring and adjustments will keep your plan on track.

Final Insights
Your monthly SIP of Rs 70,000, spread across diversified funds, will create a strong foundation for your retirement corpus. With no debts and a secure foundation in fixed deposits, you are well-positioned for growth. By focusing on an actively managed and diversified portfolio, you can potentially outperform the market and meet your financial objectives.

Key Takeaways:

Stay invested in a diversified mix of large-cap, flexi-cap, mid-cap, and debt funds.

Avoid index and direct funds; regular, actively managed funds through a CFP provide strategic growth and management.

Monitor tax implications to maximise post-tax returns.

Consult with a certified financial planner for personalised advice and portfolio adjustments.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: You are starting your mutual fund journey with clear planning. This itself is a strong step. Fixing 20 years horizon is also wise. Long term horizon allows compounding to work better. Your selected funds show good diversification across categories. Let us review your plan from all angles.

» Strengths of Your Selection

– You have included a flexi cap fund.
– You also added mid cap exposure for growth.
– Small cap portion creates high growth potential.
– Contra fund brings contrarian style to balance.
– Infrastructure oriented fund adds thematic exposure.
– Allocation is spread across five styles.
– Horizon of 20 years supports equity risk.
– Disciplined monthly SIP ensures cost averaging.

» Areas That Need Improvement

– Number of funds is slightly high for Rs 10,000 SIP.
– Too many categories can dilute focus.
– Thematic fund is very narrow in approach.
– Contra fund may face long underperformance phases.
– Mid and small cap allocation is already high.
– Overlap of holdings may reduce effectiveness.
– Better balance between core and satellite funds is needed.

» Core and Satellite Approach

– Portfolio should have a strong core.
– Core should be stable and consistent funds.
– Satellite can be smaller allocation to style funds.
– In your plan, core allocation looks weak.
– You are giving higher weight to mid and small caps.
– That increases volatility risk.
– Instead, core should be flexi cap and large cap.
– Satellite can be mid, small, contra, thematic.

» Suggested Allocation Restructure

– Keep flexi cap as core with 35%.
– Add one large cap fund with 25%.
– Mid cap can be 20%.
– Small cap can be 10%.
– Contra or thematic can be 10%.
– This structure gives balance and growth.
– It reduces risk while keeping return potential.

» Importance of SIP Increase

– Rs 10,000 monthly is a good start.
– But for long term wealth, increase yearly.
– Raise SIP by 10% every year.
– This protects you from inflation.
– It helps corpus to reach meaningful size.
– Over 20 years, step-up makes big difference.

» Why Not Index Funds

– Index funds only copy market index.
– They cannot beat the index.
– They fall equally in downturns.
– No active management to control downside.
– Active funds can rotate across sectors.
– Good fund managers add extra returns.
– Over long term, active funds perform better.

» Why Not Direct Plans

– Direct plans reduce expense slightly.
– But investors often mismanage without guidance.
– Wrong selection and panic exits reduce returns.
– Regular plans with CFP support give better results.
– CFP helps with review and rebalancing.
– Discipline and expert guidance matter more than cost saving.

» Tax Aspects of Mutual Funds

– Equity mutual funds taxed under new rules.
– Long term gains above Rs 1.25 lakh taxed at 12.5%.
– Short term gains taxed at 20%.
– SIP units held less than one year attract short term tax.
– Long term discipline reduces tax impact.
– Plan redemptions carefully in future.

» Behavioural Discipline

– Equity funds will face ups and downs.
– Small cap especially may fall sharply at times.
– Do not stop SIP in those periods.
– Continue investing to average cost.
– Avoid frequent switching between funds.
– Stick to long term discipline.

» Risk and Return Balance

– Higher mid and small cap allocation gives high return potential.
– But risk is also high.
– Flexi cap and large cap provide stability.
– Contra and thematic can boost in certain cycles.
– Balanced structure ensures smoother compounding.

» Role of Certified Financial Planner

– A CFP helps align investments with your goals.
– They track portfolio performance regularly.
– They guide in rebalancing when markets change.
– They prevent emotional mistakes during volatility.
– They also align insurance, tax, and estate needs.
– This brings a 360 degree wealth plan.

» 360 Degree Planning Aspects

– Keep emergency fund separate.
– Maintain health insurance and term cover.
– Do not mix insurance and investment.
– Review mutual fund portfolio every year.
– Increase SIP amount with salary growth.
– Avoid investing more in gold or property.
– Keep debt exposure low for better savings rate.

» Finally

Your start is strong and promising. A few adjustments will strengthen your portfolio further. Give more weight to flexi and large cap as core. Keep mid, small, and thematic as satellite. Stick to 20 year discipline. Increase SIP every year. Avoid index and direct plans. Take guidance of a CFP for yearly review. With this path, your investment journey can create strong wealth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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