How should I restructure my parents’ Rs 2.2 lakh mutual fund underperforming portfolio for better returns?

I am seeking guidance to restructure my parents’ mutual fund portfolio, which I believe has delivered below-average performance. 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):

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

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

3. Nippon India Growth Mid Cap Fund: Invested ₹1,00,000; current value ₹83,794; invested 2 weeks ago

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

5.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 Manish Srivastava, Executive Director, Anand Rathi Wealth Limited

At 23, stepping into the role of financial decision-maker for your parents can feel both empowering and intimidating. In this case, the situation involves a ₹2.2 lakh mutual fund portfolio spread across five schemes, many of them regular plans delivering modest returns. The total current value stands slightly below the invested amount, and there is an additional ₹50,000 available for fresh allocation. The goal is not just to improve performance, but to bring structure, clarity, and cost-efficiency to the portfolio.

The current scenario is straightforward but requires disciplined planning. You are 23 years old and want to take charge of your parents’ investments instead of relying solely on a fund manager. Of the existing corpus, ₹1 lakh is meant for a 5–6 year horizon, while ₹1.7 lakh will be needed in just two years for personal reasons. You also plan to invest ₹4,000 per month via SIP and allocate ₹20,000 monthly toward debt or low-risk instruments.

The key challenge lies in balancing short-term safety with long-term growth. For the two-year goal, capital protection should be prioritised through low-risk options such as arbitrage or short-duration debt funds. For the longer horizon, a disciplined equity allocation can help generate growth. While short-term needs require caution, for long-term wealth creation an 80:20 equity-to-debt allocation is generally advisable.

Current Scenario:

· Hi, investor. You are currently 23 years old.

· Your parents have invested Rs 2.2 lakh in 5 funds, and have an additional 50K to invest.

· You wish to invest a total of Rs 1 lakh for next 5-6 years.

· You have a personal goal of Rs 1.7 lakh in 2 years.

· You wish to invest Rs 4,000 in SIP and wish to invest 20K in debt.

· However, we suggest maintaining an 80:20 in equity to debt for long term wealth creation.

Goal Status:

· We can create 2 baskets. One for your short term goal in 2 yrs, and one for your long term goals.

· Short Term Goal:

o For the short term goal, we suggest investing 6.5K every month into an arbitrage fund and allow it to grow at around 6-7% for 2 yrs.

o This allow you to reach your goal of 1.7L.

· Long Term Goal:

o Your current portfolio value of 2.14L will grow at 12-13% for the long term.

o Invest the 50K lumpsum along with the 13.5K (20K minus 6.5K) in equity.

o Continue your 4K SIP every month in equity mutual funds.

o For the debt allocation of your portfolio, you can consider your EPF to fulfil this portion.

Portfolio Remarks:

· The ideal market cap allocation is 55:23:22. You are currently under-allocated to Large Cap by 15%, over-allocated to Mid Cap by 9%, under-allocated to Small Cap by 5%

· Avoid investing in thematic/sectorial funds as they undergo cyclical performance

· Avoid investing in FOFs as they attract multiple expense cost, which will impact your returns.

· We do not recommend investing in silver as it is heavily dependent on industrial demand and speculation and showcases cyclical performance. It also has very poor risk adjusted return.

· Recency bias played a huge role in its recent rally.

· Investors are adviced to stick to their investment strategy and goals for the long term.

· For the investment platform, consider using one that allows you to view your entire portfolio across asset classes in one place. Platforms such as Dhan or Groww help consolidate holdings, track performance, and monitor allocation more efficiently.

Funds to hold, exit & invest:

The recommended restructuring divides the portfolio into three clear buckets — funds to hold, exit and invest. Among the funds to hold are HDFC Large and Mid Cap Fund – Regular (Growth), which has delivered 14.86% over one year, 20.37% over three years and 18.96% over five years, and Nippon India Growth Mid Cap Fund (Growth), with returns of 21.55% over one year, 26.23% over three years and 23.17% over five years.

On the exit list are ICICI Prudential Energy Opportunities Fund – Regular (Growth), a sectoral fund that has delivered 23.08% over one year, and Nippon India Silver ETF FoF – Regular (Growth), a fund of funds structure that recorded 165.01% over one year and 53.39% over three years but carries higher cost and cyclical risk.

For fresh allocation, the suggested additions include Quant Large Cap Fund – Regular (Growth), which has delivered 11.49% over one year and 17.19% over three years; Invesco India Smallcap Fund – Regular (Growth), with returns of 14.45% over one year, 24.69% over three years and 22.52% over five years; and ICICI Prudential Dividend Yield Equity Fund (Growth), which has generated 15.60% over one year, 23.23% over three years and 23.51% over five years.