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Ramalingam Kalirajan |8940 Answers |Ask -Follow

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

What is a good mix of mutual fund portfolio? I mean, Equity Small, mid, large, multicap, flexicap Debt Gold Hybrid

Ans: You are asking a very important question. A well-structured mutual fund portfolio brings balance and stability. It helps you grow wealth, manage risk, and meet goals.

Let us create a proper mix. This is based on your age, risk level, and long-term plans. We will also look at each type of fund carefully. The goal is to make your portfolio strong and future-ready.

We are not suggesting any specific scheme name. Just a model portfolio structure.

Understand the Purpose of Each Fund Type
Every mutual fund category plays a different role.

You must choose based on time, risk, and return needs.

We will now look at each one in simple words.

Large Cap Equity Funds
These funds invest in top 100 big companies in India.

They give steady growth and lower risk.

Good for foundation of your equity portfolio.

Suitable for medium to long-term goals.

Return is moderate but less volatile.

Suggested allocation: 20% to 25% of equity portfolio.

Flexi Cap and Multi Cap Funds
Flexi cap can invest across large, mid, and small cap.

Multi cap must invest in all three market caps equally.

These funds give better diversification.

Help balance risk and reward in all conditions.

Flexi cap is more flexible. Multi cap is more balanced.

Suggested allocation: 30% to 35% of equity portion.

Mid Cap Funds
Invest in medium-sized growing companies.

More return than large cap. But risk is also higher.

Good for investors with 5+ years horizon.

Not good for short-term needs.

Suggested allocation: 15% to 20% of equity portfolio.

Small Cap Funds
Invest in very small companies.

Very high growth potential, but also high risk.

Market fall can hit them hard.

Keep only a small part in small cap.

Suggested allocation: 5% to 10% max.

Hybrid Equity Funds
Mix of equity and debt in one fund.

Reduces risk. Gives stability in uncertain times.

Helpful for medium-term goals.

Equity exposure gives growth. Debt gives protection.

Suggested allocation: 10% to 15% of overall portfolio.

Debt Mutual Funds
Invest in bonds and fixed income instruments.

Give stable but lower returns.

Useful for short-term goals and emergency corpus.

Less risk than equity but not fully risk-free.

Avoid long-duration debt funds in rising interest rate.

Suggested allocation: 10% to 20% based on time horizon.

Keep debt funds in liquid, ultra-short, or short-term types.

Gold Funds or Gold Saving Funds
Good for diversification and inflation protection.

Gold price moves opposite to equity sometimes.

Don’t over invest. It gives no interest or dividend.

Also, gold ETF is passive like index fund.

Passive funds don’t adapt to market actively.

Use actively managed gold savings fund via MFD route.

Suggested allocation: 5% to 10% of total portfolio.

Direct vs Regular Mutual Fund Option
Avoid direct funds.

Direct funds give no advice, no support, no behavioural coaching.

You are alone in tough times.

People often stop SIPs or redeem during market fall.

That destroys long-term wealth creation.

Regular funds through MFD and CFP give proper guidance.

They help you invest in right mix and track goals.

Value of a guide is more than small cost difference.

Index Funds vs Active Funds
Index funds copy the market. They don’t beat market.

They do not react to market changes actively.

In India, active funds still perform better.

Fund managers pick quality stocks, manage risk better.

So avoid index funds. Prefer active mutual funds.

Suggested Model Mix for a 36-Year-Old Investor
If you are moderate to aggressive investor:

Equity Funds – 70% of total portfolio

Large Cap Funds – 20%

Flexi Cap / Multi Cap Funds – 30%

Mid Cap Funds – 15%

Small Cap Funds – 5%

Debt Mutual Funds – 15%

Short Term and Liquid Funds – 10%

Corporate Bond or Banking & PSU – 5%

Hybrid Funds – 10%

Balanced Advantage or Aggressive Hybrid

Gold Mutual Funds – 5%

This makes a 100% well-structured mutual fund portfolio.

Each fund has a role. No over-dependence on any one type.

Use goal-based SIPs to divide your investments further.

Align Portfolio to Your Goals
Different goals need different risk levels.

Link each SIP to a goal.

Long-term goals (10+ years):

Use equity-heavy portfolio.

Mix of flexi, multi, mid, large cap funds.

Medium-term goals (3–7 years):

Use hybrid and some debt funds.

Reduce small cap exposure.

Short-term goals (1–3 years):

Use debt funds only.

No equity or hybrid.

Gold can be held for long-term, not short-term goals.

Key Risk Control and Monitoring Tips
Do annual review of portfolio with CFP.

Check if goals are on track.

Don’t stop SIPs during market fall.

Rebalance once in 12 to 18 months.

Shift from equity to debt slowly as goal nears.

Don’t mix insurance and investment.

Always keep nominee updated.

Maintain SIP discipline. Avoid emotional investing.

Taxation Rules to Know
Equity mutual fund LTCG above Rs. 1.25 lakh taxed at 12.5%.

Short-term gains taxed at 20%.

Debt mutual fund gains taxed as per your income slab.

So hold funds long-term to reduce tax.

Do proper documentation of investments for easy tracking.

Final Insights
A well-mixed portfolio gives power and peace.

Each fund type has its own use and timing.

Too much equity is risky. Too little is slow.

Too much gold is dead weight. Too little gives no protection.

Balance and patience build wealth.

Don’t chase returns. Chase discipline.

Invest through regular route with support from Certified Financial Planner.

This keeps your investments aligned to life’s goals.

Keep your mix clear. Keep your goals focused.

Wealth will follow.

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

Asked on - May 21, 2025 | Answered on May 21, 2025

Thanks a ton for the detailed answer. I have a small followup question. 1) You have mentioned to have liquid and short term funds 10%. Is it necessary when the investment horizon is 10+ years. If yes , can you please suggest some funds. 2) the same question for corporate bond funds? 3.) Is not a bit overlapping when we choose both flexicap and hybrid funds in the portfolio. Thanks in advance

Ans: Thanks for the kind words and thoughtful follow-up. Here are clear and short insights for you:

1. Liquid and Short-Term Funds – Needed for 10+ Year Horizon?

Yes, but only for emergency use or rebalancing needs.

Not meant for long-term returns, but for stability and liquidity.

You don’t need 10% here if you already have a separate emergency fund.

Keep 3–5% max if your emergency fund is outside MF portfolio.

2. Corporate Bond Funds – Needed for Long-Term Portfolio?

Yes, they add stability and reduce volatility in equity-heavy portfolio.

Useful when nearing goals for gradual shift from equity.

5% allocation helps balance risk over 10+ year horizon.

3. Flexicap and Hybrid – Is There an Overlap?

They serve different roles.

Flexicap focuses only on equity, across all market caps.

Hybrid funds balance equity with debt, giving smoother ride.

Both can co-exist if you are moderate investor.

Just ensure total equity exposure stays within comfort zone.

Best Regards,

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

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