Hello sir I have 5 cr asset 1 cr fd 1 cr PPF note I want to invest in mutual funds which is zero as in date I am interested for lum sum in large cap icici small cap nippon mid cap Motilal Osatwal and flexi cap parag parekh please suggest and guide me
Ans: You have done very well in building Rs 5 crore asset base.
It is also wise that you are thinking to enter mutual funds now.
Let us assess and build a plan. From a 360-degree angle. Simple language. Deep analysis.
Please follow each section below carefully.
Your Current Financial Position
You have Rs 5 crore worth of total assets.
Rs 1 crore is in Fixed Deposits. This gives safety and liquidity.
Rs 1 crore is in PPF. This gives tax-free and risk-free returns.
You have zero mutual fund investments currently.
You want to now begin investing in mutual funds via lump sum.
You are considering four categories: Large Cap, Mid Cap, Small Cap, Flexi Cap.
You have mentioned specific schemes. But I will guide category-wise. Without any scheme names.
Let’s Appreciate Your Thought Process
You are not putting everything in mutual funds. This is a good move.
You are balancing traditional instruments like PPF and FDs.
You are taking a gradual, thoughtful entry into equity investments.
You are aware about diversification. That is why you are considering multiple categories.
Suggested Asset Allocation – A Balanced Strategy
To become a wise long-term investor, we need to balance safety and growth.
Let’s do a proper allocation.
Rs 2 crore: Can stay in FD + PPF. Already in place. Retain for safety.
Rs 3 crore: Can be planned for equity mutual funds. Do not invest all at once.
Start with Rs 1 crore lump sum first. Keep balance Rs 2 crore ready in FD.
This way you don’t take too much risk at once.
Over next 12 to 18 months, move rest Rs 2 crore slowly to mutual funds.
Recommended Category-Wise Allocation for Rs 1 Crore Lump Sum
Now we split Rs 1 crore across different categories.
This gives diversification and reduces concentration risk.
Large Cap Fund: Rs 25 lakh
Stable, less volatile. Invests in top 100 companies.
Flexi Cap Fund: Rs 25 lakh
Fund manager can pick across large, mid, and small caps. Balanced flexibility.
Mid Cap Fund: Rs 25 lakh
Gives potential growth. Slightly higher volatility.
Small Cap Fund: Rs 25 lakh
Very high risk. Very high return potential. Invest only if you can stay for 10+ years.
All these should be actively managed mutual funds. Not index funds or ETFs.
Why Not Index Funds?
Many investors believe index funds are low cost. But that alone is not enough.
Index funds cannot beat the market. They only copy it.
During market falls, index funds fall as much or more.
No fund manager is present to manage risk.
In volatile times, actively managed funds perform better.
Good actively managed funds give better returns than index funds. With better downside protection.
Why Not Direct Funds?
Direct funds look cheaper. But not always better.
Without a Certified Financial Planner or MFD, there is no personalised guidance.
Direct plans leave investors confused in bad markets.
You may enter or exit at the wrong time. This reduces overall returns.
Regular funds through a trusted MFD + CFP ensure strategy is followed.
They help you stay invested and adjust based on your goals.
Taxation Awareness – Keep These in Mind
Equity mutual fund gains above Rs 1.25 lakh (LTCG) taxed at 12.5%.
Short-term gains taxed at 20%.
Debt mutual funds are taxed as per your income slab.
PPF is tax-free. FD is taxed as per slab.
So hold equity mutual funds for minimum 5 years to benefit from taxation.
How to Proceed – Step by Step Approach
Step 1: Identify your financial goals. Retirement, children, travel, etc.
Step 2: Choose category-wise funds with help of Certified Financial Planner.
Step 3: Invest Rs 1 crore in 4 parts: Large, Flexi, Mid, Small.
Step 4: Keep balance Rs 2 crore in liquid FDs.
Step 5: Start STP (Systematic Transfer Plan) from FD to mutual funds monthly.
Step 6: Review portfolio every 6 months with your planner.
Step 7: Rebalance portfolio yearly. Take help from Certified Financial Planner.
Emergency Fund and Liquidity Plan
Keep at least Rs 20 lakh separate for emergency.
Use liquid mutual funds or short-term FDs.
Do not touch equity funds in emergencies.
Medical or sudden family needs must be funded from safe instruments.
Insurance and Risk Planning
Check if you have proper health insurance. For you and dependents.
Life insurance may not be needed at this stage. Still, assess with a planner.
Do not mix insurance and investment.
Behavioural Discipline Matters Most
Market will go up and down. Do not panic.
Stay for at least 10 years in equity mutual funds.
Avoid switching funds frequently.
Monitor but do not react too much.
Trust the process. Be patient. Wealth will grow.
Common Mistakes to Avoid
Do not invest lump sum in only one fund or one category.
Do not chase past performance.
Do not keep too much in FD beyond emergency or short-term needs.
Do not fall for NFOs or trendy new funds.
Do not withdraw early unless for goals.
Final Insights
You are already financially sound. That is a strong foundation.
Mutual funds will now add a growth engine to your wealth.
Choose actively managed funds. Avoid index and direct plans.
Take help of a trusted Certified Financial Planner to manage this journey.
Stay diversified. Stay patient. Stay goal-focused.
Mutual funds will help you become wealthier. In a stable and systematic way.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment