Rs 4 crore portfolio with ULIPs and multiple mutual funds. Should you simplify and consolidate your investments?

Managing a large investment portfolio can become complicated when it includes multiple insurance policies, mutual funds and traditional assets. At this stage, the focus may not need to be on adding more investments, but on making the existing portfolio simpler, more efficient and better aligned with long-term goals.

An investor who is investing in mutual funds, property and ULIPs reached out to ETMutualFunds seeking advice on his portfolio. His mutual fund portfolio includes funds such as Kotak Small Cap Fund, Parag Parikh Flexi Cap Fund, Canara Robeco Large Cap Fund, ICICI Prudential US Bluechip Equity Fund, HDFC Small Cap Fund and Axis Mid Cap Fund.

His Rs 1.18 crore portfolio includes Rs 73.03 lakh invested across mutual funds (direct plans) and Rs 45.74 lakh in ULIPs. The investor has nearly Rs 20 lakh as emergency fund, has invested Rs 5 lakh in bonds, has a property of Rs 2.35 crore, holds gold and silver of Rs 2.16 crore. He has invested Rs 79,482 in NPS.


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The investor has a family loan of Rs 1 lakh and personal loan of Rs 10.09 lakh from Kuwait Gulf Bank.

Shivam Pathak, CFP and Founder of Asset Elixir analysed the portfolio and told ETMutualFunds that the investor should review the portfolio across ULIPs, mutual funds and overall asset allocation. The portfolio, excluding gold, is worth approximately Rs 4.01 crore, with a significant portion invested in property and mutual funds.

Review ULIPs and separate insurance from investments

The expert said that the investor currently has three ULIPs. Pathak recommends reviewing these investments because ULIPs come with multiple charges, including fund management and policy-related charges, which can make their structure more expensive compared with keeping insurance and investments separately.

Another limitation is that the investment remains within the fund options offered by the same insurance company. If the underlying funds do not perform as expected, the investor has less flexibility compared with mutual funds, where investments can be moved to another fund house.

The objective, therefore, is to keep insurance and investments separate and improve flexibility in managing the investment portfolio.

Consolidate mutual funds and reduce duplication

The mutual fund portfolio also requires some consolidation. Pathak recommends moving out of some existing funds and giving each holding a clearer role in the portfolio. The recommendation is to consolidate Kotak Small Cap and HDFC Small Cap into Bandhan Small Cap. Axis Mid Cap, meanwhile, can be moved to Edelweiss Mid Cap.

The existing funds do not score as well on some of the key parameters evaluated, including Alpha and Sharpe Ratio, along with their overall performance. The proposed consolidation is aimed at reducing duplication and avoiding multiple funds in the same category.

The investor already has exposure to these schemes. The consolidated account statement also shows holdings in Kotak Small Cap, HDFC Small Cap, Axis Mid Cap, Edelweiss Mid Cap and Bandhan Small Cap.

For the proposed exits, the timing can be planned by taking exit load and tax efficiency into account. Wherever possible, the exits can be spread across financial years to make the process more tax-efficient.

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Property accounts for the largest share of the portfolio

Excluding gold, the investor's working portfolio is approximately Rs 4.01 crore. Property accounts for Rs 2.35 crore, or 58.7% of the portfolio, making it the largest asset allocation. Mutual funds account for Rs 1.19 crore, or 29.6%, while fixed deposits account for Rs 21 lakh, or 5%.

The portfolio also includes Rs 5 lakh in bonds, Rs 0.79 lakh in NPS and Rs 20 lakh as an emergency fund. Based on the return assumptions used in the review, the portfolio has a weighted average assumed return of 7.8%. This is only an assumption based on the asset-wise returns and is not a guaranteed portfolio return.

For property, a long-term return assumption of around 6% has been used as a general working assumption. Actual returns can vary significantly depending on the locality, property type and holding period.

Gold has been excluded from the investment portfolio because it is assumed that it will ultimately be used for the investor's daughter's or son's marriage or other family purposes. It has therefore been treated as a consumption asset rather than a long-term investment asset.

Focus on making the Rs 4 crore portfolio more efficient

Pathak believes the investor has already built a strong asset base. At this stage, the priority should be to simplify the portfolio, reduce overlapping funds, keep insurance separate from investments and gradually improve the allocation towards financial assets.

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The objective is not to add more investments, but to make the existing Rs 4 crore portfolio more efficient, flexible and aligned with the investor's goals. In short, the strategy is to consolidate where required, exit inefficient investments in a tax-efficient manner and ensure that every investment has a clear purpose.

(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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