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41 Years Old, Seeking 20 Lakh return from SIP in 15 Years for Children's Education?

Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 23, 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 - Jul 18, 2024Hindi
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HI, I am 41 years old and want to start a SIP to give a return of 20 lakh in next 15 yrs for children education. which fund I should choose?

Ans: Goal Assessment

You aim to accumulate Rs. 20 lakh over the next 15 years for your children's education.

Starting a SIP is a smart way to achieve this goal.

Let's explore the best approach to meet your objective.

Investment Horizon and Risk Appetite

You have a long-term horizon of 15 years.

This allows you to take on more risk for potentially higher returns.

Equity mutual funds are suitable for long-term goals.

Types of Equity Mutual Funds

Large-Cap Funds: Invest in big, stable companies. Less risky but moderate returns.

Mid-Cap Funds: Invest in medium-sized companies. Moderate risk and returns.

Small-Cap Funds: Invest in smaller companies. High risk but high returns.

Flexi-Cap Funds: Invest across various company sizes. Balanced risk and returns.

Why Not Index Funds?

Index funds follow the market. They lack active management.

Actively managed funds aim to beat the market.

This offers potentially higher returns.

For your goal, actively managed funds are better.

Benefits of Regular Funds

Professional Management: Managed by experts.

Personal Guidance: Certified Financial Planner can guide you.

Better Performance: Regular monitoring and adjustments.

Choosing the Right Funds

Diversify across different types of funds.

This balances risk and reward.

A mix of large-cap, mid-cap, and small-cap funds is ideal.

Example Allocation Strategy

Large-Cap Fund: 40% for stability and steady growth.

Mid-Cap Fund: 30% for moderate growth.

Small-Cap Fund: 20% for high growth potential.

Flexi-Cap Fund: 10% for balanced growth.

Regular Monitoring and Review

Review your investments annually.

Adjust based on performance and changing market conditions.

Seek advice from a Certified Financial Planner regularly.

Benefits of SIP

Discipline: Ensures regular investment.

Rupee Cost Averaging: Buys more units when prices are low.

Compounding: Helps in wealth creation over time.

Why Avoid Direct Funds?

Direct funds lack personal guidance.

You miss out on expert advice.

Certified Financial Planners provide valuable insights.

Final Insights

Starting a SIP for your child's education is a wise decision.

Choose a mix of large-cap, mid-cap, small-cap, and flexi-cap funds.

Regularly review and adjust your portfolio.

Seek professional guidance to stay on track.

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  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 29, 2024

Asked by Anonymous - Oct 28, 2024Hindi
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Hello Everyone one greetings! I am planning to start SIP. I AM 40 yrs n can invest 5000 monthly to start initially and continue for next 12-15yers. The goal to create some corpus for child education n their future needs.Any suggestion would help. I am unable find good fund across different fund houses. Thank you.
Ans: Starting a SIP with Rs. 5,000 per month is a great decision. With a disciplined approach over 12 to 15 years, this amount can grow significantly. Let’s structure your plan step by step.

1. Set Clear and Realistic Goals
Define how much you need for your child’s education or other future needs.

Estimate the timeline—when will the expenses occur (school, college, or higher education)?

Having a target amount will guide your investment strategy better.

2. Determine Your Risk Appetite
Since your investment horizon is 12 to 15 years, you can take moderate to high risks.

Long-term investments tend to perform better in equity-based funds.

If you want lower risk, you can mix equity with hybrid funds.

3. Avoid Index Funds and Choose Actively Managed Funds
Index funds may provide average returns, as they follow the market.

Actively managed funds can outperform markets, especially during volatility.

Professional fund managers adjust portfolios to benefit from changing market conditions.

This makes actively managed funds better suited for long-term goals.

 
4. Importance of Regular Funds over Direct Funds
Direct funds offer slightly lower costs but come with higher management challenges.

Choosing regular funds through a certified financial planner provides expert guidance.

They help you with fund selection, monitoring, and timely portfolio adjustments.

This ensures your investments stay aligned with your goals.


5. Diversify Across Different Fund Types
Spread your Rs. 5,000 SIP across multiple categories for better returns and risk management.

Consider allocating across large-cap, mid-cap, and hybrid funds.

Large-cap funds offer stability, while mid-cap funds provide growth potential.

Hybrid funds ensure some safety by combining equity and debt.

6. Increase SIPs Over Time
Start with Rs. 5,000 monthly and increase it by 10-15% annually.

This helps you counter inflation and meet rising education costs.

Even a small increase yearly will have a big impact over time.

7. Monitor and Rebalance Regularly
Track your portfolio performance every 6 to 12 months.

If a fund underperforms for long, switch to a better-performing fund.

As the education expenses approach, shift some investments to safer instruments.

This helps protect your corpus from sudden market drops.

8. Understand Taxation of Mutual Funds
For equity funds, long-term capital gains above Rs. 1.25 lakh attract 12.5% tax.

Short-term capital gains are taxed at 20%.

Debt funds are taxed according to your income tax slab.

Plan withdrawals smartly to reduce tax impact on your earnings.

9. Use Lump Sum Investments for Boosting Growth
Apart from SIPs, invest lump sums whenever possible, such as bonuses or gifts.

Lump sum investments in hybrid funds can stabilise returns.

This strategy will ensure your overall corpus grows faster.
10. Stay Disciplined During Market Volatility
The market may fluctuate, but SIPs work best during corrections.

Continue investing even in downturns to benefit from rupee cost averaging.

Avoid panic-selling during market dips.

Staying invested ensures long-term wealth creation.

11. Avoid Investment-Cum-Insurance Policies
If you hold LIC or ULIP policies, they may offer low returns.

Consider surrendering such policies and reinvesting the proceeds into mutual funds.

Keep insurance and investments separate for better financial outcomes.

12. Consult a Certified Financial Planner
A planner helps with fund selection, portfolio tracking, and risk management.

They offer valuable insights that ensure your investments stay on course.

Their expertise makes investing less stressful and more efficient for you.

13. Finally: Keep a Long-Term Focus
Building a corpus takes time, patience, and consistent effort.

Celebrate small milestones along the way to stay motivated.

Adjust your investments based on life changes, like additional children’s needs.
Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 13, 2025

Asked by Anonymous - Feb 13, 2025Hindi
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Why do Debt Funds offer lower returns as compared to Equity Mutual Funds?
Ans: Debt funds and equity mutual funds serve different purposes in an investor's portfolio. Debt funds offer stability and lower risk, while equity mutual funds focus on high growth with higher risk.

Below are the key reasons why debt funds provide lower returns than equity funds.

1. Nature of Underlying Investments
Debt funds invest in bonds, government securities, corporate debt, and fixed-income instruments.

These instruments provide fixed interest, leading to predictable but lower returns.

Equity mutual funds invest in company stocks, which have the potential for higher capital appreciation over time.

2. Risk-Return Tradeoff
Lower risk means lower return potential in debt funds.

Debt investments focus on preserving capital rather than aggressive growth.

Equities are volatile, but over the long term, they tend to generate higher returns.

3. Interest Rate Sensitivity
Debt fund returns depend on interest rate movements in the economy.

Rising interest rates reduce bond prices, lowering returns in debt funds.

Equity funds are less impacted by interest rate changes and benefit from economic growth.

4. Inflation-Adjusted Returns
Debt funds often fail to beat inflation in the long run.

Equity investments provide inflation-adjusted growth due to rising corporate earnings.

Holding equities for longer durations results in compounding benefits.

5. Growth Potential
Equities represent ownership in businesses that expand over time.

Business growth translates to higher share prices and higher returns.

Debt instruments provide fixed interest, which limits potential upside.

6. Tax Efficiency
Equity mutual funds enjoy lower long-term capital gains (LTCG) tax rates compared to debt funds.

Debt fund gains are taxed as per the investor’s income tax slab, reducing post-tax returns.

This tax treatment makes equities more attractive for long-term wealth creation.

7. Market Performance
During economic growth, companies generate higher profits, leading to higher equity returns.

Debt fund returns depend on interest rate cycles, making them less rewarding in growth periods.

Equities have historically outperformed debt over longer durations.

Finally
Debt funds provide safety and stability but offer lower returns.

Equity mutual funds outperform over time due to business expansion and compounding.

A well-balanced portfolio should include both debt and equity, based on financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Harsh

Harsh Bharwani  |75 Answers  |Ask -

Entrepreneurship Expert - Answered on Feb 13, 2025

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Sir I am a Engineer by profession snd working in Qatar. Same time i had Cost accountant Degree and passed out way back at 2009. After that no touch with Cost Accounts. Now i am 48 yrs and after few yrs i want to move back to India. But that time if want open a cost accounting firm, what would be the best move i can do to open the consulting firm?
Ans: Hello Mr. Heman,
Reestablishing your career in cost accounting and setting up a consulting firm in India requires careful planning. Start by updating your knowledge through ICAI’s continuing education programs, industry seminars, and professional courses to stay current with evolving regulations and industry practices. Reactivating your ICAI membership and obtaining a Certificate of Practice (CoP) is essential to offer consulting services legally. While still in Qatar, gaining practical exposure by offering freelance or part-time cost auditing or GST advisory services to Indian firms will help establish credibility.

Next, choose a suitable business structure - Sole Proprietorship, LLP, or Private Limited Company - based on your growth plans and compliance preferences. Register your firm with the Ministry of Corporate Affairs and obtain the necessary licenses. Conduct thorough market research to identify your target clients, understand industry needs, and define your service offerings, such as cost audits, financial consulting, and management advisory. A well-structured business plan with clear financial projections will help ensure long-term sustainability.

Investing in technology and infrastructure is crucial. Setting up a professional office, adopting modern accounting software, and leveraging cloud-based financial solutions will enhance efficiency. Building a strong professional network is equally important - reconnect with former colleagues, join industry associations, attend networking events, and establish a digital presence through a website and social media to attract clients.

Lastly, focus on compliance and quality assurance. Adhering to ICAI regulations, tax laws, and ethical standards is critical for maintaining credibility and trust. By systematically following these steps, you can successfully transition back into cost accounting and establish a reputable consulting firm in India, ensuring a stable and rewarding career.

...Read more

Milind

Milind Vadjikar  |1012 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Feb 13, 2025

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Can I change my plan from star FOH to Star Assure. In plan migration form What I write in PED column. my policy number was taken on 19 February 2021, in the first week of March 2021 suddenly my blood pressure increased, due to which the doctor asked me to undergo angiography. After that the doctor asked to do angioplasty immediately and thus on 18 March 2021 I got angioplasty done. Now I am completely healthy, since my illness occurred within 31 days of taking the policy, company agent told me that there is no provision to cover any health related problem within 31 days. Company agent told me that there is no provision to declare any illness midway. Now I am completely healthy. Company not include my above mentioned health condition in my policy. And compny given me reply "Dear Mr. Jain, We acknowledge the receipt of your mail. With reference to our previous telcon, this is to inform that any disease or ailment/illness if found after inception of policy. It is not required to disclose under policy. But if you still wish to disclose the disease then kindly find the attached PED inclusion form, fill and submit us for further evaluation. Note : To note the disease in the policy PED form is mandatory. We request you to provide the Medical reports/ Discharge summary /any relevant /First consultation paper / medical document of the said procedure/diagnosis, which shall be kept for our reference. " What can I do.
Ans: Hello;

Regarding plan migration feasibility you may check with your insurer/insurance agent.

If you want to inform the insurer about your later acquired illness you may furnish the details to them as per their requirement and check their feedback on the same.

Their feedback will decide your next course of action.

Best wishes;

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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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