How to manage one mutual fund portfolio for multiple financial goals

Mutual fund investors build their portfolios around clear financial goals, balancing short-term needs with long-term wealth creation through SIPs. As portfolios grow, questions often arise around whether the existing fund mix is adequate, how much risk to take as goals draw closer, and whether withdrawals or rebalancing can be done without disturbing long-term plans.

One such query is by Sumanta Das, who is an investor and viewer of The Money Show on ET Now. He invests in mutual funds and needs Rs 10 lakh in five years and Rs 1.5 crore in 15 years. He also says his current portfolio is almost Rs 3.70 lakh.

Also Read | NFO Insight: Will TIDE investment strategy of this tech mutual fund help you navigate market volatility?His current investments include SBI Large and Midcap, investing almost Rs 5,000 via SIP, SBI Contra, and Kotak Multicap at Rs 5,000 each. Tata Midcap at Rs 1,200, Tata Smallcap Fund at Rs 2,000, and ICICI Multi Asset at Rs 3,000 SIP are ongoing. Without changing much, he wants to know what strategy he should follow now.

Market expert Samir Shah, Founder, Investa Financial, shared insights on how investors can align their existing portfolios with both short- and long-term financial goals without making frequent or drastic changes.

Reviewing the portfolio, Shah noted that the overall fund selection and asset mix are already quite strong. The presence of large and mid-cap funds, along with exposure to mid-cap, smallcap, multicap, and multi-asset strategies, makes the portfolio well diversified. From a structural perspective, he said there is no immediate need to exit or replace any of the existing funds, as the portfolio already spans different market segments and investment styles.

“It is a very good mix. Overall diversified portfolio. Even along with that, Sumanta ji has multicap as well as multi asset. So, the portfolio is very well diversified. From our side, at this juncture, there is no need to make any changes in his portfolio,” Shah said.

Turning to the five-year goal of Rs 10 lakh, Shah explained that assuming an average annual return of around 12%, the current portfolio of Rs 3.7 lakh could grow to roughly Rs 6.5 lakh over five years. The remaining amount needed for this goal could be met by partially withdrawing from ongoing SIP investments closer to the goal period. However, since five years is a relatively short time frame for equity-heavy investments, managing volatility becomes crucial.

To reduce risk as the goal approaches, Shah advised a gradual shift in strategy. Around three to four years into the investment journey, Sumanta should begin moving his accumulated equity exposure, especially from more volatile segments like mid-cap and smallcap funds, into relatively safer options such as passively managed index funds or conservative hybrid funds. This gradual transition helps protect the portfolio from sudden market corrections in the final year and ensures greater certainty around meeting the five-year goal.

For the longer-term goal of building Rs 1.5 crore over 15 years, Shah highlighted that the current SIP amount may fall short. To bridge this gap, Sumanta has two practical options. If feasible, he can increase his SIP immediately from Rs 21,200 to around Rs 32,500 per month. Alternatively, if a sudden increase is not comfortable, he can opt for a disciplined annual step-up of around 10% in his SIP contributions. Either approach, Shah said, would significantly improve the chances of achieving the long-term corpus.

Also Read | Top sectors that witnessed high levels of buying by mutual funds in January

“Now, he can do two things. If he is in a position to increase his SIP right away, then he has to increase and take it to 32,500. The present SIP amount is 21,200. So, from that too, he has to take this SIP amount to 32,500. And if he is not willing to increase SIP amount immediately, in that situation what he can do is every year, if he can step up his SIP by 10%, in both situations he will be able to achieve his goal of Rs 1.5 crore in the next 15 years,” Shah recommended.

Addressing concerns about whether shifting money for the five-year goal could affect the 15-year objective, Shah clarified that there is no need for complete redemption. While part of the accumulated corpus is gradually moved to safer assets for the shorter-term goal, fresh SIP contributions will continue flowing into equity funds for the long-term goal. This ensures that both objectives can coexist within the same portfolio without interfering with each other.

In closing, Shah emphasised the importance of regular portfolio reviews, ideally once or twice a year. While the current fund choices appear sound, investors should stay alert to consistent underperformance or changes in fund management and be prepared to switch within the same category if needed. The key takeaway, he noted, is that a well-diversified portfolio combined with timely rebalancing and disciplined SIP increases can help investors meet multiple goals without frequent churn or unnecessary complexity.

One should always consider their risk appetite, investment horizon and goals before making any investment decision.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [email protected] alongwith your age, risk profile, and twitter handle.