MF Query: I’m 33 and want to build wealth and buy a property. How should I allocate my mutual fund SIPs?

Building a substantial investment corpus over the long term requires more than choosing mutual funds with strong returns. Investors also need to review their asset allocation, manage portfolio overlap and increase their investments as their income grows. For those planning multiple financial goals, such as long-term wealth creation and a property purchase, aligning their SIP strategy with each goal’s timeline is equally important.

A 33-year-old salaried professional with an aggressive risk appetite reached out to ETMutualFunds as he wants to build a corpus of Rs 6 crore or more over the next 22 years. He currently invests Rs 12,100 every month through systematic investment plans (SIPs), with an annual step-up of 10%, and has accumulated investments worth around Rs 4.16 lakh. His portfolio includes Parag Parikh Flexi Cap Fund, Edelweiss Mid Cap Fund, DSP Multi Asset Fund and HDFC Small Cap Fund, along with a lump-sum investment in Kotak Multicap Fund.

The investor has also set a separate goal of accumulating Rs 25 lakh for a property purchase in 10 years. He plans to begin investing Rs 7,000 a month towards this goal and increase contributions as his income grows. He sought advice on his portfolio allocation, fund overlap, scheme performance and SIP strategy, particularly regarding the large assets under management (AUM) of Parag Parikh Flexi Cap Fund and the continued underperformance of HDFC Small Cap Fund.


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The expert Shivam Pathak, CFP and Founder of Asset Elixir, analysed the portfolio and told ETMutualFunds that the investor needs to increase his annual SIP step-up to reach his long-term wealth target.

Assuming an annual return of 12%, his SIP would need to increase by around 16-17% every year to build a corpus of Rs 6 crore over 22 years. His current 10% annual step-up may not be sufficient, Pathak said, advising him to raise the increase as his income grows.

The property goal also requires a separate SIP strategy because the investment horizon is shorter. Assuming the same annual return of 12%, the investor would need to increase his monthly contribution towards the Rs 25 lakh goal by around 11.5% every year, according to Pathak. This would help him raise his investments progressively while working towards the target over the next decade.

On fund selection, Pathak recommends reconsidering HDFC Small Cap Fund, which he said has performed weakly compared with its peers. Rather than replacing it with another small-cap scheme, he suggests considering a large-cap fund.

He believes large-cap stocks are attractively valued and that adding exposure to this category could also moderate the overall risk of the investor’s portfolio, which already includes mid-cap and small-cap investments.

The investor’s concern about the large AUM of Parag Parikh Flexi Cap Fund also needs to be assessed in context. Pathak said the fund house has a track record of managing scale, while the scheme’s substantial overseas exposure makes its size less concerning than it might be for a fund investing exclusively in Indian mid-cap or small-cap stocks.

The expert recommends remaining invested while reviewing the fund’s performance annually rather than assuming its past record will continue indefinitely.

For broader diversification, Pathak suggests considering gold funds, with an allocation of up to around 10% of the portfolio. Gold can provide an additional asset class alongside equity investments, although the allocation should be assessed in the context of the investor’s overall portfolio and risk tolerance.

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For the separate property goal, Pathak also points to real estate investment trusts (REITs), which provide exposure to real estate-related investments without requiring the investor to purchase a property directly. However, investors should evaluate whether such investments suit their 10-year horizon and risk profile before committing money to them.

(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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