My parents are both in their mid-50s (father 56 years, mother 52 years). I am seeking guidance on restructuring my parents’ mutual fund portfolio, which I believe has underperformed compared to the average. I am 23 years old, a complete beginner in investing, but have recently started learning about personal finance and mutual funds through books and online resources. I now want to take charge of my parents’ investments instead of relying on a fund manager.

Current portfolio (parents):

HDFC Manufacturing Fund – Regular Growth: Invested ₹48,404; current value ₹53,498; XIRR 6.26%; SIP ₹1,000/month; 1-year period

HDFC Large & Mid Cap Fund – Regular Growth: Invested ₹2,874; current value ₹3,021; 1-year period

Nippon India Mutual Fund (Growth): Invested ₹1,00,000; current value ₹83,794; invested 2 weeks ago

Nippon India Silver ETF FoF: part of above; currently at ~₹16,000 loss

ICICI Prudential Energy Opportunities Fund – Growth: Invested ₹69,000; current value ₹73,789; XIRR 5.06%; SIP ₹1,000/month; 1-year period

Total invested is ₹2.2 lakh, with a current value of ₹2.14 lakh. An additional ₹50,000 is available for investment. Monthly income is ₹50,000, with ₹5,000 going toward a small loan/limit.

Investment goals:

• ₹1 lakh to be invested for 5–6 years

• ₹1.7 lakh needed after 2 years for personal reasons

• Hold silver ETF for 6–7 months before exiting

Future investments:

• ₹4,000 monthly SIP for 2 years (partial withdrawal planned)

• ₹18,000–₹20,000 monthly savings for 2 years, preferably low risk (FD or alternatives)

Given that most funds are regular plans with low XIRR, how should I restructure this portfolio using direct funds? What fund categories would be suitable for a 2-year vs 5–6-year horizon with moderate risk? Also, which platform (Groww, Zerodha, etc.) would be best for low-cost investing?

Advice by Anshi Shrivastava, Head – Personal Finance Training at 1 Finance

Many families manage mutual fund portfolios that deliver below-average returns due to significant exposure to sectoral and thematic funds, including manufacturing, and energy. These categories often lead to higher volatility and unsatisfactory outcomes when market cycles fluctuate, causing investor anxiety about their hard-earned savings. Achieving true financial peace of mind requires a clear, structured portfolio that aligns with liquidity requirements and risk appetite while minimizing unnecessary costs.

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In the context of a portfolio that requires ₹1.7 lakh over 2 years and ₹1 lakh over a 5–6-year horizon, a goal-based restructuring is imperative. It is advisable to transition all holdings to direct plans immediately, as this can save 0.5% to 1% or more annually in expenses, which compounds significantly over time.

Investors should consider exiting underperforming sectoral funds (while accounting for any applicable exit loads) and avoid similar concentrated bets. It is crucial to note that any redemption or switch constitutes a taxable event, triggering capital gains tax liability. Equity-oriented funds, including arbitrage, are subject to a 20% short-term capital gains tax if held for up to 12 months, and a 12.5% long-term capital gains tax (with a ₹1.25 lakh annual exemption) if held beyond this period. Debt-oriented and most liquid funds are taxed at the investor’s income slab rate, emphasising the importance of careful tax planning during switches.

For the 2-year horizon, which may include monthly SIPs and savings, it is recommended to allocate primarily to low-to-moderate risk categories such as liquid funds, arbitrage funds, or short-duration debt. These options offer better capital protection and steady returns, ensuring easy liquidity for planned withdrawals.

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In contrast, for the 5–6 year horizon, a moderate-risk equity allocation through diversified flexi-cap or large-cap index funds is advisable. These funds offer growth potential with lower volatility compared to sectoral schemes. Investors can also refer to the 1 Finance scoring and ranking system, which evaluates funds based on risk-adjusted performance, fund manager consistency, liquidity, and portfolio quality.

Among third-party platforms like Groww, Zerodha Coin, or ET Money, there is minimal difference in costs for direct mutual fund investments and SIPs, as all charge zero brokerage fees. Groww distinguishes itself with a user-friendly interface that appeals to novice investors.

In conclusion, this structured, low-cost approach, executed with an awareness of tax implications, enables families to replace worry with confidence and clarity. Annual portfolio reviews are essential to maintain alignment with financial goals and ensure stability without succumbing to panic-driven reactions.

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