If you have many mutual fund investments, SIPs, and older holdings, the focus should be on keeping your portfolio simple, deciding how much to invest in each type, and investing regularly to achieve your long-term goals.
Also Read | Portfolio in red after moving from FDs? Expert shares how to handle volatility and allocate smartly
Portfolio overview: Diversified but slightly complex
A 52-year-old investor from Muzaffarnagar, with a target of building Rs 2 crore by age 60 reached out to ETMutualFunds for analysis of his portfolio and guidance on his overall portfolio and his wife’s combined portfolio as well.
Currently he has a combined portfolio of around Rs 30 lakh across multiple mutual funds held by him and his wife. The investments span large-cap, flexi-cap, balanced advantage, multi-asset, contra, and index funds, with combined SIPs of around Rs 40,000 per month. In addition, there is an existing portfolio of approximately Rs 19 lakh in older regular plans.
The investor is also thinking of stopping the Rs 5,000 SIP his wife has in the Motilal Oswal Midcap Fund. He wants to know whether it is better to continue or stop this SIP, and where this money should be invested instead—like in the HDFC Midcap Fund or any other suitable option.
An expert, Shivam Pathak, CFP and Founder of Asset Elixir analysed the portfolio and told ETMutualFunds that while the portfolio is well-diversified across categories, it is slightly over-diversified, which can dilute returns and make tracking difficult. The immediate focus should be on simplifying the portfolio and aligning it with a clear asset allocation strategy.
Will the current strategy meet the Rs 2 crore target?
Given the current SIP contribution and an 8-year investment horizon before retirement, the expert cautions that the investor may fall short of the Rs 2 crore target if the SIP contributions of Rs 40,000 remain unchanged. Equity markets can be volatile in the short term, and with a relatively shorter time horizon, disciplined investing becomes even more critical.
To bridge the gap, the expert recommends increasing SIP contributions by around 8–10% annually, assuming a long-term return expectation of about 10–12%. This step-up approach can significantly enhance the final corpus and improve the chances of achieving the retirement goal.
Asset allocation: What should change?
The current portfolio already has exposure to multiple asset classes through flexi-cap, multi-asset, and balanced advantage funds. However, there is scope to bring more structure to the allocation.
Also Read | MF Tracker: Quant Multi Asset Allocation Fund shines across timeframes. Can it sustain the lead?
The expert suggests maintaining a balanced mix of equity and hybrid funds while gradually preparing for capital protection as retirement approaches. Adding a small allocation to gold (around 5%) can help improve diversification and act as a hedge during market volatility. Over time, especially closer to retirement, the portfolio should gradually shift towards debt or conservative funds to reduce risk.
Fund selection: What to add and what to avoid?
For the additional SIP of Rs 5,000, instead of adding another new category through Nippon India Multicap Fund, the expert recommends increasing allocation to an existing fund like the ICICI Prudential Multi Asset Fund. This helps avoid unnecessary duplication and keeps the portfolio streamlined.
In the wife’s portfolio, the suggestion is to shift from Motilal Oswal Midcap Fund to HDFC Midcap Fund, primarily for better consistency and stability in performance. Rather than adding too many new funds, increasing allocation to existing well-performing schemes can be a more effective approach.
Existing portfolio of Rs 19 lakh: Hold or shift?
The investor also holds around Rs 19 lakh in older mutual fund investments through regular plans. While the underlying funds are largely sound, the expert points out that these are regular plans, which typically have higher expense ratios.
If there is no active advisory or service being received, a gradual shift to direct plans can be considered. However, this transition should not be rushed. The expert advises evaluating tax implications, exit loads, and market conditions before making any changes. A phased approach to shifting can help minimise costs and avoid market timing risks.
This case highlights the importance of simplifying investments, especially as retirement approaches. While diversification is essential, over-diversification can reduce efficiency. Increasing SIP contributions over time, maintaining a disciplined allocation strategy, and gradually reducing risk closer to the goal are critical steps.
Also Read | SIP or lumpsum? Expert suggests best approach for first-time mutual fund investors with Rs 10,000
With an 8-year horizon, achieving a Rs 2 crore retirement corpus is possible but requires a more structured and proactive approach. By streamlining the portfolio, increasing SIP contributions, and focusing on asset allocation rather than adding new funds, investors can improve their chances of meeting their financial goals while managing risks effectively.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle
as a Reliable and Trusted News Source