Sir, I have closed my ppf account and got 10 lacs. Should I invest these in mutual fund or repay my home loan(at 8.25%). Request to share few of good mutual funds.
Ans: You have shared detailed inputs. I really appreciate your clarity and effort. Your goals are big and your commitment towards them is sincere. Now let us assess your mutual fund portfolio, analyse gaps and plan a proper rebalancing strategy.
Below is a complete 360-degree review of your investments and recommendations.
Investment Goals Review
You have two important goals.
First, Rs 1 crore for your child’s education after 10 years.
Second, Rs 1 crore for your retirement after 10 years.
Both goals are clear, time-bound and realistic.
Your goal-based investing mindset is appreciable.
Your high risk appetite also helps in targeting long-term wealth creation.
Since your goals are after 10 years, an equity-oriented strategy suits you well.
But continuous monitoring and timely rebalancing is important.
Staying invested is not enough. Strategic adjustments are needed over time.
Let us evaluate your existing SIPs next.
Existing SIP Portfolio Assessment
You are currently investing Rs 15,500 every month through SIPs.
All your funds are from equity categories.
Your portfolio has coverage in large cap, mid cap, flexicap and large & mid cap.
This gives a decent diversification within equity.
There is sectoral and market cap mix in place.
You have avoided overlapping funds, which is good.
Overall fund selection shows that you are targeting growth.
The portfolio leans more towards mid cap and flexicap strategies.
These have potential for high growth but also higher volatility.
A balance of stability and growth is needed going ahead.
There is no hybrid or balanced allocation yet.
This limits protection during market downturns.
SIP amounts also need to be increased gradually towards your Rs 25,000 limit.
Let us now look at your discontinued SIPs.
Analysis of Discontinued SIPs
You have stopped SIPs in two equity funds.
First, a small cap fund with Rs 56,000 invested.
Second, an emerging bluechip fund with Rs 2.64 lakhs invested.
You have not redeemed them yet.
Retaining them without active investment creates portfolio imbalance.
These funds are lying idle without a goal alignment.
Small caps are highly volatile and risky in nature.
In a high-risk profile, small caps are okay but in limited exposure only.
The emerging bluechip fund has a mid and large cap mix.
But as you have stopped SIPs here, it's not adding consistency anymore.
Keeping these without integration weakens your portfolio structure.
You must rebalance and reinvest them wisely.
Rebalancing Strategy for Idle Funds
You can plan fresh allocation from the Rs 3.2 lakh idle investments.
Divide it between small cap and hybrid funds.
Allocate Rs 1 lakh to small cap fund in lumpsum.
Use only a high-quality, consistently performing small cap fund.
Start fresh SIP of Rs 2,000 in the same small cap fund monthly.
Avoid sector-based or thematic small caps. Use only diversified fund.
Allocate remaining Rs 2.2 lakhs into a hybrid aggressive equity fund.
This hybrid fund will provide cushion during volatile market periods.
Hybrid funds offer growth and protection.
They rebalance equity and debt dynamically.
They reduce emotional panic during market corrections.
Also start SIP of Rs 2,000 in the same hybrid fund.
Gradual entry through SIP helps reduce risk.
Monthly SIP Reallocation
You can invest up to Rs 25,000 monthly in SIPs.
You are currently investing Rs 15,500.
Increase SIPs by Rs 9,500 across suggested categories.
Here is a balanced approach for this:
Increase flexicap fund SIP by Rs 2,000.
Start fresh SIP in hybrid aggressive fund for Rs 2,000.
Start fresh SIP in a small cap fund for Rs 2,000.
Increase SIP in large and midcap fund by Rs 1,500.
Increase SIP in large cap fund by Rs 2,000.
This mix will offer growth and controlled volatility.
Key Strengths in Your Portfolio
You are consistent in SIP investments.
You have selected funds from different categories.
Your goals are clear and measurable.
You have stopped some SIPs but not exited impulsively.
You have stayed invested in equity through all phases.
Your risk profile is well aligned to your strategy.
Areas That Need Improvement
There is no allocation to hybrid or debt.
All current SIPs are in pure equity.
Portfolio lacks downside protection.
Small caps need to be handled cautiously.
Idle investments must be put to use.
SIP amount is under-utilised. You can invest more.
No automatic rebalancing mechanism is in place.
Future goals need better alignment with asset allocation.
Importance of Diversified Allocation
Equity is good for growth.
But combining it with hybrid gives better stability.
Flexicap and large & mid cap give market-wide coverage.
Small cap must be less than 10-15% of overall portfolio.
Hybrid funds manage asset mix smartly.
They reduce emotional decision-making in volatile markets.
Flexibility in funds increases long-term success.
Risk Management Suggestions
Equity funds carry market risk.
Small cap and mid cap have high volatility.
Avoid overexposure to one market cap.
Limit small cap exposure to 10-12% of total.
Maintain some investments in hybrid or balanced funds.
Don’t try to time the market.
Stay invested through ups and downs.
Review your portfolio once every 6 months.
Taxation Awareness
When selling equity mutual funds:
LTCG above Rs 1.25 lakh is taxed at 12.5%.
STCG is taxed at 20%.
Plan redemption only after checking tax impact.
Keep track of each fund’s holding period.
Avoid Direct Funds
You did not mention direct funds. But here is a key note.
Direct funds may look cheaper.
But they don’t offer guidance or support.
Investing through an MFD with CFP certification adds great value.
You get timely reviews, goal alignment and hand-holding.
Many investors lose more by mistakes in direct funds.
Avoid Index Funds
Index funds follow a passive strategy.
They just copy the market index.
No active selection or exit is done by the fund manager.
During market falls, index funds also fall without protection.
Actively managed funds aim for better risk-adjusted returns.
Good active funds can beat benchmarks consistently.
Next Steps to Follow
Reinvest idle funds into small cap and hybrid fund.
Start fresh SIPs of Rs 2,000 in each.
Increase existing SIPs to reach Rs 25,000 monthly.
Focus on flexicap, hybrid, large and midcap.
Keep small cap SIP under 15% of monthly SIP.
Stay invested with discipline for 10 years.
Don’t panic during market corrections.
Do portfolio review every 6 months.
Take guidance from Certified Financial Planner regularly.
Finally
You have built a good foundation.
You just need sharper planning now.
Your goals are possible with a better structure.
Rebalance idle investments.
Allocate monthly SIPs smartly.
Focus on stability, growth and discipline.
You are on the right track. Continue with focus and patience.
A Certified Financial Planner can guide you further with custom planning.
Keep your financial journey goal-driven and well-monitored.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Satish on Feb 27, 2023Hindi
