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Ramalingam

Ramalingam Kalirajan  |5367 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2023

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
Nirmal Question by Nirmal on May 08, 2023Hindi
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My son(27 yrs) wants to create an SIP of Rs.20K monthly for 20 years for Infosys and ITC each. How much wealth can he expected to create by this action at the end of 20th year. Is it a wise approach for weath creation.

Ans: Investing only in just 2 stocks may not be the right approach. Need to have reasonable diversification.
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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Moneywize

Moneywize   |125 Answers  |Ask -

Financial Planner - Answered on Feb 09, 2024

Asked by Anonymous - Feb 08, 2024Hindi
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Can a SIP of Rs 2,000 per month for 20 years help me earn Rs 40 lakh? I would also be interested in doing a top-up SIP of Rs 1,000 after end of every year, and may be Rs 2,000 SIP top-up after three years. What kind of returns can I expect from this endeavor?
Ans: Whether a SIP of Rs 2,000 per month for 20 years with top-ups can help you earn Rs 40 lakh depends on the rate of return you achieve. Here's a breakdown:
Investment plan:
• Monthly SIP: Rs 2,000
• Investment period: 20 years (240 months)

Top-up SIP:
• Rs 1,000 annually
• Rs 2,000 after 3 years (one-time)

Possible returns:

It's impossible to predict future returns with certainty, but here's an estimate based on historical averages:

• Equity mutual funds: Historically, equity mutual funds in India have delivered average annual returns of around 12-15%. With this rate, you could reach Rs 40 lakh in approximately 15-17 years.
• Debt mutual funds: Debt funds offer lower returns but are less volatile. They typically yield 6-8% annually. At this rate, reaching Rs 40 lakh would take much longer, possibly exceeding 20 years.

Reaching Rs 40 lakh:

Based on the above, a return of at least 8% would be necessary to reach Rs 40 lakh within 20 years with your investment plan. Remember, this is just an estimate, and actual returns may vary significantly.

Using a SIP calculator:

For a more precise estimate, consider using a SIP calculator that factors in your investment details and desired return rate. Many online platforms offer such calculators.

Important factors to remember:

• Past performance is not indicative of future results. Mutual fund returns can fluctuate significantly depending on market conditions.
• Consider your risk tolerance. Equity funds offer higher potential returns but also carry greater risk. Choose a fund that aligns with your risk appetite.
• Seek professional advice. Consulting a financial advisor can help you create a personalised investment plan based on your goals and risk profile.

..Read more

Ramalingam

Ramalingam Kalirajan  |5367 Answers  |Ask -

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

Asked by Anonymous - Feb 20, 2024Hindi
Money
I m 49yrs, investing in SIP since 2019, started with Rs.10k/month, now Rs.20k/month. This month invested Rs.10lk in 4 equity linked MFs. Expecting Rs.43lks from PPF by 2031. How should I go further to have monthly income of Rs.2lk after 60yrs of age? How can I earn Rs. 80,000 in 12 months by investing just Rs. 4,000? Not possible in my opinion. I will continue to track answers i wish to learn from other experts.. I am 31 years-old & investing INR 110k/ month in various SIPs in India since July 2015. How can I make 10 Crores in 10 years from now? I have invested in PPF and Bank FD, and asset allocation in my SIP portfolio is appropriate as of March 2016. Good job! your thinking process is abolutely perfect. You have a set goal to achieve an end number of Rs10crores. But it will lead to utter failure- I will explain in a moment- And you also have a good savings rate of Rs1.1l per month which adds up to Rs13.2l per year. So assume even if your investments yield 0% returns over the long period it would still amount to Rs1.32crores. Now don’t get upset when I say 0% returns. When you invest in equities, you have the worst scenario in your mind before you venture. Preparing for the worst is preparing to succeed. Now lets look at your preferred mode of If I invest 15000 INR every month in SIPs, how much returns can I expect by the end of 15-20 years? *Answering this question from my perspective* As I am going to invest for a long term, I would choose EQUITY funds. ( No debt or hybrid) Per month I am going to invest Rs 15000. So, it amounts to 1 lakh 80 thousand per year and 36 lakhs for 20 years. In this case, I am assuming an annual returns of 12% as it is equity fund and any good equity fund can give 12% returns. At the end of 15 years, Amount Invested= 27 lakhs Wealth Gain= 48.7 lakhs Expected Total amount= 75.7 lakhs At the end of 20 years, Amount Invested= 36 lakhs Wealth Gain= 1.1 crore Expected Total amount= 14987219 ( 1.5 Crores) I hope this an If I invest ?1000 for 10 years in SIP what will be my returns? I want to invest 2K per month for two years in SIP. What are the best SIP Plans for that? If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? I have Rs. 50,000 with me to invest. Where can I invest so that I get an insured monthly return of Rs. 10,000? Rs. 10000 per month means 240 percent per annum rate of interest You cannot get through investments anywhere in the world If you have financial discipline and know the techniques of doing any business activity, you can definitely get the return in the long run See the example: Buy clothes worth Rs. 50000 (need not be in a single day). You have purchased 500 pieces at Rs. 100 per piece. Start selling th Where should I invest Rs 30,000 every month? Hey Keshav, I am not a Financial Adviser, so i can’t advise where to invest, but here’s what i will do as a middle class investor. Split that 30K into three parts: 15,000 - Plan A I will invest this money in Fixed , PPF or RD deposit every month without fail, i will make sure, all the interest generated will also be put back into this account again and again. until i really need it for emergency or re-investing it in Home down payment, This money will only be for the most important need. 10,000 - Plan B I will take the next 10K, and split it in to 7K and 3K. With 7K i will find two good mutual funds If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? First of all, any mutual fund question is incomplete without a Goal and Individual Age. Have you thought why you are investing 3000 and till what period ? What is your target amount? Without having answers to these questions it doesn't matter you invest in 1 fund or 100 funds. Now for your purpose we make assumption that you are now 25 years old and you need 80 lakhs amount for your child higher education after 25 years (that is your child may be at a age of 21) So as you are investing early I assume you could take a bit higher risk and target small cap funds with 15% annual returns expectation I If I invest 2,000 rupees per month in SIP for 10 years, in which fund should I invest, and how much will I get a return after 10 years? My suggestion would be to go for Mid Cap Mutual Funds. There are quite a number of Good Mid Cap Funds available for investments like: Quant Mid Cap Fund, Nippon India Growth Fund, HDFC Mid Cap Opportunities fund, SBI Magnum Mid Cap fund etc. etc. Now how much you will get after 10 Years. For Example Quant Mid Cap Fund - Direct Plan has NAV of Rs 197.99 its 3 years returns are 36.83 % and returns since launch of fund is 18.64 % and its assets under management is Rs 3781 Crores. Suppose you do Monthly SIP in this fund for 10 years or 120 months and we assume the fund will return 15 % average then you I want to invest in SIP, 1000 per month for 5 years. Is there any SIP available with this amount? You can start your investment in mutual funds via SIP of Rs. 1000 for 5 years. Checkout following schemes in which you can begin your investment. Reliance Tax Saver ELSS G Axis Long Term Equity Fund G SBI Magnum Multicap Fund G ICICI Pru Value Discovery Fund G L&T Tax Saver Fund G HDFC Long Term Advantage Fund G Franklin India Tax Shield Fund G Sundaram Diversified Equity G UTI Mastershare G UTI Balanced Fund G UTI Bond Fund G Sundaram Money Fund G Following calculations are takes place : Monthly Investment (SIP) = Rs. 1000 Time Horizon (in years) = 5 years Expected Return (%) = 12.5 Total SIP Amount Invested What should I do with Rs. 50,000 to earn Rs. 10,000 per month? There are lots of things you can do with your Rs 50,000 but if you invest in bitcoin, stock exchange or start trading you first have to know how these things work don't Just invest blindly. I would suggest you invest it in yourself get knowledge, get smarter. Look at it this way right now the 2ND richest person on this planet is Jeff Bozos the CEO of Amazon. Yes he's a billionaire. Now think about it for a second does Amazon have physical store ? No. Does it advertise on TV ? No. It all started form internet and it's where it generates it's traffic from. In America about 50% of people earn from I want to invest 15-20k per month in SIP, how much return is expected after say 2-3 years? Of Rs.20,000 invest Rs.10,000 in Equity mutual funds, Rs.5,000 in Balanced funds and Rs.5,000 in Debt mutual funds. Normally it will more than 3 years to see decent return from equity & balanced mutual funds but the return will be good around 13% to 15% (Tax free). As for debt funds, you will see returns sooner and it will be around 9% (Taxable). In three years returns won’t be much. You will be investing around Rs.7 lakh and you may have return of around Rs.60,000 after 3 years. But as years goes on, power of compounding takes effects and you will see massive returns in long term like in 15 ye I have Rs. 50,000 with me to invest. Where can I invest so that I get an insured monthly return of Rs. 10,000? I recommend you to invest in yourself by doing a professional course so that you stop asking these type of question. By investing money in yourself you may open a business for yourself and can much more. On investment term, the monthly return of 20% is possible only in a poonzi scheme where chances of losing money are very high. How can I generate a monthly income of Rs 50,000 from Rs 20 lakh? Learn “Income investing” method which goes on like this: Buy a basket of banks : HDFC BANK, ICICI and Kotak. These 3 make the major market cap of all banks. You can put these “Shares as Margin” with good brokers like ICICIDIRECT and get up to 85% of amount as margin. Thus investment of 20L gives u a margin of about 17L. Sell Banknifty (BN) call contracts about 40–50 days from current date and such that the premium comes close to ?50,000 ?50k premium needs to write 2500 points of BN contracts as the lot size is 20. Writing 1 Lot requires about 60k of capital. With 17L capital, you can write about 2 If I invest 1000 per month in SIP for 20 years, how much will I return after 20 years? For this amount, which fund is best for me? If you Invest in SBI Small Cap Mutual Fund thru SIP of Rs 1000 per month for 20 Years or 240 months then your Expected Fund value at the end of the 20 th Year would be Rs 24,38,856.38 approx. SBI Small Cap Fund is currently returning 25.81 % average since its launch. However, in the above calculation I have considered only 20 % average returns. Your total Investment Rs 1... If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? It depends. If u want to have sound sleep in nights without worrying about fluctuations, balanced advantage funds r great. In theory they follow the principle of BUY LOW and SELL HIGH. Again it's a very individual preference. Everyone is UNIQUE and should invest as per his/her capacity and personal situation. Ideal would be to invest in combination of NIFTY 50 index funds and NIFTY next 50 index funds Again the proportion can vary from 70:30 to 50:50. Many people will say I have high risk tolerance but remember to recover 5% loss u haveto earn double 10 % of profit and so on. So it's better to have hi If I invest ?1000 for 10 years in SIP what will be my returns? I want to invest 2K per month for two years in SIP. What are the best SIP Plans for that? If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? Where do I invest Rs. 2000 per month for SIP? What if I started investing 2000rs / month in SIP for 40 years? Which SIPs are good for investing Rs 500 per month to get Rs 20 lakh and above after 16 years? Which are the best long-term MF SIPs to invest Rs. 4,000 per month? How do I invest 500 Rs per month? What capital do I need to invest to get Rs.20K per month in dividends? I want to invest 5000 (fixed) as SIP every month for my sister for 10-15 years for a corpus of 30 lakhs. What are some good funds for investment?
Ans: It's great that you're exploring investment options and seeking advice. Investing in SIPs can be a prudent way to build wealth over the long term. Here are some general considerations and principles to keep in mind:

Diversification: It's often recommended to diversify your investments across different asset classes and fund categories. This helps spread risk and maximize potential returns. Consider allocating your investments across equity, debt, and balanced funds based on your risk tolerance and investment objectives.

Investment Horizon: Determine your investment horizon, which refers to the length of time you plan to stay invested before needing to access the funds. Longer investment horizons typically allow for more aggressive investment strategies, whereas shorter horizons may necessitate a more conservative approach.

Risk Tolerance: Assess your risk tolerance carefully and choose funds that align with your comfort level. Equity funds tend to offer higher potential returns but also come with higher volatility and risk. Debt funds, on the other hand, offer lower risk but typically lower returns.

Expense Ratio: Pay attention to the expense ratio of the mutual funds you're considering. Lower expense ratios can translate to higher returns for investors over the long term, as less of the fund's assets are consumed by fees and expenses.

Fund Performance: While past performance is not indicative of future results, it's still essential to review the historical performance of mutual funds before investing. Look for funds with a consistent track record of delivering returns that align with your investment goals.

Review Regularly: Regularly review your investment portfolio and make adjustments as needed based on changes in your financial situation, investment goals, and market conditions. Rebalancing your portfolio periodically can help ensure that it remains aligned with your objectives.

Seek Professional Advice: If you're unsure about which funds to choose or how to construct a well-diversified portfolio, consider seeking advice from a qualified financial advisor. An advisor can assess your individual circumstances and help tailor an investment strategy that meets your needs.

Remember that investing involves risks, and it's essential to conduct thorough research and exercise due diligence before making any investment decisions. By following these principles and investing consistently over time, you can work towards achieving your financial goals.

Best regards.

..Read more

Ramalingam

Ramalingam Kalirajan  |5367 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 2024

Asked by Anonymous - Jun 27, 2024Hindi
Money
I am planning to start SIP of Rs.5000 with step up of 50% for a time horizon of 20 years. If we assume an average return of 12% , approximately how much wealth can be accumulated
Ans: you have a commendable plan for starting a SIP of Rs. 5000 with a 50% step-up over a 20-year horizon. This strategy, paired with an estimated 12% average return, can accumulate significant wealth. Let’s delve into the details step by step.

Understanding SIP and its Advantages
Systematic Investment Plan (SIP) is a disciplined investment method where you invest a fixed amount regularly, irrespective of market conditions. It helps in averaging the cost of investment and instilling a habit of regular saving.

Advantages of SIP:

Discipline in Savings: SIP enforces regular saving, which is essential for wealth accumulation.
Rupee Cost Averaging: It averages out the purchase cost, mitigating the impact of market volatility.
Power of Compounding: Over time, the returns on your investments start earning, leading to exponential growth.
Flexibility: SIPs offer flexibility in terms of investment amount and tenure.
Convenience: Automatic deductions make it hassle-free.
Concept of Step-Up SIP
A step-up SIP allows you to increase your SIP amount annually. Your plan to start with Rs. 5000 and step it up by 50% annually is strategic. This approach leverages the increase in your income and enhances your investment portfolio significantly over time.

Benefits of Step-Up SIP:

Enhanced Savings: Regularly increasing the SIP amount boosts your savings without a significant impact on your lifestyle.
Inflation Hedge: Helps in combating inflation as your investments grow at a faster pace.
Goal Alignment: Helps in reaching financial goals quicker by systematically increasing contributions.
Mutual Fund Categories
**1. Equity Funds:
These funds invest primarily in stocks. They offer high growth potential but come with higher risks.

**2. Debt Funds:
These invest in fixed-income securities like bonds and treasury bills. They are safer but offer lower returns compared to equity funds.

**3. Hybrid Funds:
These funds invest in a mix of equity and debt instruments, providing a balanced approach to risk and return.

Advantages of Mutual Funds
Professional Management: Managed by experienced fund managers who make informed investment decisions.
Diversification: Mutual funds invest in a variety of securities, reducing overall risk.
Liquidity: Mutual funds can be easily bought or sold, providing liquidity to investors.
Accessibility: You can start investing with a small amount, making it accessible for all income groups.
Risk Factors in Mutual Funds
Market Risk: Equity funds are subject to market fluctuations.
Interest Rate Risk: Debt funds are affected by changes in interest rates.
Credit Risk: The risk of default by the issuers of the debt securities.
Inflation Risk: Returns may not always keep up with inflation, particularly in conservative funds.
Power of Compounding
Compounding is the process where your investment earnings are reinvested to generate additional earnings over time. In the context of mutual funds, reinvesting dividends and capital gains leads to exponential growth of your investment.

Example:

If you invest Rs. 5000 monthly with a 12% annual return, the power of compounding significantly boosts your wealth accumulation.
Estimating Wealth Accumulation
Starting with Rs. 5000 and stepping it up by 50% annually can lead to substantial wealth. Over a 20-year horizon, with an assumed return of 12%, you can accumulate a sizeable corpus. The compounded returns, along with the increased contributions, play a pivotal role in wealth creation.

Actively Managed Funds vs. Index Funds
Disadvantages of Index Funds:

Limited Growth: They track a market index, offering limited growth potential.
No Active Management: Lack of active management means missed opportunities in volatile markets.
Market Dependency: Their performance is entirely dependent on the market index.
Benefits of Actively Managed Funds:

Professional Expertise: Managed by experienced fund managers who aim to outperform the market.
Flexibility: Can adapt to changing market conditions and take advantage of market opportunities.
Potential for Higher Returns: Aim to provide higher returns than index funds through strategic investments.
Regular Funds vs. Direct Funds
Disadvantages of Direct Funds:

Lack of Guidance: No access to professional advice, making it difficult for novice investors.
Time-Consuming: Requires more time and effort to manage and monitor investments.
Higher Risk: Without professional advice, the risk of making poor investment choices increases.
Benefits of Regular Funds through MFD with CFP Credential:

Expert Advice: Access to a Certified Financial Planner for professional guidance.
Convenience: Easier to manage with the support of a financial expert.
Personalized Planning: Tailored investment strategies based on individual goals and risk tolerance.
Investment Strategy and Financial Goals
Your plan of starting a SIP with a step-up strategy is excellent. Aligning this with your financial goals will ensure you are on the right path to achieving them.

Short-Term Goals:

Emergency Fund: Ensure you have sufficient liquidity for unexpected expenses.
Short-Term Purchases: Plan for upcoming expenses like vacations, gadgets, or home renovations.
Long-Term Goals:

Retirement Planning: Accumulating a significant corpus for a comfortable retirement.
Children's Education: Ensuring funds for higher education without financial strain.
Wealth Creation: Building wealth for future security and lifestyle enhancement.
Risk Assessment and Management
Understanding your risk tolerance is crucial. Since SIPs in equity funds involve market risks, assessing your risk appetite helps in choosing the right funds. Diversifying your investments across various asset classes can mitigate risks.

Risk Management Strategies:

Diversification: Spread investments across different asset classes and sectors.
Regular Review: Periodically review your portfolio to ensure it aligns with your goals.
Rebalancing: Adjust your portfolio based on market conditions and changing goals.
Importance of Financial Planning
A Certified Financial Planner (CFP) can provide valuable insights and help in strategizing your investments. Their expertise ensures your financial plan is comprehensive and aligned with your long-term objectives.

Benefits of Consulting a CFP:

Holistic Planning: Covers all aspects of financial planning, including investments, insurance, tax planning, and retirement.
Objective Advice: Provides unbiased recommendations based on your financial situation.
Customized Solutions: Tailored investment strategies to meet your unique financial goals.
Final Insights
Starting a SIP of Rs. 5000 with a 50% step-up is a smart strategy. Over a 20-year horizon, with an estimated 12% return, it can accumulate substantial wealth. The power of compounding, combined with disciplined investing and regular step-ups, will significantly boost your financial growth. Leveraging the expertise of a Certified Financial Planner ensures your investments are well-managed and aligned with your goals. This holistic approach, with a focus on diversified and actively managed mutual funds, sets the stage for achieving your financial aspirations.

Investing in mutual funds through SIPs, understanding the advantages, risks, and benefits of professional management, and aligning them with your goals ensures a robust financial future. Stay disciplined, review your portfolio regularly, and make informed decisions to maximize your wealth accumulation journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Krishna Kumar  |358 Answers  |Ask -

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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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