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Omkeshwar

Omkeshwar Singh  | Answer  |Ask -

Head, Rank MF - Answered on Feb 18, 2022

Mutual Fund Expert... more
Anurag Question by Anurag on Feb 18, 2022Hindi
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Money

I am 43 years old. I making following investments in Mutual Funds:-

  • Mirae Asset Large Cap Fund Regular Plan Growth 2500/- PM
  • Axis Focused 25 Fund Growth 5000/- PM
  • Axis Blue chip FundGrowth 2500/- PM
  • Kotak Flexi Cap Fund Regular Plan Growth 2500/- PM
  • ICICI Prudential Blue chip Fund Growth 2500/- PM
  • Motilal Oswal Flexi Cap Fund-Growth 2500/- PM
  • Nippon India Small Cap Fund-Growth 2500/- PM
  • ICICI Pru Life Time Classic 5000/- PM
  • ICICI Pru Signature 150000/- PA
  • ICICI Pru Savings 100000/- PA
  • HDFC Life ProGrowth Plus 30000/- PA

Please advise changes in above portfolio if required. I want to build a corpus of Rs 3-5 crore in next 10-15 years.

Ans: To build a corpus, Equity funds are suitable and Insurance should be used for life protection and cover

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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You may like to see similar questions and answers below

Milind

Milind Vadjikar  |682 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 22, 2024

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 22, 2024

Money
I am 49 years old and doing MF since 2009 staring with small amount 2000/- pm. Last year i shuffle the portfolio last year. I have following investment in mutual fund 1. parag parik Flexi cap fund - reg gr 5000/- 2. Canara robeco bluechief equity fund gr 5000/- 3. Invesco india infra structure fund 5000/- 4. Quant small cap fund 5000/- 5. PGIM midcap oppotunies fund gr 5000/- I want to create corpus of 2 cr in next 10 years Currently my portfolio value is around 31 L.
Ans: Value funds are a great option for many investors. They invest in undervalued companies with strong potential for future growth. These funds target businesses that may not be performing well now, but have the capacity to grow in the future. This makes them a good choice if you have a long-term horizon and the ability to tolerate volatility.

A key feature of value funds is that they can outperform during certain market phases. However, during other phases, they may underperform compared to other equity funds like growth funds or flexi-cap funds.

Assessing Long-term Returns
Although your current fund may be delivering 30% XIRR, this is not sustainable in the long run. Market conditions fluctuate, and value funds can see significant ups and downs. Historically, the long-term average return for equity funds is between 10-12%. This will vary depending on market cycles, and it’s crucial to consider this when evaluating the performance of your fund.

So, while the current returns look appealing, they should be viewed as part of a larger trend over time. A key insight here is that investing in equity always comes with volatility. Don’t get caught up in short-term gains; instead, focus on the long-term growth potential.

Value Funds vs. Other Equity Funds
Value funds are one part of the equity category, and they have a specific strategy. But compared to growth funds or flexi-cap funds, value funds can be more volatile in the short run.

In growth funds, investments are made in companies expected to grow faster than the market. They can provide better short-term performance during a bullish phase. Flexi-cap funds, on the other hand, balance risk by investing across large, mid, and small-cap companies. This makes them more flexible and diversified.

While value funds have the potential for higher returns, they may also see more volatility. Other equity funds might provide a smoother ride, albeit with possibly lower highs during market rallies.

Active Funds vs. Index Funds
It is worth noting the difference between active value funds and index funds. Index funds are passively managed and follow the market's movement. They don't aim to outperform but to match a particular benchmark. This means they may offer lower returns compared to actively managed funds, where the fund manager picks stocks based on market conditions and strategies.

One of the disadvantages of index funds is that they cannot react to market changes. If a particular sector is underperforming, index funds will still be forced to hold those stocks, while an active fund manager can make adjustments to avoid losses.

So, in your case, actively managed funds, especially in the value space, can provide better returns with professional management.

Direct vs. Regular Funds
If you are investing through direct funds, you might want to consider the benefits of switching to regular funds through a Certified Financial Planner. Direct funds have lower expense ratios, but that comes with fewer insights and advice. A Certified Financial Planner can guide you through market cycles and help rebalance your portfolio.

A good MFD with a CFP credential will actively monitor and suggest changes in your investments based on changing market conditions. This advice and regular tracking help in making better financial decisions compared to direct funds.

Setting Up an STP for Better Risk Management
Systematic Transfer Plans (STPs) can be a smart option for managing risk. If you're experiencing a windfall in returns, an STP allows you to move your money into a safer option gradually.

Instead of pulling out everything and trying to time the market, an STP can help you balance between high-risk and low-risk investments. You can shift from a value fund into something more stable like a balanced fund or debt fund over time.

This approach can lock in your profits while giving you a more stable future return.

However, an STP is not necessary for everyone. If your goal is long-term, and you can handle market fluctuations, then staying invested in the value fund may be more beneficial. Equity funds reward patience. You should only consider an STP if you're nearing a financial goal or require more liquidity.

Risk Assessment of Value Funds
Every equity fund comes with risk, but value funds can be more volatile. They often invest in companies going through temporary troubles but with strong fundamentals. The risk here is that not all of these companies will recover quickly.

In good times, value funds can outperform the market. But when the economy slows, these funds may underperform. This makes them ideal for long-term investors who are willing to ride out market swings. If you are comfortable with this level of risk, then value funds are still a good option.

The Impact of Volatility
Volatility is a part of investing in value funds. High returns like the 30% XIRR you are seeing now may not last. But even if they drop, the core potential of value funds remains strong. Over a 10 to 15-year period, the return could stabilize around 12% CAGR, which is still healthy.

It is essential to have realistic expectations when investing in these funds. Don't let short-term gains make you overly optimistic or lead you to increase your risk unnecessarily.

Should You Continue Investing in Value Funds?
If your investment horizon is long-term, value funds can still play a crucial role in your portfolio. You should, however, ensure that you are diversified across other fund types to spread your risk. A Certified Financial Planner can help in assessing whether you need to rebalance your investments.

In general, staying invested in value funds is not wrong. They offer great potential for wealth creation but come with volatility. You just need to ensure you’re not overexposed to one fund type.

Final Insights
A 30% XIRR from a value fund is impressive but temporary. Over time, expect returns to normalize around 12% with volatility.

Diversifying across other equity funds can reduce your overall risk. If you’re uncomfortable with the current volatility, consider setting up an STP. But if your goal is long-term, staying invested in the value fund could still yield strong results. Always seek advice from a Certified Financial Planner to ensure you are on the right track.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 16, 2024

Money
Sir I have been investing in mutual funds for the last 5 years. Now the corpus is around 5.5 lakhs . I have the following funds in my portfolio. Please asses my portfolio or need switch. 1. Nippon india large cap fund 2000 2. Mirae asset large cap 3000 3.Axis elss tax saver 1000 4. Kotak elss tax saver 1000 5. Axis Blue chip fund 6. Jm flexi cap fund 2200 7. Motilal oswal mid cap 2000 8. Axis mid cap 1000 9. Icici prudential passive multi asset for regular growth one time amount 5000 . 10.Sbi contra fund 2000 Sir i need to build a corpus of 1.5 crore in next 12 years. My age is now 38. Please review .
Ans: You have built a diversified portfolio with a combination of large-cap, mid-cap, ELSS, and flexi-cap funds. Each fund serves a specific purpose, but a review will help optimize your investments to meet your goal of Rs. 1.5 crore in 12 years. Let’s assess each category.

Large-Cap Funds
Nippon India Large Cap Fund – Rs. 2,000 per month

Mirae Asset Large Cap Fund – Rs. 3,000 per month

Axis Bluechip Fund

These funds focus on large-cap companies, offering stable growth but with relatively lower risk. While having multiple large-cap funds ensures stability, it may lead to overlap in the portfolio. You can consider consolidating them into 1 or 2 funds to reduce redundancy. Mirae Asset and Axis Bluechip are solid options for continued long-term investments.

ELSS Funds
Axis ELSS Tax Saver – Rs. 1,000 per month

Kotak ELSS Tax Saver – Rs. 1,000 per month

ELSS funds offer tax benefits under Section 80C. However, having two ELSS funds for Rs. 2,000 might not be necessary. You can choose the one with consistent performance and focus your ELSS investment there. Axis ELSS has performed well historically, but assess both before making a decision.

Mid-Cap Funds
Motilal Oswal Mid Cap – Rs. 2,000 per month

Axis Mid Cap – Rs. 1,000 per month

Mid-cap funds offer higher growth potential than large-cap funds, but with more risk. Holding two mid-cap funds is a balanced strategy, but since the Axis Mid Cap has been consistently strong, you can consider increasing your SIP here. Motilal Oswal Mid Cap is a good performer but may need to be watched for volatility.

Flexi-Cap Funds
JM Flexi Cap Fund – Rs. 2,200 per month
Flexi-cap funds give fund managers the flexibility to invest across market capitalizations, reducing concentration risk. This fund provides good diversification. Review its performance regularly, as flexi-cap funds can vary in returns based on market conditions.

Passive Multi-Asset Fund
ICICI Prudential Passive Multi-Asset Fund (One-time investment of Rs. 5,000)
This fund combines equity, debt, and gold to balance risk. While passive funds reduce the need for active monitoring, they may not provide the same growth potential as actively managed funds. Actively managed funds tend to perform better in dynamic markets, which could better align with your long-term goal of wealth creation.

Contra Fund
SBI Contra Fund – Rs. 2,000 per month
Contra funds follow a contrarian investment strategy, buying when others are selling. While this can provide significant gains during market recovery, contra funds may experience long periods of underperformance during market booms. It's a high-risk option that may not suit every portfolio. Regularly review its performance to ensure it fits with your investment goals.

Suggestions for Improvement
Consolidate Funds: You have multiple large-cap and ELSS funds. Streamline to 1 or 2 per category to reduce overlap and improve focus. A well-performing large-cap fund and one ELSS should suffice.

Increase SIP in High-Growth Funds: Focus more on mid-cap and flexi-cap funds, as they have higher growth potential. Increase your SIP in Axis Mid Cap and JM Flexi Cap, as they can boost your returns over the long term.

Review Contra and Passive Fund: SBI Contra and ICICI Passive Multi-Asset may not align with your goal of aggressive wealth creation. Consider switching to funds with more aggressive growth profiles, like a focused equity fund or a small-cap fund, to maximize potential returns.

Building a Rs. 1.5 Crore Corpus
To achieve your goal of Rs. 1.5 crore in 12 years, you'll need to invest aggressively. Based on your current portfolio, the estimated return would range between 10-12% annually, depending on market conditions and fund performance. To reach Rs. 1.5 crore in 12 years, you may need to increase your monthly SIP amount to around Rs. 20,000-25,000, depending on the returns.

Steps to Build the Corpus:
Increase SIP Contributions: To reach your goal, gradually increase your SIP amount over time. Aim to raise your SIP to Rs. 20,000-25,000 per month.

Rebalance Annually: Revisit your portfolio at least once a year. Make sure your portfolio remains aligned with your long-term goal.

Stick to Long-Term Investment: Avoid switching funds frequently. Stay committed to your investment horizon, and let the power of compounding work for you.

Emergency Fund: Ensure that you have an emergency fund in place, covering at least 6 months of expenses. This will prevent you from withdrawing your investments during unforeseen events.

Tax Planning with ELSS
You are already investing Rs. 2,000 in ELSS funds, which qualifies for tax deductions under Section 80C. Continue this as part of your tax-saving strategy, but make sure it fits into your overall portfolio without over-diversifying.

Final Insights
Your portfolio is well-diversified but can be simplified by reducing overlapping funds.

Focus on high-growth funds like mid-cap and flexi-cap to achieve your long-term goals.

Regularly review and rebalance your portfolio based on performance and market conditions.

Increase your SIP contributions gradually to ensure you are on track for your Rs. 1.5 crore goal in the next 12 years.

Avoid frequent switching; give your investments time to grow.

Tax planning with ELSS funds is good, but one fund is enough for your tax-saving needs.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Ravi

Ravi Mittal  |431 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 22, 2024Hindi
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Relationship
A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

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Milind

Milind Vadjikar  |682 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Money
Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet 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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