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Ramalingam

Ramalingam Kalirajan  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 01, 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
Khwaja Question by Khwaja on Jun 30, 2024Hindi
Money

Hi Sir... I am 43 years and having 3 girls childrens... I am working and monthly earning is 35K, i have own house with value 40L, i want start savings for my daughters education and marriages.. I dont know anything about mutual funds, how to invest and where to invest, pls guide me about mutual fund investments..

Ans: let's talk about investing for your daughters' future. Mutual funds can be a great way to grow your savings over time. Here's a detailed guide to help you understand and start investing in mutual funds.

Understanding Mutual Funds
What Are Mutual Funds?
Mutual funds pool money from many investors to invest in various securities like stocks, bonds, and other assets. Professional fund managers manage these funds, aiming to grow the investment while managing risk.

Types of Mutual Funds
There are different types of mutual funds:

Equity Funds: These invest in stocks and have the potential for high returns but come with higher risk.

Debt Funds: These invest in bonds and are generally safer with lower returns.

Hybrid Funds: These invest in both stocks and bonds, balancing risk and return.

Benefits of Mutual Funds
Professional Management
Investing through mutual funds means you get the benefit of professional fund managers making investment decisions on your behalf. This expertise can be especially valuable if you're not familiar with the stock market.

Diversification
Mutual funds invest in a variety of assets, which helps spread risk. If one asset underperforms, others might do well, balancing the overall performance.

Liquidity
Mutual funds are relatively liquid investments, meaning you can easily buy or sell your investments. This makes it easier to access your money when needed.

Starting Your Investment Journey
Setting Goals
Before investing, it's crucial to set clear financial goals. For instance, you want to save for your daughters' education and marriages. Estimate the amount you will need and the time frame.

Risk Assessment
Understand your risk tolerance. Since you're saving for long-term goals, you might be able to take on more risk for potentially higher returns. However, ensure you are comfortable with the level of risk.

Investment Amount
Decide how much you can invest regularly. Even small amounts can grow significantly over time due to the power of compounding.

Choosing the Right Funds
Equity Funds for Growth
Since you have long-term goals, consider investing in equity funds. They have the potential for higher returns, which can help you reach your financial goals faster.

Hybrid Funds for Balance
If you prefer a balance between risk and return, hybrid funds can be a good choice. They invest in both equities and debt instruments, offering a mix of growth and stability.

Debt Funds for Stability
If you have a low-risk tolerance, debt funds can provide stability. Though the returns are lower compared to equity funds, they are less volatile.

How to Invest
Systematic Investment Plan (SIP)
A SIP allows you to invest a fixed amount regularly, say monthly. This approach helps inculcate a disciplined saving habit and averages out the cost of investment over time.

Lump Sum Investment
If you have a significant amount to invest initially, you can consider a lump sum investment. This method might be suitable if you receive a windfall or bonus.

Regular Funds vs. Direct Funds
Investing through a Certified Financial Planner (CFP) using regular funds can provide you with professional guidance and support. Although direct funds have lower expense ratios, they require more knowledge and effort to manage.

Creating a Diversified Portfolio
Mix of Funds
A well-diversified portfolio should include a mix of equity, hybrid, and debt funds. This combination can help balance risk and return while working towards your financial goals.

Reviewing and Rebalancing
Regularly review your portfolio to ensure it aligns with your goals. Rebalancing helps maintain the desired asset allocation, adjusting for changes in market conditions.

Practical Steps to Start Investing
Selecting a Certified Financial Planner (CFP)
A CFP can provide personalized advice, helping you choose the right mutual funds based on your financial goals, risk tolerance, and investment horizon.

KYC Compliance
Complete the Know Your Customer (KYC) process, which is mandatory for investing in mutual funds. This involves submitting identity and address proofs.

Investing Through MFD
You can invest in mutual funds through a Mutual Fund Distributor (MFD). They can guide you through the process, provide valuable insights, and help you choose the best funds for your needs. This method is convenient and ensures you have professional support.

Monitoring Your Investments
Keep track of your investments regularly. Many platforms offer tools and reports to help you monitor the performance of your mutual funds.

Addressing Concerns
Market Volatility
It's natural to be concerned about market volatility. Remember, mutual funds are long-term investments. Short-term fluctuations are normal, and staying invested can help you ride out the volatility.

Understanding Fees
Mutual funds come with certain fees, such as expense ratios and exit loads. While these fees might seem small, they can impact your returns over time. Ensure you understand the fee structure before investing.

Avoiding Common Mistakes
Avoid trying to time the market or chasing past performance. Instead, focus on your financial goals and stick to your investment plan.

Educating Yourself
Continuous Learning
Investing in mutual funds requires some knowledge. Take time to educate yourself about different types of funds, market trends, and investment strategies.

Resources
Utilize resources like financial news, online courses, and advice from your CFP to stay informed and make educated decisions.

Final Insights
Investing in mutual funds can be a powerful tool to secure your daughters' future. By understanding your goals, assessing your risk tolerance, and choosing the right funds, you can create a solid investment plan.

Start with small, regular investments through a SIP, and gradually build your portfolio. Seek guidance from a Certified Financial Planner to ensure you're on the right track.

Remember, investing is a journey. Stay patient, stay informed, and keep your long-term goals in sight.

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  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

Asked by Anonymous - Jul 04, 2024Hindi
Money
Hello... I am 36 year old female working in a public sector bank. I am planning to come of out my present job after 4 years. I am interested in starting investment in mutual funds. I already have 12 lakhs in sip, 14 lakhs in fd and 4 in savings account Kindly guide me in doing further investments in mutual funds
Ans: Mutual funds are a popular investment option. They pool money from many investors. This money is then invested in stocks, bonds, or other securities. Professional fund managers manage these investments. Mutual funds offer diversification, which reduces risk. They are a good choice for long-term financial goals.

Your Current Financial Situation
You have Rs. 12 lakhs in SIPs, Rs. 14 lakhs in FDs, and Rs. 4 lakhs in a savings account. This is a solid start. It shows your commitment to saving and investing. You are on the right track. However, diversifying your investments is important.

Benefits of Mutual Funds
Mutual funds offer several advantages:

Diversification: They spread your money across various investments. This reduces the risk of loss.

Professional Management: Experts handle the investments. They make informed decisions based on market research.

Liquidity: You can easily buy or sell mutual fund units. This offers flexibility in managing your finances.

Variety: There are different types of mutual funds. You can choose based on your risk appetite and financial goals.

Types of Mutual Funds
Mutual funds come in different categories. Each category has its own risk and return characteristics.

Equity Funds
Equity funds invest in stocks. They have higher potential returns but also higher risk. They are suitable for long-term goals. These funds are ideal for a horizon of 5 years or more.

Debt Funds
Debt funds invest in fixed-income securities. These include bonds and treasury bills. They are less risky compared to equity funds. They provide regular income and are suitable for short to medium-term goals.

Hybrid Funds
Hybrid funds invest in both stocks and bonds. They offer a balanced approach. They provide moderate returns with moderate risk. These funds are good for investors seeking a mix of growth and income.

Setting Your Financial Goals
Identify your financial goals before investing. This helps in choosing the right mutual funds. Your goals can be:

Retirement: Build a corpus for a comfortable retirement. Equity and hybrid funds are suitable.

Child's Education: Save for your child's education. Equity funds are a good choice for long-term goals.

Emergency Fund: Maintain an emergency fund. Debt funds or liquid funds are ideal for this purpose.

Asset Allocation
Asset allocation is crucial. It involves dividing your investments among different asset classes. This strategy reduces risk and maximizes returns. Your asset allocation should be based on your risk tolerance and investment horizon.

Risk Tolerance
Understand your risk tolerance. It is your ability to handle market fluctuations. If you have a high-risk tolerance, you can invest more in equity funds. If you prefer stability, opt for debt funds.

Investment Horizon
Your investment horizon is the duration you plan to stay invested. For long-term goals, equity funds are suitable. For short-term goals, debt funds are better.

Systematic Investment Plan (SIP)
SIP is a disciplined way of investing. It involves investing a fixed amount regularly. This can be monthly, quarterly, or annually. SIP helps in averaging the cost of investment. It reduces the impact of market volatility.

Systematic Withdrawal Plan (SWP)
SWP allows you to withdraw a fixed amount regularly. This is useful for generating regular income. It is suitable for retirees or those needing regular cash flow.

Avoiding Common Mistakes
Avoid common mistakes while investing in mutual funds:

Chasing Past Performance: Do not invest based on past performance. It does not guarantee future returns.

Ignoring Expenses: Be aware of the expenses involved. These include expense ratio and exit load.

Lack of Diversification: Do not put all your money in one fund. Diversify across different types of funds.

Monitoring Your Investments
Regularly monitor your investments. Review their performance periodically. This helps in making necessary adjustments. It ensures that your investments align with your goals.

Rebalancing Your Portfolio
Rebalance your portfolio periodically. This involves realigning the asset allocation. It helps in maintaining the desired level of risk.

Consulting a Certified Financial Planner
Seek guidance from a Certified Financial Planner. They can provide personalized advice. They help in creating a comprehensive financial plan. Their expertise ensures that your investments align with your goals.

Tax Implications
Understand the tax implications of mutual fund investments. Equity funds are subject to capital gains tax. Long-term capital gains (LTCG) tax is applicable after one year. It is 10% on gains exceeding Rs. 1 lakh. Short-term capital gains (STCG) tax is 15%. Debt funds have different tax rules. LTCG is applicable after three years at 20% with indexation. STCG is taxed as per your income slab.

Advantages of Actively Managed Funds
Actively managed funds have professional managers. They aim to outperform the market. They adjust the portfolio based on market conditions. This can lead to higher returns compared to passive funds.

Disadvantages of Index Funds
Index funds track a specific index. They do not aim to outperform the market. Their returns are tied to the index performance. They lack flexibility in changing market conditions. Actively managed funds can provide better returns with expert management.

Benefits of Regular Funds
Investing through regular funds offers benefits. Certified Financial Planners can guide you. They provide valuable insights and advice. They help in selecting the right funds. They assist in creating a balanced portfolio.

Evaluating Fund Performance
Evaluate the performance of mutual funds before investing. Look at the historical returns. Check the consistency of returns. Compare the fund's performance with its benchmark. Analyze the fund manager's track record.

Expense Ratio
The expense ratio is the annual fee charged by the fund. It covers the management and administrative costs. A lower expense ratio is preferable. It affects the overall returns on your investment.

Exit Load
Exit load is a fee charged on early withdrawal. It is a percentage of the redeemed amount. Be aware of the exit load before investing. It impacts the returns if you withdraw before the specified period.

Portfolio Diversification
Diversify your portfolio across different sectors and asset classes. This reduces the impact of poor performance in one sector. It helps in achieving a balanced risk-return profile.

Risk Management
Effective risk management is essential. Diversification and asset allocation are key strategies. Regularly review and rebalance your portfolio. Stay informed about market trends and economic conditions.

Market Volatility
Be prepared for market volatility. The market can be unpredictable. Do not panic during market downturns. Stay focused on your long-term goals. SIPs help in averaging the cost during volatile markets.

Financial Discipline
Maintain financial discipline. Stick to your investment plan. Avoid making impulsive decisions based on market movements. Regularly invest through SIPs to stay disciplined.

Emergency Fund
Keep an emergency fund separate. It should cover at least six months of expenses. Use debt funds or liquid funds for this purpose. It ensures liquidity and safety of funds.

Financial Goals Review
Review your financial goals periodically. Life circumstances can change. Your goals may evolve. Adjust your investment strategy accordingly. Ensure that your investments align with your current goals.

Long-Term Perspective
Have a long-term perspective. Mutual funds are best for long-term wealth creation. Do not focus on short-term market fluctuations. Stay invested to benefit from compounding returns.

Financial Literacy
Enhance your financial literacy. Understand the basics of mutual fund investing. Stay informed about market trends and economic factors. This helps in making informed investment decisions.

Benefits of SIP
SIP offers several benefits:

Disciplined Investing: It encourages regular investing.

Rupee Cost Averaging: It averages the cost of investment over time.

Compounding: It helps in compounding returns over the long term.

Financial Advisor vs. Certified Financial Planner
Certified Financial Planners have specialized training. They provide comprehensive financial planning. They offer personalized advice based on your financial situation. They help in achieving your financial goals.

Final Insights
Mutual fund investments are a powerful tool for wealth creation. They offer diversification, professional management, and flexibility. Understand your financial goals and risk tolerance. Choose the right type of mutual funds. Regularly monitor and review your investments. Stay disciplined and focused on your long-term goals. Seek guidance from a Certified Financial Planner. They can help you navigate the complexities of mutual fund investing.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 2024

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My salary is 67k in hand my age is 29 and unmarried and i have no investment now i want to start investment with a motive to get retire in age 60 and also build wealth for my child and home how can i achieve all this through which Mutual funds so that i can easily fund my child education in future and for home
Ans: Setting Financial Goals
Your primary financial goals are:

Retirement at age 60
Wealth creation for future child's education
Purchasing a home
Let's devise a plan to achieve these goals through mutual fund investments.

Monthly Budget Allocation
Your salary is Rs. 67,000. Here's a suggested allocation:

Emergency Fund: Save 6 months' expenses in a savings account or liquid fund.
SIP Investment: Allocate 20-25% of your salary for SIPs (Rs. 13,400 - Rs. 16,750).
Short-term Goals: Save for immediate needs (10% of salary).
Lifestyle Expenses: Allocate the rest for living expenses and discretionary spending.
Suggested Investment Strategy
Diversified Portfolio
Equity Mutual Funds:

Invest in large-cap and multi-cap funds for stable growth.
Allocate a portion to mid-cap and small-cap funds for higher returns.
Debt Mutual Funds:

Invest in debt funds for stability and lower risk.
Allocate a portion to balanced or hybrid funds for a mix of equity and debt.
Systematic Investment Plan (SIP):

Start SIPs in chosen funds.
Regular investments ensure disciplined savings and cost averaging.
Example Allocation
Large-Cap Fund:

Stability and steady growth.
Allocate Rs. 5,000 per month.
Multi-Cap Fund:

Diversified equity exposure.
Allocate Rs. 4,000 per month.
Mid-Cap Fund:

Higher growth potential.
Allocate Rs. 3,000 per month.
Small-Cap Fund:

High risk, high reward.
Allocate Rs. 2,000 per month.
Balanced Fund:

Mix of equity and debt.
Allocate Rs. 2,000 per month.
Retirement Planning
Calculate Future Needs
Retirement Corpus:

Estimate future expenses.
Use a retirement calculator for precise planning.
Regular Reviews:

Adjust investments as needed.
Increase SIPs with salary hikes.
Investment Horizon
Long-Term Focus:
Equity funds for long-term growth.
Debt funds for stability as retirement approaches.
Child's Education
Education Fund
Dedicated SIPs:

Start a separate SIP for education.
Choose child education-specific funds.
Goal-Based Planning:

Estimate education costs.
Adjust SIPs to meet target amount.
Home Purchase
Down Payment and Loan
Savings Plan:

Save for a down payment in a short-term debt fund or FD.
Consider a home loan for the balance amount.
EMI Affordability:

Ensure EMIs are within your budget.
Keep debt-to-income ratio manageable.
Final Insights
Diversification:

Ensure portfolio is diversified.
Minimize risk by spreading investments.
Regular Monitoring:

Review investments periodically.
Rebalance portfolio as needed.
Professional Advice:

Consult a Certified Financial Planner for personalized guidance.
Ensure alignment with financial goals.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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Hi Mr. Ramalingam, Can I check New Asset class (Specialized Investment Fund SIF) for 10 lakhs investment for my kids education(Right now 4months old). Thank you for your response.
Ans: Investing Rs 10 lakhs for your child’s education is a thoughtful decision.

Your child is 4 months old, so you have a long investment horizon.

Currently, SIF is not yet launched or operational.

Equity Mutual Funds: A Reliable Option
Equity mutual funds are proven for long-term goals like education.

They offer inflation-beating growth over a 15-18 year period.

Start investing now to benefit from compounding.

Choose funds with a consistent track record.

Wait and Observe SIF Performance
SIF is a new asset class and lacks a performance track record.

It’s wise to wait for its launch and review its stability.

Assess the fund's returns, risk profile, and management quality.

Investing in an untested asset could increase risks unnecessarily.

Diversify Investments Over Time
Initially, focus on equity mutual funds for growth.

Later, as SIF stabilises and performs well, consider it.

Diversify across asset classes gradually based on market insights.

Final Insights
Begin with equity mutual funds for your child’s education fund.

Monitor SIF's launch and performance over the next few years.

Decide on SIF only after it demonstrates a solid track record.

Keep your investments aligned with your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Milind

Milind Vadjikar  |790 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 23, 2024

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I& my wife is 32. What would our ideally retirement corps. I assume 20Cr. Correct me if I'm wrong. My current saving & income are below - 1) Rs 2,40,000 take home per month combined. 2) We both have PPF for the last 7 years contributing 1.5L each year from starting and plans to continue till 60. 3) LIC will give us 2Cr when we hit 60. 4) NPS we contribute 1L per each year form 2022 combined plans continue till 60. 5) Mutual Fund of SIP Rs 10,000 each month for last 1 year combined plans continue till 60. 6) APY we will get 5000 per month at 60. 7) FDs of Rs 36Lakh 8) Gold of Rs 15Lakh bonds 9) Got Inherited Rs 1.6Cr in form of FDs 10) Have Medeclaim of 40Lakhs and have own house. 11) Monthly expenses is around 40,000. 12) Have 1 year old Kid. 13) Have PF of 8 lakhs and will grow till 60. Also taking Gratuity in account.
Ans: Hello;

Your current monthly income need of 2.4 L will grow up to 12.27 L after 28 years (At your retirement age of 60) considering 6% inflation.

Assuming your expenses at retirement will reduce so you may need 75% of this income to cover your expenses at that time therefore you may need a monthly income of 9.2 L.

To generate this income you may need a corpus of 27 Cr(Min.) at the age 60 that may generate post-tax monthly income of around 9.2 L.

Your investments will grow as follows,

1. PPF: 1.5 L per person per year for 35 years will grow into a corpus of around 4.32 Cr. (6.9% return assumed)

2. LIC: policy maturity proceeds will provide 2 Cr at age 60.

3. NPS: 1 L per person per year may grow into a sum of 2.5 Cr at 60.(8% return considered)

4. MF sip of 10 K may grow into a sum of 2.05 Cr at 60. (10% return considered)

5. FD of 36 L will grow into a sum of 2.1 Cr if held till 60. (6.5% return assumed)

6. Gold in form of bonds if reinvested into gold mutual funds and held till 60 may yield a corpus of around 1.1 Cr. (7% return assumed)

7. Inherited funds if held in FD till the age of 60 may yield a corpus of 9.9 Cr.
(6.5% return considered)

8. EPF is expected to grow into a sum of around 1.8 Cr at the age of 60.(7% return considered)

A summation of investment values at 60 indicates a sum of around 25.77 Cr thereby hinting at a gap of around 1.23 Cr.

You may begin another monthly sip of 7 K now which may grow into a sum of around 1.3 Cr by 60 age.(10% return assumed)

If the mediclaim policy is from employer, do buy a personal health care cover after 50-55 for your family for post retirement needs.

I presume you both have adequate term life insurance cover apart from LIC policy.

The financial goal for your kid's education and family expansion, if any, is not factored here. You may need to plan for it suitably.

Also it appears that your allocation to equity is quite low, may be due to limited risk appetite but you have time on your side and although short to medium term(5-7 yr) equity asset class may be impacted due to volatility but over a long-term(10 yr+) they have demonstrated good inflation adjusted returns so may be you may consider to increase allocation through hybrid funds suiting your risk appetite.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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Meri family ki income 80 lakhs hai yearly aur 40 lakhs expense hai aur age meri 48 hai capital family ki 4 cr hai to unko kaise manage aur kaha invest kare
Ans: Current Financial Snapshot
Annual Income: Rs 80 lakhs
Annual Expenses: Rs 40 lakhs
Capital Available: Rs 4 crores
Age: 48 years
Your income and existing capital provide a strong foundation. With proper planning, you can secure your financial future and achieve your goals.

Key Financial Goals
Retirement Planning: Build a corpus to sustain your post-retirement lifestyle.
Wealth Growth: Invest capital for inflation-beating returns.
Risk Management: Ensure adequate insurance coverage for family security.
Tax Efficiency: Optimise investments to reduce tax liabilities.
Suggested Investment Allocation
1. Emergency Fund
Maintain 6-12 months of expenses (Rs 20-40 lakhs) in liquid funds or a high-interest savings account.
This ensures liquidity for any unforeseen circumstances.
2. Equity Mutual Funds
Allocate 50-60% of your capital (around Rs 2-2.4 crores) to equity mutual funds.
Use diversified funds like large-cap, flexi-cap, and mid-cap funds for growth.
Avoid index funds due to lack of flexibility and active management.
Invest monthly through systematic investment plans (SIPs) for disciplined investing.
3. Debt Investments
Invest 20-25% of your capital (Rs 80 lakhs-1 crore) in debt mutual funds or fixed-income instruments.
Choose funds with low risk to ensure stability and predictable returns.
These funds act as a safety net during market downturns.
4. Children’s Education or Marriage
Allocate funds for long-term goals like education or marriage.
Invest in balanced advantage funds or equity mutual funds for higher returns.
5. Retirement Planning
At 48, focus on building a retirement corpus.
Allocate 20% of your capital (Rs 80 lakhs) to retirement-specific investments.
Use a mix of equity and debt for growth and safety.
Risk Management
Life Insurance
Ensure you have a term insurance cover of at least Rs 2-3 crore.
This protects your family’s financial future in your absence.
Health Insurance
Take a family floater health insurance plan of Rs 25-30 lakh.
Include critical illness coverage to address rising healthcare costs.
Tax Efficiency
Maximise Section 80C benefits by investing in ELSS mutual funds or PPF.
Use NPS for additional tax deductions under Section 80CCD.
Invest in tax-efficient instruments to reduce liabilities.
Regular Monitoring
Review your investments every six months with a Certified Financial Planner.
Rebalance your portfolio to align with market trends and life changes.
Final Insights
You have a strong financial base with high income and significant capital.

With disciplined investing, risk management, and tax efficiency, you can grow your wealth and achieve your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7322 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 22, 2024Hindi
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Namaskar Sir, I am 30 years old and want to start SIP @10,000/-pm in Mid cap mutual fund for next 30 years for a target of Rs 20 Cr (18-20%/year). You are requested to guide me about risks may come in future in MF industry and risk regarding sustainability of the fund house for next 30 years.
Ans: Investing Rs. 10,000 monthly in a mid-cap mutual fund is a commendable strategy. It shows your commitment to achieving a robust corpus of Rs. 20 crore in 30 years. However, there are risks and considerations to address.

1. Potential Risks in the Mutual Fund Industry
Market Volatility
Mid-cap funds are more volatile than large-cap funds.

Short-term fluctuations can impact returns during market corrections.

Economic Slowdowns
Economic instability can adversely affect mid-cap stocks.

Such slowdowns could lower the growth trajectory of the fund.

Regulatory Changes
SEBI and government regulations may impact mutual fund operations.

For example, changes in taxation or investment limits can affect returns.

Inflation Risk
Inflation can erode purchasing power and real returns over 30 years.

This risk must be factored into your long-term goal.

2. Risks of Fund House Sustainability
Fund House Stability
A fund house with a poor track record may not survive for 30 years.

Choose an established and reputed fund house with strong governance.

Fund Manager Risk
Performance depends on fund manager decisions.

Manager changes may impact the strategy and consistency of the fund.

Operational Risks
Fund houses may face risks like technology failures or poor compliance.

Verify the operational strength and risk management policies of the fund house.

3. Realistic Return Expectations
Expecting 18-20% annualised returns over 30 years is optimistic.

Historical data shows mid-cap funds average around 12-15% returns.

Relying on higher returns can lead to unrealistic expectations.

4. Diversification for Stability
Do not rely solely on mid-cap funds for your goal.

Diversify with large-cap or flexi-cap funds to reduce volatility.

Balanced funds can provide a mix of growth and stability.

5. Importance of Periodic Review
Monitor your SIP performance regularly, at least once a year.

Assess fund performance against benchmarks and peers.

Make necessary adjustments to align with your goals.

6. Role of Active Fund Management
Actively managed funds can outperform benchmarks during volatile markets.

Fund managers actively track market changes and rebalance portfolios.

This approach offers an edge over passively managed index funds.

7. Tax Implications on Returns
Long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

Understanding tax implications helps plan withdrawals effectively.

8. 360-Degree Financial Planning
Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses.

This ensures financial stability during unforeseen situations.

Adequate Insurance
Secure yourself with adequate life and health insurance.

Avoid using ULIPs or investment-linked insurance for this purpose.

Retirement Planning
Parallelly invest in retirement-specific instruments for long-term security.

Diversify your portfolio to include stable growth options.

Education and Marriage
Plan separate investments for future education and marriage expenses.

Diversify investments to balance risk across different life goals.

Finally
Mid-cap funds are a promising option for wealth creation, but they come with risks. Diversify, review periodically, and adjust your strategy as needed. Consult a Certified Financial Planner to build a robust, long-term investment plan tailored to your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...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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