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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 18, 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 forbackup on May 10, 2024Hindi

Hi, I'm 32now, i want to have money generated 30 lakh for the next 16 years, what SIPs are better for moderate risk

Ans: Generating ?30 Lakhs in 16 Years: A Moderate Risk Approach
You are 32 now and aiming to generate ?30 lakhs over the next 16 years. It is a commendable goal and certainly achievable with a disciplined approach.

Understanding your financial goals and risk appetite is crucial. For a moderate risk profile, Systematic Investment Plans (SIPs) in mutual funds offer a balanced approach.

Importance of SIPs
SIPs provide the benefit of rupee cost averaging. This means you invest a fixed amount regularly, buying more units when prices are low and fewer when prices are high. This smoothens the impact of market volatility over time.

Another advantage is the power of compounding. By investing regularly, your money has the potential to grow exponentially as returns themselves generate returns.

Asset Allocation for Moderate Risk
Diversifying your investments across different types of mutual funds can help manage risk. A combination of equity and debt funds is typically recommended for moderate risk profiles.

Equity Funds
Equity funds invest primarily in stocks. They have the potential for higher returns but come with higher risk. Within equity funds, consider a mix of large-cap and multi-cap funds. Large-cap funds invest in well-established companies, providing stability. Multi-cap funds invest across various market capitalisations, offering balanced growth.

Debt Funds
Debt funds invest in fixed income instruments like bonds. They provide stability and lower risk compared to equity funds. Consider including short-term and medium-term debt funds in your portfolio. These funds can offer steady returns and act as a cushion during market downturns.

Choosing Actively Managed Funds
Actively managed funds have a fund manager who makes investment decisions based on market research. These funds aim to outperform the market and offer potentially higher returns.

Unlike index funds, which simply track a market index, actively managed funds seek to beat the index. This active management can provide better returns, especially in a volatile market.

Benefits of Regular Funds
Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential can be advantageous. MFDs offer regular funds which include a small commission. This commission incentivises them to provide continuous support and advice.

Regular funds also come with the benefit of personalised guidance. A CFP can help you adjust your investments based on changing market conditions and personal financial goals.

Monitoring and Rebalancing
Regular monitoring of your investments is essential. Market conditions and personal circumstances can change, affecting your investment strategy.

Rebalancing your portfolio periodically ensures that it remains aligned with your risk profile and financial goals. This involves adjusting the proportions of equity and debt funds to maintain the desired asset allocation.

Tax Efficiency
Mutual funds offer tax-efficient returns. Long-term capital gains from equity funds are taxed at 10% if the gains exceed ?1 lakh in a financial year. Debt funds, held for over three years, qualify for indexation benefits, reducing the tax burden on gains.

Conclusion
Investing in SIPs with a mix of equity and debt funds is a prudent approach for generating ?30 lakhs in 16 years. This strategy balances growth potential with stability, suited for a moderate risk profile.

Actively managed funds, chosen with the help of a Certified Financial Planner, can provide better returns and personalised advice. Regular monitoring and rebalancing of your portfolio will help you stay on track to meet your financial goal.

Congratulations on taking this important step towards your financial future. Your discipline and commitment to investing will surely pay off.

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.