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Ramalingam Kalirajan |6275 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 14, 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

Question by Srinath on May 03, 2024Hindi

I'm 26 years old and want to invest 50 k each in two ELSS schemes as a SIP to achieve a corpus of 1 cr. Is my strategy right? Or if there is a change can you please guide me accordingly. I've close to 10 lacs in FDs

Ans: Your aspiration to build a corpus of 1 crore through ELSS SIPs is commendable. However, let's evaluate your strategy and explore potential adjustments to optimize your investment approach.

Assessing Your Strategy
ELSS SIPs:
Equity Linked Savings Schemes (ELSS) offer the twin benefits of tax savings under Section 80C of the Income Tax Act and potential for wealth creation through equity exposure. Investing 50,000 each in two ELSS schemes through SIPs is a proactive step towards your financial goals.

Existing FDs:
Having close to 10 lakhs in FDs indicates a conservative investment approach. While FDs provide stability, their returns may not be sufficient to achieve long-term wealth creation goals, especially considering inflation and taxes.

Suggested Adjustments
Diversification:
Consider diversifying your investment portfolio beyond ELSS and FDs. While ELSS SIPs offer the potential for high returns, they also carry market risks. Diversification across asset classes like equity, debt, and real estate can help mitigate risk and optimize returns.

Review FD Allocation:
Reevaluate the allocation of your FDs. While FDs provide liquidity and stability, consider whether tying up a significant portion of your savings in low-yield investments aligns with your long-term wealth creation goals. You may explore gradually reallocating a portion of your FDs towards higher-yielding investment avenues.

Regular Review:
Periodically review your investment portfolio to ensure alignment with your financial goals, risk tolerance, and market conditions. As your financial situation evolves, be prepared to make necessary adjustments to optimize returns and minimize risk.

Alternative Investment Options
Since you're open to suggestions beyond ELSS and FDs, here are a few alternatives to consider:

Equity Mutual Funds:
Apart from ELSS, explore other equity mutual fund categories such as large-cap, mid-cap, and multi-cap funds to diversify your equity exposure further.

Debt Mutual Funds:
Consider allocating a portion of your portfolio to debt mutual funds for stability and regular income. Debt funds invest in fixed-income securities like bonds and provide relatively lower but steady returns compared to equity.

Systematic Investment Plans (SIPs):
SIPs offer the benefit of rupee-cost averaging and disciplined investing. You can explore SIPs in both equity and debt mutual funds to maintain a balanced portfolio.

Conclusion
While your strategy of investing in ELSS SIPs is a step in the right direction, consider diversifying your portfolio and reviewing your FD allocation to optimize returns and mitigate risks. A balanced approach tailored to your financial goals and risk profile will enhance your chances of achieving long-term wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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