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43-Year-Old Seeking Advice on MF SIP Portfolio for Retirement

Ramalingam

Ramalingam Kalirajan  |6978 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 10, 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 - Oct 09, 2024Hindi
Money

I am 43 Years Old and have started MF SIP in the following 05 Funds, ICICI Bluechip Fund 10K, HDFC Felxi Cap - 10K, HDFC - Nifty 50 Fund 10K, TATA Small Cap 10k & Tata Mid cap growth k, Total 50k SIP, the objective is to accumulate corpus for my retirement at age 60. Please advise if the portfolio..Thanks

Ans: Your existing portfolio comprises a mix of large-cap, flexi-cap, small-cap, and mid-cap mutual funds. The objective you have outlined is to accumulate a retirement corpus by age 60, which is commendable.

The combination of different categories of funds in your portfolio indicates a balanced approach. You are ensuring exposure to both large-cap stability and the high growth potential of mid-cap and small-cap segments. However, there are certain areas that could use refinement to maximize your long-term returns, especially considering your goal of retirement.

Let’s break down the elements of your portfolio.

Large-Cap Fund Allocation
Large-cap funds typically invest in well-established companies with a strong market presence. They offer stability and moderate returns, particularly in volatile markets. In your portfolio, Rs. 10,000 is allocated to large-cap funds.

Benefits of large-cap funds:

Provides a cushion during market downturns.
Typically less volatile compared to mid and small-cap funds.
Potential concerns:

Growth potential is limited compared to mid and small-cap funds.
Over time, returns may lag behind other aggressive investments.
Given your long investment horizon of 17 years, while large-cap funds add stability, relying too much on them may limit your growth. A review of your exposure after every 3-5 years is suggested.

Flexi-Cap Fund Allocation
Flexi-cap funds give fund managers the freedom to invest across market capitalizations (large, mid, and small caps). Your allocation of Rs. 10,000 here is a good move because it offers diversification and reduces risk by spreading investments across companies of varying sizes.

Benefits of flexi-cap funds:

Flexibility to navigate across market caps, based on market conditions.
Potential to capture higher growth in mid and small caps while maintaining large-cap stability.
Potential concerns:

Performance is highly dependent on the fund manager’s expertise.
Not immune to market risks during extreme volatility.
Your flexi-cap exposure is solid, but it should be evaluated periodically to ensure it’s aligned with your evolving risk tolerance.

Small-Cap and Mid-Cap Fund Allocation
Small-cap and mid-cap funds, with a total allocation of Rs. 20,000 in your portfolio, are aimed at high-growth potential. These funds can significantly boost your returns over the long term.

Benefits of small and mid-cap funds:

Higher growth potential compared to large-cap funds.
Suitable for long-term investors who can weather short-term volatility.
Potential concerns:

Higher volatility and risk.
Performance can be erratic during market downturns.
Given your long-term horizon, the inclusion of small-cap and mid-cap funds is a positive. However, these funds should be monitored closely. You may want to reduce exposure to them as you near retirement and opt for more stable investments.

Nifty 50 Fund Allocation
Though you mentioned an investment in a Nifty 50-based fund, it is crucial to understand that index funds, including Nifty 50 funds, are passively managed. This means they replicate the index and offer no scope for the fund manager’s expertise to outperform the market.

Drawbacks of index funds:

They follow the market and do not aim to outperform.
In volatile or bearish markets, they offer no downside protection.
Actively managed funds can provide better risk-adjusted returns over the long term.
Given these disadvantages, actively managed funds in the same category may offer more growth potential and better risk management. Consider reallocating some portion of this investment towards actively managed funds for improved performance.

Regular Funds vs. Direct Funds
Investing in regular funds through a Certified Financial Planner (CFP) is a wise decision. While direct funds might seem attractive due to lower expense ratios, regular funds offer several advantages.

Benefits of regular funds:

You get ongoing professional advice and portfolio reviews from a CFP.
A CFP can help in strategic fund selection, rebalancing, and tax planning.
The marginally higher expense ratio is justified by better service and support.
Disadvantages of direct funds:

Lack of personalized guidance and strategy.
Risk of making uninformed investment decisions.
More time-consuming, as you have to track and manage everything on your own.
In the long run, investing in regular funds through a Certified Financial Planner will likely lead to better returns and effective risk management.

Tax Considerations
It's important to keep in mind the tax implications of mutual fund investments. Here’s a brief overview based on the latest rules:

Long-term capital gains (LTCG) from equity mutual funds exceeding Rs. 1.25 lakh are taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20% for equity mutual funds.
You should plan your withdrawals or systematic withdrawal plans (SWP) closer to retirement to minimize tax liabilities. A CFP can guide you on when to redeem units to maximize tax efficiency.

Review and Monitoring
Mutual funds require periodic reviews. You should evaluate your portfolio every 2-3 years to ensure it aligns with your risk tolerance, financial goals, and market conditions. A Certified Financial Planner can help you reassess your investments and suggest necessary adjustments to keep you on track for retirement.

Key aspects to review:

Fund performance relative to peers.
Sectoral allocation to avoid over-concentration.
Rebalancing across market capitalizations based on market cycles.
Risk and Reward Balance
Your current portfolio shows a balanced approach between stability (large and flexi-cap funds) and growth (small and mid-cap funds). However, small and mid-cap funds can be volatile, and their allocation should be adjusted as you get closer to retirement. As you reach your 50s, shifting towards more conservative options, such as large-cap or balanced funds, would reduce risk without sacrificing too much on returns.

Inflation and Retirement
Given that you aim to retire at 60, it's important to account for inflation. Your retirement corpus needs to be sufficient to maintain your lifestyle in the face of rising prices.

Consider the following:

Increase your SIP contributions periodically to combat inflation.
Keep some portion of your retirement portfolio in growth-oriented funds even post-retirement to counter inflation.
Emergency Fund and Insurance
Since your focus is on retirement, ensure you have an adequate emergency fund. This will protect your investments from any unexpected expenses and avoid unnecessary withdrawals. A general guideline is to have 6-12 months of expenses in liquid assets or savings accounts.

Also, check your insurance coverage. If you don’t have a pure term insurance plan, it's advisable to get one to protect your family from any unforeseen financial burdens. Health insurance is equally crucial to avoid dipping into your retirement funds during medical emergencies.

Final Insights
Your current SIP portfolio is well-rounded and has a mix of stability and growth potential. However, it’s important to:

Reassess your Nifty 50 fund and consider shifting towards actively managed large-cap funds.
Regularly review your portfolio with a Certified Financial Planner to adjust your allocations based on market conditions and your retirement goals.
Ensure you have an adequate emergency fund and the necessary insurance coverage to safeguard your retirement savings.
Remember, consistency and periodic reviews will ensure you meet your retirement goals effectively while minimizing risks.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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  |6978 Answers  |Ask -

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

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I am 42 years salaried person investing in MF through SIP from 2014 current corpus is 37 Lakhs in MF. My Current SIP's amount is rs 22000 PM as follows- 1. Nippon Small cap - 2000, 2. Mahindra manulife midcap fund - 7000, Mahindra Manulife Small cap - 4000, PGIM Midcap opportunities Fund - 3000, Quant Flexicap fund - 6000. SIP increasing every year by 5% to 10% No Home loan, term insurance 55 lakhs, medi-claim 10 lakhs, PF & VPF accumulation Rs 16 lakhs. I want to create a good corpus of Rs 6 - 7crore for retirement at 58 years of age. Please suggest if any change required in investment amount or funds.
Ans: It's commendable that you've been consistently investing in mutual funds through SIPs for several years, laying a strong foundation for your retirement. Let's evaluate your current investment strategy and make adjustments to align with your retirement goal.

Your portfolio reflects a diversified mix of small-cap, mid-cap, and flexi-cap funds, which offer growth potential over the long term. However, given your goal of building a substantial corpus for retirement, we may need to reassess your asset allocation and make some adjustments.

Firstly, let's review your SIP amounts and consider increasing them gradually to accelerate wealth accumulation. Since your SIPs increase by 5% to 10% annually, this incremental growth can boost your investment corpus significantly over time.

Consider reallocating some of your SIP amounts to funds with a proven track record of consistent performance and lower volatility. While small-cap and mid-cap funds can offer higher returns, they also come with increased risk. Diversifying across large-cap funds or balanced funds can provide stability to your portfolio.

Moreover, review your overall asset allocation to ensure it remains aligned with your risk tolerance and investment objectives. While equity investments offer growth potential, it's essential to balance them with fixed-income securities like debt funds or PPF to mitigate risk.

Given your age and retirement horizon, periodically reassess your investment strategy and make necessary adjustments to stay on track towards your goal. Consider consulting with a Certified Financial Planner to develop a personalized retirement plan tailored to your needs and aspirations.

In conclusion, by fine-tuning your investment strategy, increasing your SIP amounts, and maintaining a disciplined approach, you can work towards achieving your retirement goal of building a corpus of Rs 6 - 7 crores by the age of 58.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Ans: Dear Anonymous,
Your feelings are valid. It is indeed difficult to adjust to an unexpressive partner. One out of two things can be happening here- one, he does not know how to express his emotions; that is who he is fundamentally. Two, the work pressure and hectic hours have made him detached. You can try having an open conversation with him about it and let him know that you are not being able to carry on like this. Communicate your concerns and how his attitude toward you has affected your mental health. That is the only way to move forward. After the conversation either of two things will happen- it will be a wake-up call for him and things will change for the better. Or, he will continue to behave the same way and you have to rethink the relationship. My suggestion is to have the talk after your exams. I know you think he is your everything, but you are your everything. Do not let this relationship waste the years of hard work you have put into your studies. Focus on yourself and trust me when I say this- value yourself the way you want others to value you. If you don't, why would anyone else?

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I am married for last 3 years. I found out about my wife's sexual past just months into our marriage. I even enquired her about her past before our marriage and told her that I don't tolerate lies and don't believe in premarital sex but she still lied to me and deceived into a fraud marriage. So I started sleeping with prostitutes and call girls as a revenge. I even had an affair with a divorced woman but that didn't last long. I know I didn't do anything wrong. She is the one is in the wrong. She deceived me into a fraud marriage. Should I forgive her and live with her?
Ans: Dear Anonymous,
instead of dealing with the problem at hand, you decided to go and create more problems?
What prevented you from actually talking to your wife. If you felt cheated, was it not possible for you to channel the anger by having a conversation with her about it? Revenge never helped anyone, but well...
Now, by blaming her, what can happen is that she will defend and you will again accuse and this will go on...
So, yes you are feeling cheated and deceived by her. You have two ways of approaching it. rebuild your marriage and start with a clean slate which means she cannot keep secrets with you anymore OR you can build more anger which is bound to destroy the marriage. I would suggest the first option where you get a fair chance to express how you feel to her and also come clean with your revenge scene with her...this may help both of you put things aside and rebuild the connection. Give this a fair shot!

All the best!
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Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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Asked by Anonymous - Nov 05, 2024Hindi
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Hello, I am a 42 year old woman with a 14 year old boy and a 12 year old girl. Ours was an arranged marriage. I got married at age 23 and my husband is just 2 years older to me. Right from the beginning my husband is great at cooking, household chores etc but never expresses romance openly. I was always a emotional woman who slowly turned to him and stopped expressing my needs well. So far out marriage was great cos I avoided confrontations and arguments. Only thing was he was always a critical person and I am emotional girl . Since I cld not express myself clearly as he never heard me, my communication with him sounded nagging, comparing and complaining. In 2011, he cheated on me and I learnt on his affair. I did not know how to process this phase so immediately forgave him within 2-3 days and even ended up being pregnant with my daughter. However he never used to speak on his past affair not were my feelings resolved. Whenever he would speak rudely or yelled at kids or me for little things, the past trauma would trigger and I would openly remind him of his grave mistake. This went on and he would get agitated and keep quiet. One day he did tell me that lifelong he needs to live with this past of me reminding him. But he has never understood the trauma I have gone through. I have just repressed it all along. Cut short 2024- there is lots of resentment with us. In 2022, I saw messages that he exchanged with another lady colleague on romantic songs , good morning messages and they would casually meet for lunch etc . This time I flew in rage and assumed he has cheated on me again. Told him first time I was a fool who didn't notice things right under my nose and now this is the latest. We had a big fight. I reminded him of his dirty past. At first he looked shocked from these allegations and told me he will clarify everything later. But next day in 2022 , when I asked him, he appeared to be a changed man and sounded more confident that he didn't do anything wrong. I pestered him to take me to office, we went to his office I met this lady and politely told her to stop sending good morning messages to my husband. I indirectly told her I have trust issues because of a past but did not elaborate. My husband who had taken me to the office , later was annoyed because apparently the woman colleague was annoyed about me coming to office and also mentioned about my trust issues. At this point this great husband spilt out to her that he had cheated on me. I never ever disclosed anything to her. Later he messaged me saying he was very annoyed and upset that I disclosed the dirty past to his colleague and if anything happens to his job he will never forgive me. I did tell him I never disclosed but he did not belive me. From 2022 until now we are almost in a silent divorce phase. We sleep in different bedroom and only communicate basic stuff on milk, curd , veggies etc He had never connected to me emotionally and would always get annoyed when I wld cry or show my frustrations. Now after all this he has literally cut me off emotionally. In this period from 2022-till now I did try to get back to normal but his vibes are very negative and disconnected. So even I too started distancing myself. During 2022, after the incident he had mentioned on how it is important to work, ve independent and how he favours open relationships ( non sexually). I was always working but earned lesser and used to depend on him a lot. Now I have changed in these 2 years, I have a better job and am not at all dependent on him emotionally, physically or mentally. Infact I pitch in to our household expenses.Our lives are totally disconnected and we there just for the kids. He cooks for all of us, I take care of remaining chores and help them in their studies . We don't attend family events and this has left many guessing on our status. I have lot of unresolved emotions and since he cannot process my emotions or least interested to hear me out I don't know when I will explode. I am just repressing my feelings and keeping a happy cheerful face for the family and kids. We even went for a vacation for kids sake where we just interacted with kids. Kids know things are not allright and pray for us together. I know this isn't healthy for me and I will invite psychosomatic issues in life later on. I am still attached to him and maybe once he expresses a sorry or a remorse and have a hope we can fall back in love again. Why can he never understand that emotional trauma that I have gone through Inspite of being loyal to him always. For once if he just uses kind words and apologises I will forever love him and forget everything.
Ans: Dear Anonymous,
Your husband perhaps is someone who is not great at conflict management; he finds it easier to avoid it and avoidance can mean that he hopes that it will go away or that you will stop talking about it or that he can find ways of actually pinning the blame on you for the way that he is feeling.
So, you will come across as nagging and may also feel guilty for asking him to listen to the way that you feel about the past incident. This is classic avoidance response from him that will make you wonder of you are actually wrong and at some point you may even start justifying his actions.
Repression is temporary; eventually all the emotions will collect themselves and hit back when you least expect it. If you want him to hear you and the way you have felt about his cheating, he will again get pushed into an avoidance mode. He has not learned any other way of handling conflicts. So, either you can go to couples counseling together OR you accept this side of him. Sounds too much to do, yeah? But how can you change a person who does not want to change. Some people also cannot express their love the way you have mentioned.
Since you still love him, I can only assume that the marriage holds a lot of significance for you. Then you can be happy only when he changes OR you accept him... which one seems more doable, start with that first...who knows if an external person like an expert can actually guide the two of you, things may fall in place!
I would also suggest requesting him for an honest chat where he is also in a space to LISTEN to you...try...

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

...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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