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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jun 02, 2024Hindi
Money

Hi, I'm at 25 years of age and currently earning 4lpa + upto 30K rent benifits and a mediacal insurance that covers myself only from my organization. I want to start investing in mutual funds. I'm able to save around 12-15K per month on avg. and considering moderate to high risk for investment portfolio. Please share some advise on this.

Ans: Investing in mutual funds is a smart choice for building wealth over time. Given your savings capacity of Rs. 12,000 to Rs. 15,000 per month and a willingness to take moderate to high risks, you are on the right path. I understand your financial goals and will provide detailed advice on how to proceed.

Understanding Your Financial Goals
Firstly, let's understand your financial goals clearly. These could include:

Building a retirement corpus
Saving for a down payment on a house
Funding children's education (if applicable in future)
Building an emergency fund
Identifying and prioritizing these goals will help you decide on the investment tenure and risk tolerance. Your willingness to take moderate to high risks suggests you have a long-term investment horizon.

Assessing Your Risk Appetite
Your risk appetite is crucial for selecting the right mutual funds. Moderate to high-risk investments can offer higher returns but also come with increased volatility. At 25 years of age, you have the advantage of time, allowing you to recover from potential short-term market fluctuations.

Diversification of Portfolio
Diversification is essential to mitigate risks. Here’s a breakdown of how you might allocate your investments across different types of mutual funds:

1. Equity Mutual Funds: These funds invest in stocks and are ideal for long-term goals. Given your risk tolerance, you could allocate 60-70% of your savings to equity mutual funds. They have the potential to offer higher returns compared to other types of funds.

2. Debt Mutual Funds: These funds invest in fixed-income securities and are less volatile than equity funds. Allocating 20-30% to debt funds will balance your portfolio and provide stability during market downturns.

3. Hybrid Funds: These funds invest in a mix of equity and debt. They are suitable for investors who want exposure to both asset classes with lower volatility than pure equity funds. You could allocate around 10-15% of your portfolio to hybrid funds.

Systematic Investment Plan (SIP)
A SIP allows you to invest a fixed amount regularly, usually monthly, into a mutual fund. This is an excellent strategy for salaried individuals like you. Here are some benefits of SIP:

Rupee Cost Averaging: By investing a fixed amount regularly, you buy more units when prices are low and fewer units when prices are high, averaging out the cost.

Disciplined Investing: SIP encourages regular saving and investing, which is crucial for building wealth over time.

Compounding: The power of compounding works best when you invest regularly and stay invested for the long term.

Selecting the Right Mutual Funds
When selecting mutual funds, consider the following factors:

1. Fund Performance: Look at the historical performance of the fund. Compare the returns with the benchmark and peer funds over 3, 5, and 10 years. While past performance doesn't guarantee future results, it provides insights into the fund manager’s effectiveness.

2. Fund Manager’s Track Record: A consistent and experienced fund manager can make a significant difference. Check the fund manager's track record and their tenure with the fund.

3. Expense Ratio: This is the annual fee charged by the fund. Lower expense ratios mean higher net returns for you.

4. Fund’s Portfolio: Analyze the fund’s portfolio to understand its holdings. A well-diversified portfolio reduces risks.

5. Asset Management Company (AMC) Reputation: Opt for funds from reputed AMCs with a strong track record of managing funds efficiently.

Actively Managed Funds vs. Index Funds
While index funds mimic the market index and have lower expense ratios, they might not always offer the best returns. Actively managed funds, where fund managers make decisions based on research and market conditions, can outperform the market, especially in volatile conditions. They offer:

Potential for Higher Returns: Skilled fund managers can identify and capitalize on market opportunities.
Flexibility: Fund managers can adjust the portfolio based on market changes.
Research and Analysis: Actively managed funds benefit from extensive research and market analysis, providing a strategic edge.
Direct Funds vs. Regular Funds
Direct funds have a lower expense ratio as they don’t involve intermediaries. However, investing through a Certified Financial Planner (CFP) can be beneficial. A CFP offers:

Expert Advice: CFPs provide tailored advice based on your financial goals and risk appetite.
Portfolio Management: They help manage and rebalance your portfolio to align with market conditions and goals.
Convenience: CFPs handle the administrative aspects, saving you time and effort.
Building an Emergency Fund
Before you start investing, ensure you have an emergency fund. This should cover 6-12 months of your living expenses. An emergency fund acts as a financial cushion during unforeseen circumstances like job loss or medical emergencies. You can park this money in a liquid fund or a savings account.

Tax Efficiency
Mutual funds offer tax benefits under Section 80C of the Income Tax Act through Equity Linked Savings Schemes (ELSS). ELSS funds have a lock-in period of three years and provide tax deductions up to Rs. 1.5 lakh. They also offer the dual benefit of tax saving and wealth creation.

Monitoring and Rebalancing Your Portfolio
Regularly monitoring your portfolio is crucial. Market conditions and your financial goals might change over time. Rebalancing ensures your portfolio remains aligned with your risk tolerance and investment objectives.

Long-Term Commitment
Mutual funds are ideal for long-term wealth creation. Stay committed to your investments despite market fluctuations. Market volatility is normal, and staying invested for the long term allows you to benefit from market upswings.

Conclusion
Investing in mutual funds is a wise decision given your savings capacity and risk appetite. By diversifying your portfolio, starting a SIP, and regularly monitoring your investments, you can achieve your financial goals. Remember to consult a Certified Financial Planner to tailor your investment strategy to your specific needs.

Investing is a journey, and with disciplined and informed decisions, you can build substantial wealth over time. You're on the right track, and with the right strategies, you will achieve your financial aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 10, 2024

Asked by Anonymous - Dec 26, 2023Hindi
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Hello Ulhas, I am 38 and will turn 39 this march. I have not invested in mutual funds and will like to start. My investments will be 15 k a month and could you please guide me. I will be investing for next 20 years
Ans: Starting your mutual fund investment journey at 38 is a great decision for long-term wealth accumulation. Here's a suggested approach for your monthly investment of 15k:

Diversified Equity Funds: Allocate a significant portion to diversified equity funds, which invest across market caps and sectors. These funds offer growth potential and help spread risk. Consider allocating around 60-70% of your investment here.

Large Cap Funds: Large-cap funds invest in established companies with stable performance. They provide stability to your portfolio. Allocate around 20-30% of your investment here.

Mid and Small Cap Funds: These funds have higher growth potential but come with higher risk. Allocate a smaller portion, say 10-20%, to mid and small-cap funds for potential higher returns.

Systematic Investment Plan (SIP): Consider investing through SIPs to benefit from rupee-cost averaging and discipline your investment approach.

Review and Adjust: Regularly review your portfolio's performance and adjust allocations based on changes in your financial goals, risk appetite, and market conditions.

Given your investment horizon of 20 years, you can afford to take moderate to high risks. However, it's essential to choose funds wisely and diversify your investments to mitigate risk. Consider consulting with a financial advisor for personalized recommendations tailored to your financial goals and risk tolerance.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 2024

Asked by Anonymous - Jun 06, 2024Hindi
Money
I am 26 years old. Right now my salary is 21000/month. My total expenses is around 9~10K per month. So i need an help about investment. I don't have knowledge about MFs so can u tell me how to invest in it or can you suggest me good mutual funds??
Ans: Investing in mutual funds is a great way to grow your wealth over time. At 26 years old, you have a significant advantage: time. Starting early allows you to benefit from compounding returns. Let's explore how you can start investing in mutual funds and suggest some general strategies.

Understanding Mutual Funds
What Are Mutual Funds?
Mutual funds pool money from multiple investors to invest in various securities like stocks, bonds, and other assets. Professional fund managers manage these funds, aiming to achieve the fund's investment objectives.

Types of Mutual Funds
Equity Funds: Invest in stocks, aiming for high growth. Suitable for long-term goals.
Debt Funds: Invest in bonds and fixed income securities. These are less risky and provide steady returns.
Hybrid Funds: Combine equity and debt investments, offering a balanced approach.
Index Funds: Track a specific market index. Less actively managed and often have lower fees.
Steps to Start Investing in Mutual Funds
Assess Your Financial Situation
Your monthly salary is Rs 21,000, with expenses around Rs 9,000 to Rs 10,000. This allows you to save Rs 11,000 to Rs 12,000 per month. It's crucial to utilize these savings efficiently to build a robust financial future.

Define Your Financial Goals
Identify what you want to achieve with your investments. Common goals include:

Emergency Fund: Save for unexpected expenses.
Short-term Goals: Save for travel or a gadget.
Long-term Goals: Save for a home, retirement, or children's education.
Risk Tolerance
Understand your risk tolerance. At a young age, you can afford to take higher risks for potentially higher returns. However, it’s important to balance this with your comfort level. This ensures you don't panic during market downturns and stay committed to your investment plan.

Choose the Right Mutual Funds
Based on your goals and risk tolerance, you can choose different types of funds:

For Long-term Goals (5+ years): Equity funds and aggressive hybrid funds.
For Medium-term Goals (3-5 years): Balanced hybrid funds and conservative equity funds.
For Short-term Goals (1-3 years): Debt funds and liquid funds.
How to Invest in Mutual Funds
Through Asset Management Companies (AMCs)
Visit the websites of mutual fund companies (AMCs) to invest directly. This approach offers lower expense ratios since there are no intermediaries. However, it requires you to have some knowledge about mutual funds and the discipline to manage your investments.

Through Online Platforms
Online investment platforms and apps provide a user-friendly interface to invest in mutual funds. These platforms offer tools to track and manage your investments, making it easier for beginners to get started. However, be aware of any additional fees they might charge.

Through Mutual Fund Distributors (MFDs)
Consulting with a Mutual Fund Distributor (MFD) ensures you get professional advice tailored to your financial situation and goals. They can guide you in choosing the right funds, managing your portfolio, and making adjustments as needed. MFDs are well-versed in the market and can provide valuable insights, helping you avoid common pitfalls and optimize your investment strategy.

Investment Strategies
Systematic Investment Plan (SIP)
A SIP allows you to invest a fixed amount regularly (monthly or quarterly). This approach helps in averaging out the purchase cost and instills disciplined investing. SIPs are particularly beneficial for young investors with a steady income, as they automate the investment process and reduce the impact of market volatility.

Lump Sum Investment
Investing a large sum of money at once is suitable when you have a substantial amount saved. It works well in a bullish market but carries higher risks. Lump sum investments require a good understanding of market conditions and timing, which can be challenging for beginners.

Diversification
Diversify your investments across different types of funds and sectors. This strategy reduces risk and increases the potential for returns. By spreading your investments, you protect your portfolio from the adverse performance of a single asset class or sector.

Monitoring and Reviewing Your Investments
Regular Reviews
Review your portfolio regularly (at least once a year). Ensure it aligns with your financial goals and risk tolerance. Regular reviews help you stay on track and make necessary adjustments based on market performance and changes in your financial situation.

Rebalancing
Adjust your portfolio periodically to maintain the desired asset allocation. Rebalancing ensures you are not overly exposed to any one type of asset, helping you manage risk and optimize returns. This process involves selling some assets and buying others to maintain your target allocation.

Tax Implications
Tax on Equity Funds
Long-term capital gains (LTCG) from equity funds (held for more than one year) are taxed at 10% if they exceed Rs 1 lakh in a financial year. Short-term capital gains (STCG) are taxed at 15%. Understanding these tax implications helps you plan your investments more efficiently.

Tax on Debt Funds
LTCG from debt funds (held for more than three years) are taxed at 20% with indexation benefits. STCG are taxed as per your income tax slab. Proper planning and choosing the right investment horizon can optimize your post-tax returns.

Building a Robust Financial Plan
Emergency Fund
Set aside 3-6 months of expenses in a liquid fund or savings account. This fund acts as a financial cushion during emergencies. Having an emergency fund ensures you don't have to dip into your investments for unexpected expenses.

Insurance
Ensure you have adequate health and life insurance. These policies protect you and your family from unforeseen events. Insurance is a crucial part of a comprehensive financial plan, providing peace of mind and financial security.

Retirement Planning
Start planning for retirement early. Investing in equity mutual funds can help build a substantial corpus over time. The earlier you start, the more you benefit from compounding, making it easier to achieve your retirement goals.

Conclusion
Investing in mutual funds is a smart way to grow your wealth. With a salary of Rs 21,000 and monthly savings of Rs 11,000 to Rs 12,000, you are in a good position to start. Understand the types of mutual funds, assess your financial goals, and choose funds that align with your risk tolerance. Regularly review and rebalance your portfolio to stay on track.

Remember, investing is a journey. Patience and discipline are key. Consulting with a Certified Financial Planner can provide personalized guidance and ensure your investments are well-aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 2024

Asked by Anonymous - Jul 21, 2024Hindi
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Money
Hello, i want to start investing in mutual funds for like 10-15 years time period. Can you suggest me which funds should i investment in and what should i do. I am planning to invest 1k per month because i don't have high salary and i have to pay home expenses. I will increase the amount by certain percentage every 10 months. Can you guide me in this. Thank you!!
Ans: Design a Proper Investment Plan
You intend to have a time horizon of 10-15 years of investment in mutual funds. You will start with a decent amount of Rs 1,000 per month. You will increase the amount every 10 months.

Selection of Correct Funds
Diversified Equity Fund:

Start your investment with a diversified equity fund.
These funds are invested in various sectors.
Balanced Fund:

Then, consider balanced funds.
Their investment is in equity and debt. A Mid-Cap and Small-Cap Funds
For better returns, add mid-cap and small-cap funds.
These funds invest in medium and small companies.
How to Increase Your SIP
Regular Increase:

Increase your SIP amount every 10 months.
Start with Rs 1,000 and gradually increase.
Percentage Increase:

Increase by a certain percentage each time.
This helps in building a substantial corpus.
Benefits of Long-Term Investment
Compounding Effect:

Longer investment periods yield better returns.
Compounding helps grow your money over time.
Market Fluctuations:

Long-term investments reduce market risk.
Short-term fluctuations have less impact.
Monitoring and Reviewing
Annual Review:

Review your portfolio annually.
Performance Adjustment:
Adjust based on performance
Stay Informed:
Stay informed about market trends
Read all financial news and reports
Other Tips
Emergency Fund:

Always maintain an emergency fund
Always keep 3-6 months expense in liquid form
Not Frequent Withdrawals:
Let it Grow
Avoid frequent withdrawals for maximum benefit
CFP
Always consult a CFP
They shall help you with personalised advice
Final Insights
You can start investing in mutual funds with as much as Rs 1,000 a month. Go for diversified equity, balanced, and mid-cap funds. Also, remember to increase the amount of money in the SIP from time to time along with changes in income. Be well-informed, but for all personalized guidance, do seek out a Certified Financial Planner.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Money
Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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