SIP Investment: Making a big fund by investing money in mutual funds for a long time is not limited to just paying installments (SIP) every month. It is equally important to choose the right fund, review your investments from time to time, and distribute the money at the right place according to the market. Recently an investor shared his portfolio with SIP of Rs 26,000 every month. His goal was to create huge capital in the long run. When Arjun Guha Thakurta, Executive Director of Anand Rathi Wealth Limited, analyzed this portfolio in detail, he gave a very useful advice. He told that if this existing investment is increased (step-up) by only 10 percent every year, then this amount can easily reach Rs 1 crore.

The target of Rs 1 crore will be achieved like this

At present, this investor is investing Rs 26,000 per month in various funds like large-cap, mid-cap, hybrid, thematic etc. According to expert calculations, if an annual return of 13 percent is obtained for 10 years, then a fund of about Rs 71 lakh can be generated from the current investment. But the real magic lies in the 10 percent step-up formula. If investors increase their SIP amount by just 10% every year, then with the same returns this fund will directly grow to close to Rs 1 crore. It simply means that as your income increases, increasing your investment in the same proportion is the strongest key to becoming a millionaire.

Do not accumulate useless schemes in your portfolio

A major flaw revealed in the investigation of the portfolio was that the investor had invested more money in the schemes than required. This was causing duplication (overlap) in their investments. According to experts, an ideal portfolio should have 55% large-cap, 23% mid-cap and 22% small-cap. While investors' money was invested 7% more in large-cap, 8% more in mid-cap. At the same time, there was a huge decrease of 14% in small-cap. Apart from this, it is clearly advised to avoid multi-asset, hybrid, thematic funds. Their returns depend heavily on market fluctuations. ELSS funds are suitable for tax saving only if you fall under the old tax regime. There is no need for these schemes for those choosing the new tax system.

Get out of these funds for right balance

Experts advise that the portfolio should be made light, clear and effective. Investors have been advised to exit about seven funds. These include Aditya Birla Sun Life Digital India Fund, HDFC Hybrid Equity Fund, ICICI Prudential India Opportunities Fund, Mirae Asset Great Consumer Fund, Mirae Asset Large and Midcap Fund, Nippon India Aggressive Hybrid Fund, Quant Multi Asset Allocation Fund. However, these funds have given returns of 20 to 24 percent in the last three to five years. Despite this, sectoral, hybrid funds can complicate asset allocation in the long run.

Invest money in these funds for excellent returns

The funds in which it is advised to continue investing mainly include Quant ELSS Tax Saver Fund (subject to tax rules), Quant Mid Cap Fund, Motilal Oswal Midcap Fund, Mirae Asset Large Cap Fund, DSP Large and Mid Cap Fund. These schemes have given excellent profits of 18 to 20 percent in the last few years. Along with this, to meet the small-cap shortage, new investments can be made in HDFC Small Cap Fund, Invesco India Smallcap Fund. Kotak Multicap Fund for broad exposure to the market, ICICI Prudential Dividend Yield Equity Fund for stable equities can also be included in your investment list.

Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.

Vibhav Shukla

Vibhav Shukla is currently working at TV9 Hindi as Senior Sub-Editor on Business Desk. He has six years of experience in journalism. Vibhav is originally from Mau district of Uttar Pradesh. He started his career with Rajasthan Patrika. After this he has been associated with prestigious institutions like Inshorts and Gujarat First.

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