Avoid investing in closed-end funds, add to your SIPs instead

  • Multi-cap funds is not bad for a long-term portfolio
  • Please avoid investing in closed-end funds, and divert your surplus to your SIP portfolio

I am 32 years old and I started investing in mutual funds in 2017. I invest 2,500 each in ICICI Bluechip and Franklin India Focused Equity; 3,000 each in Axis Long-term ELSS, Mirae Asset India Equity (multicap) and IFDC tax advantage ELSS. I also invested lump sums of 25,000 in ICICI Pru Balanced and 32,000 in ICICI Value fund series 19. I also invest 15,000 in Public Provident Fund every year. I am planning to start a systematic investment plan (SIP) in Reliance Small Cap for 2,500. My target is to accumulate 10 crore by age 55. Please help me fine tune my investments.

—Srabanjit Guha

To reach your target of 10 crore in 25 years (including the two years that have passed since you started investing), the main thing that needs to change is the amount of money you are investing. You are currently investing 14,000 and plan to add another 2,500. However to get to your target, assuming an aggressive 12% annual return over the 25-year period, you would need to invest close to 60,000 a month. So the sooner you can add substantially to your monthly investments, the better. Else, you could adjust your goal lower. If, for example, you invest 25,000 a month over this period, you would end up with close to 5 crore. Or, you could simply invest the most you can by adding to your SIP every year, and adjust your goal as you go along—which might be the most practical thing to do.

Regarding funds, you are investing mostly in multi-cap funds (ELSS funds are diversified multi-cap funds in terms of market coverage), which is not a bad for a long-term portfolio. You have one small-cap fund, one large-cap fund, and a focused fund (which also, in a way, is a diversified fund). So, there’s nothing wrong per se with your portfolio. Please avoid investing in closed-end funds, and divert your surplus to your SIP portfolio.

Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com

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