Module 11   Personal Finance (Part 1)Chapter 26

The Mutual Fund Portfolio

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26.1 – Assumptions

We have reached a stage where we have discussed almost everything related to Mutual funds, leaving us with the last crucial bit, i.e. the mutual fund portfolio construction. I’ve spent last several days to think through the best possible way to explain this, and finally concluded that this is a herculean task 😊

I’ll explain why in a bit, but don’t worry, I will attempt to explain it 😊

Before we proceed, I need to address a few assumptions I’ve made.

When we talk about constructing a mutual fund portfolio or for that matter an equity portfolio to solve for a financial goal, we make two assumption –

    • We are covered for the risk
    • We are covered for emergency

Before a person can have a portfolio of any sort, these two things should be in place.

Let me explain what I mean.

Cover for the risk – An individual faces many different kinds of risk in his/her lifetime. Risk across multiples areas of life – physical health, mental health, permanent disabilities, a prolonged state of joblessness, broken relationships, and whatnot.

While it is impossible to anticipate everything and get a cover, an individual should get a cover for two things in life – loss of life and hospitalization.

Of course, the cover comes in the form of insurance. Term insurance will ensure that your near and dear ones, your dependents are not financially burdened after your passing away.

Health insurance will ensure you don’t spend your life’s earnings to pay for hospital bills while getting treated for chronic illness.

Given this, you need to estimate the extent your family will be paid off if unfortunately, you pass away. Similarly, you need to figure out the extent of health insurance cover you need to get. Topics related to insurance are vast and have many technicalities. I won’t get into this at this point. But I want you to be aware that as an individual, the very first step in your ‘personal finance’ journey is to ensure you get cover for these two types of risks.

I want to stress that don’t buy insurance products linked to investment plans. These are not worth it.

Cover for an emergency – I’m referring to an emergency corpus here, an emergency corpus to help you navigate your tough times. Tough time could be a job loss, or it could be as simple as having enough money to replace a piece of electronic equipment at home or a medical emergency.

I understand medical emergencies are covered by health insurance but don’t take that for granted.  To give you an example, in September 2020, both my parents were hit by Covid 19. When I took them to the hospital, the hospital made me pay a certain amount of money for admission and cover the initial expenses. Of course, I had an insurance cover for both of them, which later came in handy, but at that moment, I needed ready cash and needed a fairly large amount.

Or take this, for example – thanks to Covid 19, schools went online, and I suddenly had to equip the house with a printer and a laptop for my 10-year-old daughter. That was an unplanned financial expense but had to be done.

Emergencies can come in any form and can come at any time. One has to have sufficient funds, which is easily available to you when the emergency strikes. Given this, at the very initial stages of your ‘personal finance’ journey, I’d advise you to build this emergency corpus.

The question is, how much money is good enough for the emergency corpus? Different people have different opinions, but I see most of them agree to have an emergency corpus equivalent to 6 months of expense. For example, if your monthly expense is 40K, then the emergency corpus should be at least 2.4L.

But I don’t subscribe to the 6-month emergency corpus template.

Each person is different; each family is different. It would help if you sat with your family, go through different scenarios and identify a corpus amount good enough to sail your family through these tough times.

Anyway, I will make these two assumptions – that you have the basic insurance cover and have built an emergency corpus. With these things taken care of, we will now understand how to build a mutual fund portfolio.

26.2 – Financial Goal

Imagine a newly married couple. Both the husband and wife are young, say in the late ’20s, and both are working professionals.  The couple aspires to buy a house of their own. Their idea of the home is a 2BHK apartment downtown, costing roughly 1.5Cr, and they give themselves a ten-year window to achieve this goal.

Or think of this situation – A 40-year-old working woman wants to accumulate money to upgrade her car over the next five years. The estimated cost of the car is 55L.

Or imagine this situation (last one, I promise) – A 21-year-old has just started working for an MNC. Wants to accumulate 20L in 8 years to fund his/her post-graduate degree in the UK.

These are all examples of a ‘financial goal’. A financial goal has three specific attributes –

    • The quantum of funds required
    • The estimated time over which these funds need to be accumulated
    • The current age of the person

Without these three attributes, a financial goal is incomplete.

For instance, a young working professional intends to accumulate ‘enough money’ to go to the UK for post-graduate studies in a couple of years down the line, is not a reasonable financial goal.

With the three random scenarios that I have quoted, you can imagine how diverse each person’s financial aspirations are. No two families or humans will have the same requirement (apart from retirement maybe). Financial goals are extremely diverse and very personal to your situation.

However diverse the situation is, the good thing is that you eventually have to look at mutual funds to help you solve for the situation, well, at least in most cases.

Of course, there are other financial instruments, but nothing as versatile as mutual funds (or ETFs).

Given this, there are two ways in which I can help you understand how to build a mutual fund portfolio to solve for your financial goals –

    • Consider all sorts of life scenarios, build case studies around it, and stitch together a mutual fund portfolio to solve the given scenarios. You can then look at these scenarios, identify the one closest to your situation, and build a similar portfolio for yourself.

                  or

    • Help you understand the different attributes of funds from a portfolio perspective so that you can identify what sort of funds to pick given the situation.

The difference between the two approaches is like this – assume you like savoury dishes, so I give you 20 different dishes to try. You taste each one of these and dishes and finally figure which one to eat fully.

Alternatively, I familiarize you with ten basic savoury ingredients. Once familiar, you can use these ingredients in the right measure to quickly prepare a savoury dish to satisfy your taste buds.

I will take the second approach to build a mutual fund portfolio, and I hope this works out better.

26.3 – Mutual Fund cheat sheet

I’ve prepared this Mutual fund cheat sheet for you. The sheet summarizes all the key attributes of the different mutual funds we have discussed. Please click on the image to enlarge and get a better view.

The table is simple, has few basic information –

    • Fund type
    • Category
    • The main constituents of the fund
    • Expected CAGR – as much as I hate it, I’ve included this 😊
    • The minimum holding period – the minimum holding period for the fund if you were to invest in it. Not that you cannot invest in the fund and hold it for lesser than the minimum holding period, it is just that if you do so, recovering from a drawdown could be difficult.
    • Financial Goal – The kind of financial goal the fund can be used for, more on this later.
    • ‘Special remark’ – Things you need to be aware.

I’d suggest you keep this table handy. This table will help you craft a mutual fund portfolio for most of the financial goals.

Before we proceed further, we need to understand an important aspect of the number of funds one should have in a portfolio.

I’ve seen investors with 10-12 mutual funds in their portfolio for a single financial goal. Usually, their portfolio will contain 3-4 large-cap fund, another 3-4 mid-cap funds, few random debt funds, and perhaps a hybrid fund tucked in.

This is a classic example of a messy, directionless, and a pointless portfolio.

Ideally, you need to have non-overlapping mutual funds to avoid redundancy.

Let me explain, assume you have the following three large-cap funds in your portfolio –

    • Axis Bluechip fund
    • Mirae Asset Large cap fund
    • Canara Rob Blue chip Equity.

All three funds are good, but does that mean all the three funds should belong in your portfolio.  Take a look at the top 10 holdings across all the three funds –

As you can see, nearly half the portfolio across all these funds are similar. All funds hold HDFC Bank to the extent of 10%. If you extend this across all the portfolio holdings, I’m sure the common overlap would be a much bigger number. Given this, the performance across these funds also tend to be similar. The economic/market factors that impact these funds will be similar, and the volatility will be similar.

Hence, as an investor, if you buy multiple funds of the same type across different AMCs, then you need to realize that there is no significant advantage in you doing so.

Of course, the only argument for having two funds of the same type is  AMC diversification, where you split your money across two different AMCs. You can probably do this if you worry that one of the AMCs may fold during the tenure of your investment.

The better way to do this is to see if you can include funds from different AMC, such as a large-cap fund from HDFC and a mid-cap fund from DSP, where you diversify across AMCs and market capitalizations.

As an investor, build your portfolio so that the overlap between funds is minimum. Eliminating overlap is very tough; the idea is to ensure its minimum. Otherwise, you just end up paying just to get the same exposure and costs can eat into your returns significantly.

26.4 – Portfolio, by the method of elimination

Let us revisit the scenarios we looked at earlier and see how the table can craft a mutual fund portfolio.

Case 1 – A newly married couple, aspires to buy an apartment, estimated at 1.5Cr in 10 years. Both of them work, hence can save 30K each, every month.

We have the following data –

    1. Savings per month – 30K each
    2. Target corpus – 1.5Cr
    3. Time available – 10 Years
    4. Age – Young can afford to take financial risks in life.

Given this, let us try and arrive at the portfolio by the method of elimination. I find the elimination technique quite powerful; if not for anything, the technique helps us avoid the wrong fund for the given financial goal.

Alright, with ten years’ time frame, we know that investing in debt is not required, so let us eliminate the debt category.

When I say debt is not required, I mean not required as the main investment fund. Let me get back to this in a bit. Debt has another role to play here.

The focus is clearly on Equity as the category. Within Equity as a category, we have a list of schemes available, which we need to start eliminating –

    • Large & Midcap – may not work, since most of these ‘Large & Midcap funds’ are mid-cap stocks anyway.
    • Small-cap funds – These are risky, volatile. Of course, ten years is a good enough period for this fund, but I’d personally avoid given the quantum of volatility involved in these funds.
    • Multi cap funds – These are again qazi mid, and small-cap stocks, may as well stick to a straight forward mid-cap fund.
    • Focused fund – Concentrated bets. Highly dependent on fund manager skills. If the fund’s investment turns out to be a mistake, the realization may come in a bit too late.
    • Thematic funds are sector dependent; if the call on sector goes wrong, the fund will take forever to recover.
    • ELSS funds – Useless one needs to save on taxes as well.
    • Index funds – While this is a great option, somehow, a strict 10-year period may not do justice for these funds. These funds are best used for hyper long-term financial goals like retirement.

Given the rationale, we can eliminate all the above funds, which leaves us with the following options –

    • Large-cap fund
    • Mid-cap fund
    • Value fund

I’d further eliminate the value fund due to the uncertainties involved in unlocking value stocks. Hence, the best option for the couple is to invest in a large-cap and mid-cap stock.

They both can choose a fund each across both these categories and start their investment journey. Do recall we have discussed how to select an equity mutual fund in the previous chapters.

The easiest way to invest the funds would be a systematic investment plan (SIP) in the selected mutual funds every month.

So how do the numbers stack up assuming a CAGR of 10%? Take a look at the calculation table below. Note, this is a not the entire table, it is just a part for you to get the idea –

I’ve assumed a CAGR of 10% for both large-cap fund and mid-cap fund, of course, we can argue endlessly on how conservative/aggressive this return percentage is, but it would be a waste of time for both of us.

As you can see, the couple accumulates 1.21Crs, which is quite close to the target funds over the 10-year window. A bank loan can plug in the deficit (which is not much).

Now, here is another aspect to consider. What if, as an when you approach the target year, the market starts to fall and you lose the accumulated wealth? This is a possibility; after all, no one can time the market.

One way to deal with this is to start to shift the corpus funds to a debt fund as and when you start approaching the target year. For example, from the 8th year onwards, they can withdraw the accumulated funds and park it in a debt fund. There are many different ways to do this –

    • Withdrawl can be made on a monthly/quarterly/semi-annual basis.
    • The funds withdrawn, can go into an ultra short term fund since we only hold the funds for 3 years.

The idea here is to protect the corpus from a sequence risk, where in the market takes a hit as and when the target year approaches.

Of course, this is a rather simplified approach, but I’d like to keep it simple and not over complicate it.

You may ask if this is a ‘fill it, shut it’ approach with no intervention during the investment tenure. Yes, this is largely a fill it and shut it approach. But once in a way (like once a year), one should track the fund’s performance and take a call on continuity.

Apart from that, you need to keep these two points in mind –

    • Use conservative estimates when dealing with returns in personal finance. If in the end, the returns turn out better, then it is good for you. Consider yourself lucky.
    • You need to understand that the equity returns are lumpy and not smooth and steady like a bank FD returns. You may have no returns for a long time, but the bulk of the returns will come in a short burst of times. Unfortunately, no one can time this short burst, hence the need to SIP and give it adequate time.

Let us look at another case and see how elimination would help us build a Mutual fund portfolio.

Case 2 – A 40-year-old person wants to save 25L over the next eight years for the kids’ overseas post-graduate degree. Monthly savings available for this goal is Rs.20,000/-

Since the period is less than ten years, there is no point looking at 100% equity investment. The plan would largely involve debt, maybe a small equity portion.

Ok, to begin with, let us keep Equity aside for now and look at the rest of the funds.

Hybrid funds like the Arbitrage fund may be a decent option, but something like a balanced fund may not be.

Debt funds are a good option –

    • Liquid funds and overnight funds won’t fit the bill since we are talking about eight-plus years
    • All funds with Macaulay duration of fewer than two years can be ignored since these are relatively shorter maturity funds.
    • Money market funds too can be ignored since the investor can take on a slightly higher degree of risk
    • A short-duration fund is an option
    • Credit risk is risky so that they can be avoided.
    • Corporate bonds fund is an option
    • GILTS won’t fit the bill either.

This leaves us with three good options –

    • Arbitrage Funds
    • Short duration funds
    • Corporate bond funds.

Investment in corporate bond fund requires a greater degree of involvement from the investor. If one decides to invest in it, then a regular review the scheme’s portfolio is mandatory. If this is not possible, then the only two options to invest in the short duration fund and the arbitrage fund. Probably the person can split the investment equally in both these funds.

One thing to note, just because the investment is in a short duration fund and arbitrage fund, it does not mean that a period review of the fund’s portfolio is not necessary. Yes, the short duration fund may not need as much scrutiny as a corporate bond fund, but it does require you to look at, at least once a quarter. The arbitrage fund too as the portfolio contains a debt portion.

I’ll spare you the maths here, but if you assume a 7% CAGR, the target funds can be accumulated over the given timeframe.

Since this is anyway a longish tenure, i.e. 8 years, one can also consider a little equity exposure. Maybe 20-25% of the monthly SIP can go into a large-cap fund.

Let us take up one last case – You’ve received a lump sum amount, say Rs.50L from the sale of an asset, maybe real estate. You want to use this amount and start a retirement corpus. However, you are worried about the current state of markets and fear that the current market level is unstainable.

Retirement is a hyper long-term financial goal. By hyper long term, I mean 20 plus years but may vary based on your current age.

Here is a plan assuming you are not comfortable investing the lump sum right away.

    • Invest the lump sum in a fund which offers capital protection (to the best possible extent)
    • Withdraw chunks of it every month and invest that into the designated fund for retirement
    • Continue doing do so till you deploy the entire capital

In this case, you can decide to invest 50L over 3/6/12 months, based on your comfort.

Assuming, six months, then every month you will invest –

5,000,000/6

= 8.3L.

The question is, what is the choice of funds for such a plan of action.

    • We need a carrier fund, which will hold the capital, provide adequate capital protection over the next six months.
    • The only funds which fulfil the purpose of the carrier funds are – the overnight or liquid fund.
    • Identify a target fund for retirement. Recall, retirement is a hyper long-term financial goal so the funds you pick for this purpose should fit this bill
    • The best funds for retirement (in my opinion) are Index funds, large-cap funds, or just a balanced fund.

So the set up here would look like this –

    • Park the entire 50L in a liquid fund to redeem the entire amount over six months
    • Redeem 8.3L every month from the liquid fund over the next six months
    • Invest the funds redeemed funds into the retirement fund – say a Balanced Fund and a Midcap fund. Or an Index fund and a mid-cap fund.
    • If you are choosing two funds, the funds can be split equally.

Do remember, once you invest in these funds, this is largely on autopilot mode with no frequent intervention required from your end. However, you may need to look at the following –

    • Yearly review of performance – ensure your fund is not lagging its peers and behaving more volatile compared to the rest of the category
    • You may want to rebalance based on your risk appetite, wherein you book some profits from the equity funds and deploy the same in debt funds.

Apart from the above two, you are fairly set. Please don’t attempt anything else, and let the market do what it is supposed to do.

I’ll stop the case studies here since it is impossible to cover all sorts of cases.  But I hope this chapter has given you a good starting point for designing your mutual fund portfolio.

I’d love to dig deeper on this topic of goal-based investing, but at this stage, I’m not sure if I will take that route. If you do want me to do that, share your comments below.

Over the next 2 or 3 chapters, I’d like to discuss the Sovereign gold bonds (SGB), NPS, and perhaps a bit about asset allocation, and wrap up this module.

Key takeaways from this chapter

    • The first step in personal finance is to ensure you have health and term insurance
    • 2nd most important aspect is to ensure you have an emergency corpus
    • The financial goal is defined by the amount of corpus required and the time frame available to accumulate the corpus
    • One of the easier ways to build a mutual fund portfolio is by using the method of elimination
    • Always use a conservative approach and tone down your return expectations
    • Try and avoid having multiple funds of the same subcategory, have a minimum non-overlapping portfolio instead
    • A common goal for all us to have a retirement corpus
    • Once a portfolio is set, a yearly review of the funds is more than sufficient
    • Do not over complicate mutual fund portfolio construct

202 comments

  1. Krishnakumar says:

    Hi,
    There was supposed to be a chapter on ETFs after chapter on Monday index funds. Is it still coming?

  2. Ashish says:

    I liked this chapter a lot, cleared a lot of doubts for me. You took an example of a 21 year old starting out in an MNC. I could relate to hat given I am in that situation only. But I can’t help myself to find a suitable goal for myself over the short period or the long ones. How would you suggest an investment portfolio for a person without a far sighted goal.
    Thanks.

  3. Dr Piyush says:

    Hi Karthik… your work is unparalleled and your cracking complex topics to simple is amazing. It would be really helpful if you can take few more case studies on – goal based investment ( those 3 cases provided good insight and I was able to relate with them) and thank you for this module, esp this chapter. Best wishes to you , your parents and your family.. stay safe & healthy

    • Karthik Rangappa says:

      Thanks for the kind words, Dr.Piyush!

      I’d like to deep deeper on goal-based investing. Still evaluating 🙂

  4. Arunkumar says:

    Thank you so much Karthik for your detailed analysis. It helps me a lot on constructing a mutual fund portfolio. Could you please also write one chapter about how to choose best term insurance and how much should cover?

  5. Ashutosh says:

    Yet again another great chapter. The cheat sheet is immensely helpful (especially the special remark column).
    When you say – digging deeper into the goal-based investment strategy, do you plan to go into overall portfolio building? (incorporating other financial instruments) or consider more different scenarios in the context of mutual funds? Both are helpful, although I have a slight preference for the former.

    There might be a typo in the article: 50L/6 = 833.3K (instead of 83.3K)

  6. Pradeep says:

    Hi Karthik. Great module yet again, thanks for this! Had a quick doubt – ‘Eliminating overlap is very tough; the idea is to ensure its minimum. Otherwise, you just end up paying just to get the same exposure and costs can eat into your returns significantly.’
    Can you please explain/elaborate on the last sentence? Not too clear around why the costs increase if you select one AMC over multiple. Essentially, if I have 20 K, why is investing all of it into AMC A Large Cap a better idea, compared to 10 K in AMC A Large Cap & 10 K in AMC B Large Cap, from a cost perspective? (assuming there is significant overlap between the two funds)

    • Karthik Rangappa says:

      If the portfolio overlap is significantly higher, then there is no point in owning two funds right? The returns would be similar. It is like buying two bottles of water, when you actually need just one. Not sure if that was too clear 🙂

  7. Rohit Sharma says:

    Hi Karthik,
    Thank you so much again for this entire encyclopedia of investing, Just an update that this month I have started two SIPs in AXIS BLUE CHIP(large-cap) & PARAG PARIKH (mid-cap), After reading the previous chapters & as per your analysis methods, I couldn’t resist myself to wait for this chapter to come, I chose these two for my long term goal i.e Retire early with the max corpus.
    After reading this module I am happy that I have added the right funds.
    I just missed the very first two key points in my PERSONAL FINANCE i.e Health & term Insurance. (I will add this as well at the earliest)
    Will be really happy if you make a brief module on how to select the best Health & term insurance.
    Thank you again.

    • Karthik Rangappa says:

      Thanks, Rohit! I’m glad you liked it. Yes, the first 2 steps are very critical. PLease don’t miss doing that 🙂

  8. Ajay says:

    Hi Karthik,
    I was starting to think why a new chapter hadn’t been uploaded a few days back and now I understand why it took you some time. This really was a herculean task I can understand. Yet you delivered it in the best possible way. Kudos 🙂

    In case 2, if i’m not wrong, you’re talking about SWP and STP. Is it available on Coin by Zerodha or do we have to wait for some time for it to be available?

    • Karthik Rangappa says:

      Thanks, Ajay!

      Yes, it is indeed a SWP and STP that’s at play. We are aware of it, and will plug it in Coin soon.

  9. SAMYAK JAIN says:

    Please try to add ETF’s and Insurance chapters in this module.
    Wishing you, your parents and your family good health. Stay Strong. Stay Safe.

  10. Sachin Gupta says:

    Thank you so much for all these articles. They are a wealth of knowledge. I decided to switch to Coin only because of these. Can you also include a excel download for your cheat sheet please ?

  11. Ashutosh says:

    Hi Karthik!
    Thank you so much for providing such important content. The more I read here the more the eagerness comes to learn about these topics. The simplicity with which you explain these complex things is remarkable. I really look forward to some more topics on goal-based investing. This will helps us to broaden our thought.

    Also, if for 10+ years goal multi-cap funds are not very suitable then for what type of goals we can use multi-cap funds?

    • Karthik Rangappa says:

      Thanks for the kind words, Ashutosh.

      Most multi-cap funds are mid-cap funds in disguise, so you are rather better off with a mid-cap fund, unless you find a good multi-cap fund which balances all the market capitalizations well.

  12. Mandar Kulkarni says:

    This post is quite helpful and relatable to my current situation.
    In addition, I was also thinking future perspective. Once someone gets retired, do you recommend to park retirement corpus(SIPs from large cap, mid cap, small cap) to any of debt fund and then gradually offload to fd/rd? Or simply withdraw these corpus systematically (swp) from their respective fund.

    • Karthik Rangappa says:

      The withdrawal should be phased, as in, as and when you start to move towards retirement, start moving funds from equity to mid-cap funds.

  13. invest_novice says:

    Hi Karthik,
    Thanks for this post. I would like to know if you prefer direct stock investment rather than MF for ultra long/long term goals? Say if I am able to spend an hour every week on this. Or will the risks be too high?

  14. Subhash Kapoor says:

    More on goal-based investing will definitely be a welcome addition to this module.

  15. Subhash Kapoor says:

    I am 31 yrs old and I have never invested in MFs. However, I want to start now that I have gotten married and all my existing investments are in debt related instruments. I want to start with equity investments. Is there a link which gives me the list of all MFs?

    I am thinking that once I have a list, I can start collating all the data and for different metrics, prioritize the ones which are good on all the metrics discussed in your articles and spread out my investments (some lumpsum and some SIP based on my goals) across the best ones based on the analysis. Do you recommend this approach?

  16. vaishakh says:

    Thank you so much for this chapter sir !!
    Enjoyed every bit of it. Waiting for future chapters

  17. Aman kaushik says:

    Give an specific chapter on sovereign gold bond.

  18. Ganesh Patel says:

    Hi Karthik,

    I hope your parents are doing good now. The surly blessing you earned from your good work paid you.

    loved reading these chapters. this chapter is a sort of application of the rest of the chapters. 🙂

    will love to hear more examples of scenarios for example: for an unmarried young guy who wants by flat in five years in Bangalore,

    or a person who can invest 5k SIP.

    and very very happy new to you and your family. 🙂

    finding you and Varsity was the best thing that happened to me in 2020.

    Thanks
    -Ganesh

    • Karthik Rangappa says:

      Thanks, Ganesh. They are doing good now and wishing you a happy new year:)

      Covering all scenarios will be really tough, hence the table. I will try and discuss more goal-based investing.

  19. Lokeswara Rao Nannapaneni says:

    It will be more helpful if discussed about child higher education after 10+ years and girl child marriage after 20+ years
    Thanks and Best Regards

  20. Prakash says:

    How about cyclical or disruption based thematic funds for medium term? What about some exposures in international equity funds ?

    • Karthik Rangappa says:

      I’m not sure about these international funds, these are relatively new. Have to research more on these.

  21. Anandh says:

    Hi Karthik,

    i have outstanding principal of 10L in housing loan and also equivalent corpus to close the loan. With current EMI i will be closing the loan in another 3.3 years. Is it better to close the loan now with corpus or invest it in MF and continue the EMI?
    Please advise

    • Karthik Rangappa says:

      This is a very tricky situation, Anandh. I think it always makes sense to reduce or close the liability first and then build assets. I’d probably do that.

  22. Ayushi says:

    This article really helped me to tie my investment goals to the right financial instruments. It would also be very helpful if you could add another chapter on how to rebalance the portfolio.

  23. Abhinandan says:

    Hi Kartik,
    Thanks for these modules. I am currently 22-years-old and I’m just starting my corporate life with an MNC. With a goal to buy a house after 15 years, should I blindly invest my savings in large-cap and mid-cap mutual funds?
    Also, please discuss other goal-based scenarios for young people like me.
    Thankyou.

    • Karthik Rangappa says:

      Abhinandan, that’s right. I’d suggest a large and mid-cap fund, as long as you are sure about the 15 years period.

  24. Sumedh says:

    Hello Karthik Sir. I am a third-year engineering student. I have been reading the Varsity blog since my first year. I have enjoyed it thoroughly and learned a lot. Thanks a lot for all your efforts!

    I am very keen to know how you learned all these concepts and gained so much knowledge. It would be great if you could share your story of learning and experimentation.

    • Karthik Rangappa says:

      Sumedh, I’m glad you like the content on Varsity. Like you, I’ve been learning and experimenting as well. This is a continuous and life long journey 🙂

  25. Sahil says:

    Have gone through all the topics, It’s amazing to see , how can we iterate such complex things in such simple manner… Thanks for the financial literacy that you’re providing in best way( I reckon 🙂).
    One query apart from this:
    I’ve been investing in mutual funds from past 2 years but I’ve not gone through all factors which defines good returns, especially I’ve picked some funds which have high expense ratio which can make huge difference in my returns in long terms, So how to deal with this situation because i also don’t want to close investment as it’s 2 years tenure and if I’ll start again with low expense ratio one, then I’ll have to wait for another 10 years which increase my goal time, OR
    I can transfer funds … I don’t know…
    Please suggest a best way
    Thanks

    • Karthik Rangappa says:

      Sahil, the only way to deal with it is to rectify as soon as possible. Imagine you let this run for another few years…only to realise that its a much bigger corpus (problem) to deal with 🙂

  26. Siddhanta Biswas says:

    Hi Karthik,
    I have question regarding addition of the surplus amount I have with me to a particular fund:
    Suppose I have a SIP of Rs 2000 on a certain MF and after a raise I decide to increase the SIP to Rs 3000 to reach my goals faster or maybe into a retirement fund, well does the MFs allow us to do that and if not then how should we approach this scenario?

    Secondly if I have to create a new SIP of the extra amount everytime I want to increase the amount of the SIP, will it not eat up my returns, by the fees charged?
    Thank you so much for this chapter, was waiting for it a long time.

    • Karthik Rangappa says:

      Yes, you can easily do this. If you are using Coin, simply edit the amount and its done. No, it won’t eat up the returns.

  27. Jalpa says:

    I have doubt in below lines in above article:

    “Eliminating overlap is very tough; the idea is to ensure its minimum. Otherwise, you just end up paying just to get the same exposure and costs can eat into your returns significantly.”

    How multiple funds in same category will increase costs?
    I understand Expense ratio in same category are in percentage so either way you are paying one or other AMC .

  28. Anandh says:

    Hi Karthik,

    Thanks a lot for these materials. I have never seen such a structured curriculum to learn about MF. It gave me a clearer picture of how my mutual fund investments should be aligned to my goals. When can we expect a chapter on NPS and gold bonds?

    • Karthik Rangappa says:

      Thanks, Anandh. I’m trying to get a few guest chapters asset allocation and smart-beta funds. Hopefully after that 🙂

  29. Ganumalhar Gore says:

    Hello Sir,
    Thank you for the guidance. Can you please shade some light on the international funds?

  30. Ganesh says:

    Hi karthik!!
    Hope you and your family are doing good.
    * What should one do if an individual wants to invest in MF in SIP and wants to increase the monthly SIP once in a year, eg., to invest 5k every month for year 1 and invest 10k for the next year and would like to increase the monthly SIP year by year?
    * Can one invest irregular amount every month in SIP? Like 5k in month 1, 4k in month 2, 6k in month 3?

    Thanks for the one stop for financial education- varsity❤

    • Karthik Rangappa says:

      Thanks, Ganesh, we are all doing good. Hope the same with you as well.

      1) The increase will happen if there is an overall increase in income, else this won’t be possible
      2) Yup, you can. But its good to stick to a fixed amount as it helps you get more committed to a cause.

  31. Bharath says:

    Sir if I need to pick large cap fund should I need to go through all large cap funds to pick one

  32. Manoj S says:

    Great chapter, great work, great help to start one’s investment journey.
    One question: once we start ivesting for a long term goal of say 8 to 10 years, should we book profit periodically or should we do so only when there is requirement?

    • Karthik Rangappa says:

      YOu should plan your exit in a phased manner, Manoj. That’s always a better strategy to avoid sequence risk.

  33. Saurav Datta says:

    It is very important to have a chapter on NPS as it can potentially save a lot of tax for salaried people (if going for NPS Tier – I) which serves as a good retirement solution with tax benefits and EEE status. The Tier 2 account of NPS acts as a mutual fund / liquid fund with a negligible expense ratio and can be used to park money for an emergency in the asset class of your choice as there is the freedom to allocate funds between Equity, Government Bonds and Corporate Bonds in your desired ratio.

    It was earlier exclusively for government employees but has now been opened up for all citizens. I hope a separate chapter on NPS is added to the Personal Finance Module in Zerodha Varsity, as it will benefit a lot of people who might be unaware of it.

  34. Ganesh Patel says:

    Hi Karthik,

    I hope you are doing!
    I see in the cheat sheet that you mentioned ELSS as pointless unless for tax saving purposes!
    could you please explain why you are not in favor of ELSS?

    Thanks
    -Ganesh

  35. Rohit Jejani says:

    Hi Karthik,
    This whole series of Personal Finance that you have uploaded is AMAZING. I have read quite a bit on personal finance before but I have never read such an extensive analysis and beautiful articulation. Great work!
    Sincerely thank you for this series! 🙂
    Looking forward to more articles from you! If you have a personal blog/write regularly on social media etc please plug those links. Would love to follow your writing!

    • Karthik Rangappa says:

      Thanks for the kind words, Rohit. I’m glad you liked the content here. All my writing is here, on Varsity itself. I’m on twitter, @karthikrangappa

  36. Ganesh Patel says:

    Hi Sir,
    As you are stating ELSS is pointless, what investment instrument one has to choose for saving Tax?
    will NPS will be a better option(has Extra 50k exemption)?

    or do you think we should not mix investment with tax saving?

    Thanks

  37. Sanjib Chhatait says:

    Great writing and analysis. cheat sheet is a life saver. On a personal finance note, one thing i want to ask, which one is better to park money for 6-12 month, NPS tire II or Debt fund? as the NPS – G sector returns over 8% last year, is it also covers capital protection or not.

  38. Avi says:

    Sir can we expect next module, Financial Modelling in next 2-3 months
    Thank you!

  39. Mandar says:

    Hi Karthik,

    Thanks for the article. Really helpful.

    Are SIPs in debt fund helpful? SIP covers us for volatility which is less likely in DEBT funds.
    To ask this other, is there a way SIPs help us in debt funds.

    • Karthik Rangappa says:

      Not really Mandar. I’d use debt funds to park lumpsum and not really a SIP. I will try to get perspective from others as well.

  40. Stephen Gideon says:

    Amazing content, waiting for more …
    didn’t seem just like an article, never thought this topic too would interest me all coz of the style of writing.
    Thanks again, great job
    One question though what should be done if we are having more than 2 goals should the no of goals match the funds, I guess not so how do we manage this. Say for e.g goal period is 5(5L),10 (7L),18(15L) years. Risk appetite is good

    • Karthik Rangappa says:

      Stephen, I’m glad you found the content enjoyable 🙂

      Do check the later chapter on Goals, hopefully, that will give some direction. Else will be happy to discuss here.

  41. Sudhish says:

    Hello Karthik,

    Thanks for the nice article.

    I had invested in the “Indiabulls-ultra-short-term-fund” through the coin, but now Zerodha is saying this fund is no longer active and can not be redeemed. I didn’t find any information in AMCs official website.

    I could sem fund’s AUM is increasing every month from 1783 in November to 1794 in January. How can closed fund’s AUM increase, I could notice all its investment is in TREPs CCIL. Can you share more details on what’s CCIL?

  42. Rajesh mahajan says:

    Which five mutual fund bought short term

  43. Dinesh says:

    I have not received my CRM digital copy or the same not showing on console section under account detail.

  44. Tribhuvan Pawar says:

    Hope both your parents are ok sir. Take care and yes great work as usual.

  45. Yerra V S N Sai Sudheer says:

    Dear Sir,
    Is it feasible to convert a SIP of MF into Lumpsum or vice versa?
    For example, I have 5000 rupees and I have invested it lumpsum in an MF. Now after 2 years I have regular income to invest in MF every month. So can I convert this MF into a SIP MF in order to invest more in the same MF every month? And without additional costs or fees.
    If feasible, is this possible through the Coin app of Zerodha?

  46. Bharath says:

    SIr can we park our emergency fund in liquid funds or would you prefer that corpus to keep in savings account or equal propotion in both

  47. Gaurav Kangane says:

    Great work. Very helpful content. For most part you have considered Mutual Funds and Equity for long term wealth creation or even for parking funds. However, you have never considered gold as an investment area. Would be helpful if you could make a chapter or two on investing in gold.

  48. Vignesh says:

    Hello karthik,
    Thank u so much for such content. Your modules have taken my financial knowledge from 0 to a considerably good level. 🙂
    I want to relate this to myself. I am a 27 year old professional who jus got married. The first two steps that you mentioned in this module(term plan and health plan) are done. After your lessons I have decided to start a sip(thinking of starting with 25000 which I’m comfortable with) for retirement (atleast 30 years from now considering my age) and have come up with 4 funds which I would check upon once every year and step up my sip amount every year.
    1. Largecap/Bluechip
    2. Midcap
    3. Index fund
    4. Hybrid fund(jus coz it has a mix of debt)
    Everyone else suggest a 75:25 allocation for equity:debt but I have not done that coz of the long time horizon.
    Have I learnt and understood right? Do u think I should make any changes?
    Thanks in advance.

    • Karthik Rangappa says:

      Vignesh, congrats on two things – for your recent marriage and for making the right financial decision.

      About the funds – I’d go with a combination of Largecap + Midcap or maybe Index fund with Midcap. I’d not add all 3 together since large-cap and index is an overlap. Hybrid is fine, but since you have 30 years timeframe, sticking to just Eq is also fine.

      Good luck.

  49. Vignesh says:

    Hello karthik,
    Thank you so much for your reply.
    I feel overlap is unavoidable!. For example in my case I thought of canara robeco bluechip equity and axis midcap fund. Eventhough they are different categories there is about 30% overlap in their holdings!. I had parag parikh flexi cap as my third fund since u said hybrid is not required(also that parag parikh has international holdings as well and their risk:reward has been too good). Looks like I am able to reduce the overlap to approx 20% if I replace canara robeco with parag parikh and jus invest in 2 funds. But in this case I’m confused if it’s OK to stick to jus 2 funds for such a long horizon.🤔
    Ur thoughts would be very much appreciated!🙂

    • Karthik Rangappa says:

      I understand overlap is unavoidable, unfortunately, our market is too small. Yes, 2-3 carefully selected funds for long term is fine. Please ensure you keep track and review them at least once in 6 – 12 months.

  50. Tejal shah says:

    Was an eye opener…the diff AMC with investment in same companies…omg! I am afraid to analyse my MF investment as i never knew the concept!many many thanks

  51. Manasa says:

    Hi Karthik,

    About 4 years back , I have just copied one of my friends’ mutual fund portfolio and started SIPs in the same. Now after reading your personal finance module and my research, I want to restructure my entire portfolio. What is the best way to do so ? Kindly suggest. I have around 10 funds in my portfolio

  52. Jayant says:

    Can you please give an example for rebalancing ? Like how exactly do we identify when to liquidate holdings from a particular fund and move it to debt ?

    • Karthik Rangappa says:

      Let us say you invest 50% in Eq and 50% in debt and you intend to hold this ratio. After a year, Eq has grown and now the weight is 55% and 45%, in this case you sell 5% of EQ and invest that in Debt to bring back the ratio to 50-50%.

  53. Kiran says:

    When our MF portfolios P&L is showing green and profit making when we are doing monthly SIPs. Should we add additional funds or increase the SIPs on those MFs which are giving good returns? I am curious to know how to read this MF Portfolios page and take further investment actions.

    • Karthik Rangappa says:

      You should just continue to keep the focus on your SIPs and the long term intent of your investments. Yes, if possible increase your SIPs over time, like once in every year maybe.

  54. Dinesh says:

    You said: Otherwise, you just end up paying just to get the same exposure and costs can eat into your returns significantly.

    Isn’t investing 10k in HDFC bluechip and 5k each in HDFC bluechip and Axis bluechip the same. Let’s assume ER is 1% for both AMCs, 1% of 10k and 1% of (5k+5K) is the same right? How am i ending up paying extra?

    • Karthik Rangappa says:

      Technically yes, if both have similar ER. But another way to look at it is that you are paying for the same article half and half. Why would you want to do that?

  55. Ritesh Karmare says:

    Hi Karthik,

    If I have a long-term investment horizon, let say 30 years, I was wondering do mutual fund schemes run for such a long period?
    Are there any MF schemes currently in the market which are this old?
    What’s your opinion on such long duration investment in a single MF scheme?

    • Karthik Rangappa says:

      I guess some of the UTI funds are quite old, not sure about the exact age. But MFs as an industry is still young in India.

  56. Aravinth S says:

    Hi Karthik,
    I’m a great fan of your work here at varsity! In your chapters, you have not discussed lumpsum investment in Mutual Funds. I find it intriguing and wanna see how to proceed if I had a lump sum of Rs 3 Lakh and the investment time horizon is 10 years+ How do I Filter through the various schemes via the elimination method as you had explained?

    • Karthik Rangappa says:

      Like explained, 10+ years is good for equity. Based on your risk preference, evaluate if you want large or mid-cap. If it is large, then you may be better off with an Index fund. If it’s mid-cap, as a starting point, look for the ones which have performed well in terms of managing risk aka capture ratios. Then perhaps the rolling returns, expense ratio etc.

  57. Victor says:

    Sir, what is the use of debt liquid funds? I see you have put it as capital protection and “don’t chase returns”. I can achieve the same goal by keeping it in a savings account. What do I gain by putting it in debt liquid fund, even for less than a year it gives similar returns as bank savings interest.

    • Karthik Rangappa says:

      No real difference if you as me. Maybe it is just the liquidity part, Victor. Its easy to invest and get out with liquid funds.

  58. Abhishek says:

    First and foremost, thank you for such a wonderful collection of articles.
    I have one question: even after reading through all once, I think still fumble at how to allocate my wealth, which funds to buy etc.
    I hear people go to financial advisors which help in managing these things. Should i actually go for some financial advisor ?

    • Karthik Rangappa says:

      Nothing wrong with it. Go for an advisor, but do read the contents here and make sure the advisor is not taking you for a ride. As your advisor some really tough questions and ensure you are being advised the right products.

      Good luck 🙂

  59. Vignesh says:

    Hi Karthik,
    Personal finance taught in the best way possible. One thing that is clear to me is when my goal is for 20+ years I am better off with index funds. The problem here is we feel the need to diversify and cover the entire markets. Now with many AMCs coming out with midcap and smallcap index funds, what is your take on them?. I wanna stay invested for minimum 20-30 years hopefully…Is it OK to go with index midcap and smallcap funds as well to avoid the need to rebalance our portfolio every 6 months to 1 year. Coz the best performing active fund today might under perform the index 2 years later. Your thoughts please?
    Thanks in advance.

    • Karthik Rangappa says:

      Vignesh, I’d stay away from small-cap funds and stick to Index and probably the Nifty next 50 index fund.

  60. vishy says:

    Hi,

    I have few funds which was started almost 7 years ago through a distributor(regular Plan), could u please explain as to how I could covert these plans to Direct and is there any tax implication in doing so?

    Note: I already have an Zerodha account and have been managing few Mutual funds through coin by myself.

    • Karthik Rangappa says:

      Vishy, you will have to sell these funds (regular) and then buy the same funds in direct mode. Unfortunately there is no other option.

  61. Mahalingaiah says:

    Hi Karthik,

    You have been doing a tremendous job of educating the general public. Thank you very much.
    It would be great if you can cover health insurance as well.
    Would it make sense to buy all-in-one insurance that would cover health, term, and critical illness cover?

    Thanks in advance
    -Maha

  62. Harit says:

    Thanks, Karthik for this amazing content. I have a few queries. I would be thankful if you could shed some light on that.

    1. For what type of goals, we should invest in mid-cap funds and how long should we keep our money there?
    2. Why are you preferring large-cap + mid-cap for a duration of 10 years instead of index + mid-cap (since index (nifty 50) is large-cap only and preferring index + mid-cap for retirement over large-cap + mid-cap? Is it because in very high duration index funds will be nearly same as large-cap but fewer fees?
    3. What is the rationale behind investing in both midcap and large-cap instead of only large-cap?
    4. In the 8-year example, you said that we should avoid credit risk but we are investing in corporate bonds- but those have a lot of credit risk, right?

    Apologies for a whole lot of questions!

    • Karthik Rangappa says:

      1) Any goal which can accommodate some volatility and is at least 8 – 10 yrs away. Example – vacation in Africa.
      2) Larger the time frame, higher is the ability to take in volatility
      3) Hopefully better returns
      4) Yes, if your investment horizon is so long, you may as well get into to equity right?

  63. Hitesh says:

    Hi Karthik,

    I am 3 years into my professional life and thanks to you for giving me insight into the importance of personal finance. I have accumulated a corpus of around 20 lakh. I want to get started with my investment journey. Will my case be similar to the case study of a person who got 50 lakh from the sale of a real asset (this case study is mentioned in this chapter)? Another question, what is your viewpoint of a fee-only financial planner? Do you recommend them?

    Thanks,
    Hitesh

  64. Siva says:

    In Morning star website I am not able to find Risk & return, capture ratios for any of the Index funds. Is there any particular reason why it is not available? Then with what all data will I should be choosing Index funds. Please guide.

    • Karthik Rangappa says:

      Ah not sure, Siva. But it is available as far as I know. Maybe check value research once?

  65. Hitesh says:

    Hi Karthik,

    What are your views on fee-only financial planners? Do you recommend using their services or DIY approach?

  66. V.UNNIKRISHNAN says:

    I will retire within six months time. I have accunulated Rs 5 cr as my retirement corpus in 9 mutual funds. I have ensured that I get a monthly income of Rs 1 lakh from investments in PO deposits , LIC etc.
    What I plan is to consolidate my accumulation in mutual funds into a large cap , a couple of balanced funds ( Two AMC ) and a midcap fund.
    I dont foresee a situation where in I have to dip into the above mutual funds atleast for another two or three years. After that wont it be better to systematically withdraw a certain percentage every month.
    I have adequate health cover and no other liabilities. Please advice whether this thinking is correct especially when market is at a peak.

    • Karthik Rangappa says:

      Yup, you can. I’d suggest you dont pull the funds for however long you can. Also, once you pull the funds to rebalance, there will be a tax angle, think about that. I’d suggest you speak to a good financial planner about this.

  67. Aparna says:

    Hi Karthik,
    wonderful content! I read the whole content sitting 3 days at stretch, but have book marked it, as I know I have to come back and look again! Can’t thank you enough, for writing such difficult subject in an easy style so that any novice can understand.

    Actually, I have one question: for shorter time frame (5-6 years) VR suggests Equity saving funds, if you have some Lumpsum (10 L) or so. What is your take on that? Are equity saving funds better option than FDs? I know, normally Debt funds are compared with FD, but just wanted to know. I have about 25 L in FDs? what is better option to invest that, if I need the money 6 years later for my Child’s education?

    Thank you

    • Karthik Rangappa says:

      Aparna, thanks for letting me know. I’m glad you liked the content.

      EQ savings is decent option, but its just that you need to be aware that its not entirely risk free. There are risks involved. If you want your funds to be fully safe, then nothing beats FDs. But based on the risks you are willing to take on, you can consider other things like short, medium term funds. Since you have 6 years, I’m inclined towards maybe short to medium term funds. Please do check with an advisor once.

      Btw, FDs cannot be compared to debt funds. Debt funds are risky, FDs are not 🙂

  68. Aparna says:

    Hi Karthik,

    Thank you very much for your answer. So, I guess leaving this money in FD is a better option. I’ll try to check and compare some short to medium term Funds.
    thanks again.

  69. Shivakeerthan says:

    Hello Karthik, Thanks a ton for the amazing content you have been posting so far. I am an avid reader of Varsity and I learnt most of the finance related topics from it. Heartfelt gratitude for all the hard work you and your team at Zerodha/Varsity have put in. I have a request to make a chapter on the idea of investing in smallcase as part of the personal finance rather than MF or may be both. Please try to fulfil the request. Thanks in advance 🙂

    • Karthik Rangappa says:

      Thanks, Shivakeerthan. I’m glad you liked Varsity and the contents here 🙂

      I’ll try and include smallcase, I avoided thinking that it may come across as a biased opinion 🙂

  70. Shivakeerthan says:

    Thanks Karthik. Looking forward to it 🙂

  71. Aditya Tandon says:

    Hi,
    I want to start an sip for paying health insurance premium for my parents yearly (around INR 50000) .
    What is the closest mutual fund i can choose ?
    I am thinking short term debt, liquid funds.

  72. Manideep says:

    Hey, why can’t I see this module in the app?

  73. Mahir Vadsariya says:

    Sir very well work done by you and your team , i can’t believe i have come so far to these chapter its totally engaging, keep the good work up, thanks a lot sir….

  74. JR Mishra says:

    In the shared MF cheat sheet, for debt fund it’s mentioned not to chase return. Then why should we invest in debt fund not just keep it in saving account ?

    • Karthik Rangappa says:

      Chasing returns in a debt fund implies you are taking on higher risk. The usual agenda with a debt fund is to safeguard capital with returns slightly higher than SB accounts.

  75. Anamika says:

    Hi Karthik,
    I have taken 3 ELSS fund Canara , Quant and Mirare and 1 Edleswisee Dynamic Hybrid. I’m looking at wealth creation and tax saving for a house. I’m in my late 30’s and would like your opinion on my portfolio.

  76. Anamika says:

    I’m a first time investor so I have distributed 5k Sip in these 3 funds.

  77. Anamika says:

    Which funds should I choose to diversify my portfolio? Based on my requirement that I want to buy a house in next 5-7 years. How much sip and which funds to choose

    • Karthik Rangappa says:

      For 5-7 years, I’d suggest sticking to short/medium term debt. If its 7, then maybe a large cap EQ will also help.

  78. RJ says:

    You have a gift when it comes to simplifying a complex topic – a dreaded one as such
    Ah yes , would love to see you cover more examples which would be helpful for a complete novice like myself . Also wanted to ask, for something as silly as buying a lakh rupee Laptop say within 1 month or plan an overseas vacation after 3 months , what should the portfolio look like, what should the starting investment amount- calculation should be for a student with no income source other than pocket money ?? its short term -so debt maybe ? I’m really being dumb here , but would really appreciate your help on this

    • Karthik Rangappa says:

      Thanks for the kind words 🙂

      Since the goal is short term, no point risking it with Equity. Hence liquidbees or any super short term debt. Perhaps arbitrage funds as well.

  79. RJ says:

    when you say a yearly review is required and something about rebalancing – could you please cover these topics in a separate article?

  80. Subhadeep says:

    Hi Sir,

    I am Subhadeep, 35 years old, working in a private organization. I am a late starter into the equity investment space and your writing is true gem to make me realize the importance of having a Goal and start disciplined investment towards it. Thanks to you, I now have four prominent investment objectives set against which I am going to start invest from January’2022. However, I need some clarifications on the same and hoping that you could help and advice.

    Goals:
    1. Retirement – Retirement Age: 58 | Tenure: 23 years | Corpus Required: 9CR (Life Expectancy till 80 Years and considering 6% inflation on Yearly expense of 6L) |
    a. Currently Debt heavy as very little exposure to equity as of now.
    b. Wanted to have 50:50 as Equity to Debt ratio. Looks to me impossible to meet this criteria.
    c. Avenues in place:
    i. EPF (8.5% ROI) – Will accumulate to 2.5CR if I consider 5% YOY increment henceforth.
    ii. NPS – 10% of Basic Payment [75% Equity, 15% GOI Bond, 10% Corporate Bond] (10% CAGR) – Will accumulate to 2CR if I consider 5% YOY increment henceforth.
    iii. ESOPS – Will accumulate to approximate 80L if I stay back till my retirement age.
    iv. Gratuity – Will accumulate to 20L
    d. Avenues Opting for:
    i. Equity MF (11% CAGR after LTCG) – I am planning to start a SIP starting with 15K and then step it up with 5% YoY. As per my calculation it will eventually give me 2.5CR
    ii. NPS [Fixed 50K/Year] (10% CAGR) – Will accumulate to 50L
    e. MF Fund Selected:
    i. HDFC Index Fund Nifty 50 Plan – Direct Plan : 7K contribution
    ii. UTI Nifty Next 50 Index Fund – Direct Plan: 8K contribution

    2. Kid’s Graduation – Tenure: 15 Years | Corpus Required: 80L (Inflation adjusted @6%)
    a. Avenues Opting for:
    i. Equity MF (10% CAGR after LTCG) – I am planning to start a SIP starting with 18.8K . As per my calculation it will eventually give me 78L
    b. MF Selected:
    i. Canara Robeco Emerging Equities Fund – Direct Plan : 9.8K contribution
    ii. Parag Parikh Flexi Cap Fund – Direct Plan : 9K contribution

    3. Kid’s Post Graduation – Tenure: 19 Years | Corpus Required: 1 CR (Inflation adjusted @6%)
    a. Avenues in place:
    i. Sukanya Samridhi Yojana (7.6% ROI) – 50K/year with 2% step-up YoY. This will accumulate around 24L
    b. Avenues Opting for:
    i. Equity MF (11% CAGR after LTCG) – I am planning to start a SIP starting with 9K . As per my calculation it will eventually give me 70L
    c. MF Selected:
    i. Mirae Asset Emerging Bluechip Fund – Direct Plan : 9K contribution

    4. Kid’s Marriage -Tenure: 23 Years | Corpus Required: 75L (Inflation adjusted @6%)
    a. Avenues Opting for:
    i. Equity MF (12% CAGR after LTCG) – I am planning to start a SIP starting with 5.2K . As per my calculation it will eventually give me 75L
    b. MF Selected:
    i. UTI Flexi Cap Fund – Direct Plan : 5.2K contribution

    I am a moderate risk taker; since the investment tenure is long I opted for all Equity MF. Now here are my questions.

    1. Since I have opted for all equity MF portfolio, at what point I should do rebalancing for capital preservation?
    2. Is it better to have one portfolio for all these goals or different portfolio against each goal is recommended? As you can see I have selected different AMC on the same fund category which will be changed if one portfolio is recommended.
    3. AUM for Mirae Asset Emerging Bluechip Fund, Parag Parikh Flexi Cap Fund, UTI Flexi Cap Fund is on very high end, I am kind of unsure if I should bet on these funds for long term; would appreciate your view on this.
    4. When should an investor change a fund house? What are the red flag to understand that the fund is underperforming?
    5. If a fund needs to be changed due to underperformance what is the best way? Is redeeming the whole amount, paying LTCG and then start a STP to a new fund a good strategy?
    6. Does the above plan makes sense or you think some tinkering is required?

    I would like to thank you again for all the knowledge you have been sharing and hope to get your kind view on my case.

    Thanks,
    Subhadeep

  81. Anish says:

    Awesome articles. Was always scared of keeping the hard earned money anywhere but bank sb or fd. Going through your articles only makes me more confident and also makes me feel that I am probably a lot late to this. I wish we were taught this in school/college.

    Also waiting for the part 2 of personal finance. Wanted to understand how we go about monitoring and rebalancing our portfolio.

    I have a question though.

    All the scenarios discussed here need to have some goals. Let’s say someone who has already retired and has received some retirement corpus. They want to grow this money for say next 10/20 years.

    In such cases, would the scenario that you discussed in this chapter of “getting a lumpsum from the sale of an asset like real estate” apply here?

    • Karthik Rangappa says:

      Thanks, Anish. Glad you liked the content 🙂
      I’ll try and start work on PF Part 2 later this year. I’m currently working on the financial modelling module.
      The scenario you mentioned – well, the goal is what you’ve stated, to grow the retirement corpus. But you need to plan this carefully as the person has retired and capital safety is important.
      The scenario may or may not apply, based on the age and circumstances of the person.

  82. Parag says:

    Hi Karthik,
    Thank you for taking such big efforts to educate everyone on Personal Finance. It is helping me to cut the clutter in mutual funds.
    Can you also share some good resources on term life insurance and factors to consider while selecting one?

    • Karthik Rangappa says:

      Thanks, Parag. Glad you liked the content here. I do intend to cover insurance etc, maybe in the 2nd part of Personal finance.

  83. Satish` says:

    Hi Karthik. You have a unique way to explain complex topics in layman’s language. Thanks for all your writings.

    I have an account on Zerodha, and am finalising my plans to shift my existing MFs from conventional broker to Coin. My query is an extension of the example you gave in Case 3

    For the GOAL of wealth creation…
    while investing a lump sum of 50L in a Carrier fund, with the plan of later shifting into a target fund, 
    1. What is the recommended period over which this shift should happen as STPs, for Goal of Wealth creation (retirement corpus)? would this be like 15 or 20yrs later…
    2. If this is to happen over 5 years or say 7 yrs or more, which Debt MF Category would you recommend as a Carrier Fund for this duration? (for 6months in the case example, you have recommended Liquid/overnight Debt fund)

    Will be grateful for your inputs,

    Regards,

    • Karthik Rangappa says:

      1) Satish, personally I was in a similar situation in Jan 2020 and I got stuck 🙂 I wish I had made the transition earlier. But having said that, try to deploy the funds in target funds in say 1-1.5 yrs max. Once invested in the target funds, stay invested for a long time
      2) Given 1.5 yrs target, I’d suggest something like a liquid or an arbitrage fund. Even short-term debt is a decent option.

      Good luck!

  84. sujith says:

    In section 80c, there is ELSS and Mutual Fund for examption seperately,
    My question is if i invest in BLUECHIP Mutual Fund(instead of ELSS), can i get tax examption for 1.5lac according to 80c?

  85. Akshay says:

    Hi Karthik,

    Thank you for a very informative chapter. Appreciate it! 🙂
    I have a question though. From the chapter it seems that you are not a big fan of ELSS funds and recommend them only for tax saving purposes. Why is that?

    For eg. – I have been investing in the Axis long term Equity fund for quite some time now (SIP of course) and it serves a dual purpose for me: Save tax and generate decent returns. In fact this is one of the 3 funds in my retirement portfolio (I plan to retire in 32 years). The fund’s fundamentals are quite strong with a good track record for 8 years.

    Is there anything I am missing?

    • Karthik Rangappa says:

      Akshay, its just that these funds are at a higher expense ratio, while offering nothing different apart from tax-saving benefits. You may as well invest in non-ELS based funds.

  86. Akshay says:

    Karthik, yes I see it now. The axis long term equity fund although currently has an ER of 0.74, there was a time when it had breached 1.2.

    I strongly feel that ER (for Direct plans as well) is very high in our country say compared to their US counterparts (even accounting for the fact that more of the US pop invests in their market). Eagerly waiting for Zerodha to launch their own line of Mutual funds and disrupt the AMC space. 🙂

    Anyway, happy weekend!

  87. sujith says:

    Hi sir,

    I have emergency fund which is there in bank.
    In which asset class i should invest this amount so that :
    – I should get more return than bank to beat INFLATION.
    – It should be liquid ( if i need money, i can take it in max one day).

    can you please give some advice sir ?

  88. Naval says:

    Appreciate the efforts to produce such a quality content, while still keeping it interesting!

    With the NPS (National Pension Scheme) coming in, you would be well aware, (post retirement) government employees will be required to commit 40% of their accumulated wealth in retirement solutions/MFs.
    Post retirement, the focus of the employee would (most likely) shift from wealth creation to regular income. Can you elucidate upon such Retirement solutions/Funds which will provide the employees with regular income?

    Regards,

  89. Subhash says:

    Hi Sir, you were talking about systematically withdrawing our funds when we are reaching our target and placing it in a more stable funds like debt funds etc. Is there any process on Zerodha ( Coin ) where I can set-up the systematic withdrawal every month? or is it only confined to specific mutual funds on Zerodha?

  90. Harish says:

    Hi Karthik, Awesome chapter..I was looking for retirement goal and a goal for my kids education..my current age is 38 years and for my kid is 2 years…for retirement I am planning to invest 20k per month with 20years in target and 10% stepup…for my kid I am planning 5k monthly…for retirement I am planning to have a portfolio of the mixture of 40%in large cap..20% in index fund ..20% in flexi cap…10% each in mid cap and small cap…is this plan good enough..and for kid I am targetting of a time horizon of 7/12/15 years..

    • Karthik Rangappa says:

      Harish, by and large, it looks ok. But why would you need an index fund and a large-cap fund? Guess that would be an overlap? I’d suggest you speak to a fee-only advisor once to get a perspective, but make sure you ask the right questions.

  91. Harish says:

    Thank you Karthik for the response..the idea behind having index and large cap fund was due to diversification and expense ratio in mind..but yes it will be causing overlap.. maybe I can reshuffle my portfolio to 50% large cap 20% flexi cap ..10% index..10% in midcap and small cap

    • Karthik Rangappa says:

      Yup, also I’m personally not a big fan of small-cap funds. Prefer just large and mid-cap stocks 🙂

  92. Harish says:

    Thank you Karthik, for the response. So for each goal for example retirement, child education, etc what do you suggest having multiple large\midcap stocks or for each goal one-one large\mid cap stocks because if we have to bring down the overlap ratio then we should not have multiple stocks of same category..is my undderstanding correct?

  93. Raghav Chawla says:

    Hey Karthik, I’ve made this mutual fund portfolio for myself , currently I’m 20 years old and hoping for some wealth creation via this portfolio. I also invest directly into stocks but this would be my hedge to the stock market investments.
    Please take a look at my portfolio.
    1. Paragh Parikh flexi cap 30%
    2. Uti Nifty Index fund 30%
    3. Uti nifty 200 momentum30 15%
    4. Axis small cap fund 15%
    5. Axis growth opportunities fund 10%

    By reading you article I’ve understood that it is not useful to invest in large & midcap schemes so I was thinking of replacing axis growth opportunities and invest the 10% in uti nifty index fund only. So my large cap allocation would be 40%. Please give you insights .

    • Karthik Rangappa says:

      Raghav, I’m glad you are investing at the young age of 20. Wish I had the insights to do that myself. PPFAS and Index fund is good, you need to figure you opted for small cap fund. Otherwise looks good to me, maybe you should check with a qualified financial advisor once.

  94. Harish says:

    Hi Karthik, Wanted to understand that how LTCG will come into the picture if we are planning for Retirement using Large & Midcaps. Are there anyways to hedge it?

  95. Harish says:

    That is correct..in that case we have to look for SWP and consider the taxation part also as part of our goal

  96. Kevin says:

    Awesome course! In this chapter you mention to periodically review the fund performance to ensure that it does not lag its peers. But i could not find info on what to do if after a few years, i find that the fund is indeed lagging its peers. Should i withdraw the entire amount and invest in a ‘better’ fund in the same sub-class?

  97. Kevin says:

    i had started investing in MFs before going through this course (which i now regret), and i over-diversified into 40-45 MFs. I am trying to reduce future investments gradually into lesser funds. Let’s say if i concentrate only on 15 out of these 45 MFs, what should i do with the amount i have already invested in the other 30 MFs? Should i just keep it as is, or move it to the 15 MFs as well?

    • Karthik Rangappa says:

      Are you sure you need 15 MFs Kevin? Please think about it again 🙂

      So you sell all the funds that you don’t need and invest the proceeds in funds that you think are the ones you need for long term.

  98. Kevin says:

    Oh, is 15 also a huge number? 🙂
    i had a very hard time bringing them down to 15…
    But i got your point. Selling the others and investing in these 15-ish funds 🙂

  99. Karthik says:

    Hello sir, thanks a lot for this module! This has been very very helpful. I’m in early 20s in my first job and thought of beginning with index funds for the long haul as I can’t fix near goals now. Started a small SIP in ICICI pru nifty 50 index fund. Is it a good fund? Also, sometimes I think the PE of nifty 50 is high, so can I just buy units when PE is <= 21/20 instead of SIP every month?? Or is it just trying to time the market? Also, should I sip in nifty next 50 as well?

    • Karthik Rangappa says:

      Good luck, Karthik. I’m glad you started the first SIP, hope it creates a lot of wealth for you. Nifty + Next 50 is generally a good combination. Not a big fan of timing the market 🙂

  100. Saarthak says:

    Hey Karthik,

    While you’ve provided a great cheat sheet, I believe it is time we could give an updated version to it, to give a comprehensive
    and up to date coverage.

    1. Can we please cover Conservative hybrid and Aggressive Hybrid funds there? If not, can you, let me know if they are suitable for a time period of 1-3 (expected CAGR 6%+) and 3-6 years respectively (expected CAGR 8-11%), given we take care of overlapping with the rest of the portfolio?
    2. You could add Flexicap to the list as it is different from Multicap category.
    3. Could you please let me know if I can have an index fund and a large cap fund in my portfolio, with very less overlapping and something that can be used for a proper retirement purpose, expecting great returns?

    Thanks so much for your help.
    Saarthak

    • Karthik Rangappa says:

      1) Yes, hybrid is a good option as well. But again, only if you have an intent to hold for say 5 yrs or more. As a thumb rule, I believe any MF with EQ exposure should be held not less than 5 years.
      2) Noted
      3) Yes, but that’s hard to find right?

  101. Saarthak says:

    Thank you for responding 🙂

    Just wanted to check if you offer investment advises officially? If not, would you be able to refer a Salaried person to someone who directly/indirectly manage the portfolio or at least give periodic/one time advises?

    Thank you again, Karthik 🙂

  102. Harish says:

    Hi Karthik, I am planning to keep the money which I am getting during any function or festival for my kid who is 2 years old in some of the MF ,and I want to keep it adding till he is 5 years old.So that some lumpsum will be made.for him. So was looking for your suggestions in selecting mutual funds in this case.

    • Karthik Rangappa says:

      Harish, I’d suggest you pick any decent large-cap fund and invest in it. I’d even suggest a index fund 🙂

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