Have 30+ mutual funds in your portfolio? Expert explains what a 60-year-old investor should do
An expert guides a 60-year-old investor on managing a large mutual fund portfolio. The advice focuses on dividing investments into three baskets for liquidity and growth. This strategy aims to balance immediate needs with long-term wealth creation...
Building a mutual fund portfolio is not just about selecting funds that have delivered strong returns. As investors approach retirement, the focus needs to shift towards managing risk, ensuring liquidity and aligning investments with near-, medium- and long-term financial needs. Having too many schemes can also make portfolio management difficult, particularly when several funds have overlapping mandates.
For a 60-year-old investor, the need for a well-defined asset allocation becomes even more important. The portfolio should ideally provide enough liquidity to meet immediate expenses while retaining adequate equity exposure to support long-term growth and counter inflation.
A 60-year-old investor reached out to ETMutualFunds and sought a review of his family’s mutual fund portfolio. The portfolio includes investments made for himself, his 55-year-old wife, 23-year-old daughter and his company. The family started investing around 2021, with some lumpsum investments made during 2024 and 2025.
The combined portfolio has exposure to 31 schemes across large-cap, large & mid-cap, mid-cap, small-cap, multi-cap, flexi-cap, balanced advantage, ELSS, thematic, value, focused, liquid and hybrid categories.
Some of the funds in his family portfolio were - Parag Parikh Flexi Cap Fund, HDFC Flexi Cap Fund, Parag Parikh ELSS Tax Saver Fund, SBI Small Cap Fund, HDFC Small Cap Fund, HDFC Mid Cap Fund, HDFC Flexi Cap Fund, HDFC Innovation Fund, ICICI Pru Equity & Debt Fund.
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The portfolio has a significant allocation to HDFC Balanced Advantage Fund, which accounts for 39.72% of the overall portfolio. Flexi-cap funds account for 16.24%, while mid-cap funds have a 10.27% allocation. Liquid funds account for another 6.47%.
Since individual portfolio breakups for each family member were not available, the expert reviewed the investments as a combined portfolio and suggested changes with retirement planning in mind.
Hrishikesh Palve, Director, Anand Rathi Wealth Limited analysed the portfolio and told ETMutualFunds that the investor should now divide the portfolio into three baskets based on when the money is likely to be needed.
Basket A: 100% in debt funds
The first basket should be focused entirely on liquidity and capital preservation. Palve said that in this basket, the investor should consider allocating 100% to debt funds and estimate living expenses for the next two years. This amount can then be invested in ultra-short-duration funds or arbitrage funds, particularly if the investor falls in the highest tax bracket.
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The objective of allocating 100% in debt funds is to ensure adequate liquidity for your regular cash flow needs.
<p>Source: Anand Rathi Wealth Limited<br></p>
Basket B: 60-70% equity for medium-term needs
The second basket is meant to balance growth with relatively lower risk. The expert recommends allocating 60–70% to equity funds and 30–40% to debt funds. At the end of every year, sufficient money can be moved from this basket to Basket A to replenish the next year's expenses.
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This approach can help maintain liquidity without forcing the investor to sell equity investments during a market downturn.
The third basket is meant for money that the investor does not need in the near term. The expert recommends an allocation of 80% to equity funds and 20% to debt funds for these long-term requirements.
This bucket can continue to participate in equity market growth while the first two baskets provide the liquidity needed for nearer-term expenses.
Recommendation based on existing portfolio
Increase large cap allocation: The expert's assessment suggests an ideal market-cap allocation of 55:23:22 across large-cap, mid-cap and small-cap stocks. According to the review, the investor is currently under-allocated to large caps by around 6%, over-allocated to mid caps by around 8%, and under-allocated to small caps by around 1%.
This becomes particularly relevant at age 60, when the portfolio needs to balance growth with capital preservation and liquidity.
Avoid ELSS funds: The expert has also recommended exiting the ELSS funds in the portfolio. The reasoning is that under the new tax regime, investors generally do not receive the tax benefit associated with Section 80C investments. Therefore, for investors who do not need ELSS specifically for tax planning, the three-year lock-in may not be necessary.
The portfolio currently has 2.16% allocated to ELSS through Parag Parikh ELSS Tax Saver and HSBC ELSS Tax Saver.
Avoid hybrid and thematic funds : The expert has recommended avoiding multi-asset and hybrid funds because investors do not have direct control over the asset allocation within these schemes.
The portfolio has a particularly large exposure to HDFC Balanced Advantage Fund, accounting for 39.72% of the overall portfolio. The expert has recommended exiting this holding and instead creating a customised asset allocation through the three-basket approach.
The expert has also suggested exiting thematic and sectoral funds because their performance can be cyclical and may depend heavily on a particular sector or theme. The portfolio has exposure to Tata Digital India, Franklin India Opportunities and HDFC Innovation Fund under thematic/sectoral strategies.
Mutual funds to hold: The expert has identified a number of schemes that can be retained across categories. Among large-cap and large & mid-cap funds, the recommendations include HDFC Large Cap Fund, HDFC Large and Mid Cap Fund and Mirae Asset Large & Midcap Fund.
For mid-cap exposure, the expert recommends HDFC Mid Cap Fund and HSBC Midcap Fund. In the small-cap category, HDFC Small Cap Fund, ICICI Pru Smallcap Fund and SBI Small Cap Fund have been identified as funds to hold.
For multi-cap exposure, the expert recommends Aditya Birla SL Multi-Cap Fund and ICICI Pru Multicap Fund. The suggested flexi-cap holdings include Tata Flexi Cap Fund, Parag Parikh Flexi Cap Fund, HDFC Flexi Cap Fund and SBI Flexicap Fund.
The expert has also identified ICICI Pru Value Fund and HDFC Focused Fund as funds to hold.
Mutual funds to exit: The expert has suggested exiting several schemes to simplify and restructure the portfolio. These include Mirae Asset Large Cap Fund, Edelweiss Recently Listed IPO Fund, SBI Multicap Fund, HDFC Balanced Advantage Fund and ICICI Pru Equity & Debt Fund.
The two ELSS schemes—Parag Parikh ELSS Tax Saver Fund and HSBC ELSS Tax Saver Fund—are also on the exit list. The expert has recommended exiting Tata Digital India Fund, Franklin India Opportunities Fund and HDFC Innovation Fund from the thematic/sectoral portion.
Other schemes identified for exit include Axis Small Cap Fund, Franklin India Flexi Cap Fund, Franklin India Focused Equity Fund, HSBC Value Fund and HDFC Liquid Fund. The rationale is not necessarily that these funds are poor performers, but that the overall portfolio needs to be simplified and brought closer to the desired asset allocation.
Mutual funds to add: For the portfolio's revised allocation, the expert has suggested three funds to consider which are Quant Large Cap Fund, Bandhan Large & Mid Cap Fund and Kotak Midcap Fund.
The objective is to improve the portfolio's market-cap allocation while reducing the concentration and overlap created by holding too many schemes.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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