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Ramalingam Kalirajan |10872 Answers |Ask -Follow
Mutual Funds, Financial Planning Expert - Answered on Nov 06, 2025
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
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 - Nov 05, 2025Hindi
Hi , I am 44yrs old working professional with income of around 2lks per month. I have Mutual fund investment of 22.5lakhs (Index fund across Large, Mid, Small and Microcap segment). I started my investment journey in to Equity Mutual fund of late 2023. I do irregular SIPs when ever market corrects (5~10% market dips). I am also parking my cash/crash fund of 60 lakhs in Liquid & Arbitrage Fund (30lakhs each). Kindly review my approach and suggest if there is a need for better alternative required to manage my crash fund (I am waiting for market correction 15~20% crash to deploy same)
Ans: You are on a very good track in your investment journey. Starting early in your 40s with such discipline and clarity is truly commendable. Many investors wait much longer to act, while you have already built a substantial base in both equity and short-term funds.
– You have built Rs.22.5 lakhs in mutual funds within a short time.
– You are saving systematically even during market corrections.
– You have a strong cash position of Rs.60 lakhs, showing high financial stability.
– You are thoughtfully waiting for better entry points rather than chasing returns blindly.
– These reflect maturity and financial discipline.
» Understanding your investment pattern
– You invest mainly in index funds across market segments.
– You also park large cash reserves in liquid and arbitrage funds.
– You make irregular SIPs based on short-term market dips.
– Your approach combines market timing and defensive parking.
– It shows awareness but also carries some potential limitations.
» Drawbacks of index fund–only strategy
– Index funds only mirror the market; they cannot outperform it.
– When markets fall, index funds also fall equally without protection.
– There is no active fund manager to identify undervalued sectors or quality companies.
– In volatile phases, actively managed funds can protect capital better by shifting exposure.
– Index funds may seem low-cost but offer limited flexibility.
– You may miss opportunities during market corrections where active management shines.
» Why actively managed funds deserve more allocation
– A skilled fund manager can reduce downside risk during deep market falls.
– Active funds can rebalance towards defensive sectors like FMCG, pharma, or utilities in uncertain times.
– They can also pick quality mid and small caps before the next market upturn.
– Over longer periods, good active funds have historically beaten index returns after costs.
– Diversifying into active funds through a Certified Financial Planner ensures better risk control.
» Disadvantages of direct funds
– You are investing through direct plans, which means you miss personalised monitoring.
– In direct plans, you need to track fund performance, portfolio drift, and rebalancing by yourself.
– This becomes time-consuming and emotionally tiring when markets turn volatile.
– Regular plans through a Certified Financial Planner provide guidance, timely reviews, and emotional discipline.
– The additional expense ratio is like an ongoing advisory fee ensuring constant portfolio alignment.
– It avoids panic selling or mistimed entries during volatile markets.
– So, shifting to regular plans through a qualified CFP helps in 360-degree financial management.
» Evaluating your cash management in liquid and arbitrage funds
– You have rightly split Rs.60 lakhs between liquid and arbitrage funds.
– This provides both safety and short-term liquidity.
– Liquid funds are ideal for emergency and parking cash for 1–6 months.
– Arbitrage funds are tax-efficient for parking funds beyond 6 months.
– However, if your investment horizon is more than one year, there can be better alternatives.
» Alternative options for your crash fund
– Since you expect a market correction before deploying, ensure this fund earns steady returns.
– Instead of parking all Rs.60 lakhs in low-yield options, consider hybrid or short-duration debt funds.
– Balanced advantage funds dynamically manage equity and debt and can partially capture market upside.
– They also provide smoother transition if your expected 15–20% correction takes longer.
– If the market does not correct soon, your cash still earns better returns compared to liquid or arbitrage funds.
– Discuss with a Certified Financial Planner to structure your parking strategy in 3 layers:
Immediate emergency fund (liquid fund).
Short-term parking (arbitrage or ultra-short debt fund).
Dynamic allocation (balanced advantage or equity savings fund).
» The risk of waiting for a deep correction
– Market corrections of 15–20% are rare and unpredictable.
– Waiting for a large fall can lead to long periods of idle cash.
– During such waiting periods, inflation quietly erodes your purchasing power.
– You might miss moderate market opportunities when valuations turn fair, not cheap.
– Timing the market with precision is difficult even for professional fund managers.
– Hence, relying purely on crash-based deployment may delay long-term wealth creation.
» A disciplined phased investment plan works better
– Instead of waiting for one big crash, plan systematic deployment over 6–12 months.
– You can invest fixed portions every month irrespective of short-term corrections.
– This reduces timing risk and ensures participation across different market levels.
– Even if markets correct midway, your later instalments will capture lower prices.
– Over time, the average cost becomes efficient and less volatile.
– You can still keep a smaller reserve for opportunistic lumpsum when deep correction actually happens.
» Aligning your portfolio to financial goals
– It is important to connect your investments with your financial goals.
– Identify time frames: short-term (1–3 years), medium-term (3–7 years), and long-term (7+ years).
– Allocate funds accordingly:
Short-term goals: liquid, arbitrage, or short-duration funds.
Medium-term goals: conservative hybrid or balanced advantage funds.
Long-term goals: diversified active equity funds.
– This ensures you don’t rely on timing but on time-based allocation.
» Taxation aspect of your funds
– For equity mutual funds, long-term gains above Rs.1.25 lakh are taxed at 12.5%.
– Short-term gains are taxed at 20%.
– For debt and liquid funds, both short and long-term gains are taxed as per your income slab.
– Arbitrage funds are treated as equity for taxation, hence remain more tax-efficient.
– Balanced advantage funds also enjoy equity taxation, making them good alternatives for crash fund parking.
» Managing risk exposure properly
– Avoid overexposure to small and microcap segments.
– These categories can fall sharply during corrections.
– Maintain a balanced mix across large-cap, mid-cap, and diversified active funds.
– Ensure your total equity allocation suits your risk tolerance and goals.
– Having 22.5 lakhs in equity with 60 lakhs in low-risk funds shows you are conservative now.
– You can slowly increase equity allocation over the next 2–3 years in a phased manner.
» Psychological discipline in investing
– You are already using a logical correction-based SIP style.
– However, avoid emotional reactions to short-term volatility.
– Markets can fall 10% and recover before you deploy, leaving you behind.
– Maintain a fixed structure rather than a reactive approach.
– Having a Certified Financial Planner monitor your behaviour keeps emotions in check.
– This helps you stay consistent and confident even in unpredictable market phases.
» Rebalancing and monitoring
– Once your deployment is complete, review your portfolio every six months.
– Rebalance between equity and debt based on your asset allocation plan.
– Trim profits from overperforming categories and reallocate to underweighted areas.
– This maintains stability and long-term compounding.
– Regular portfolio reviews through a CFP prevent concentration risk or overlap.
» Importance of liquidity and emergency fund separation
– Do not mix your crash fund and emergency fund.
– Emergency fund should be strictly for unforeseen expenses like job loss or medical needs.
– Keep that separately in liquid fund or bank account.
– Crash fund is a tactical pool for future deployment in equity.
– Mixing both may cause emotional pressure during market volatility.
» Suggested structured approach for next 12 months
– Maintain Rs.10–15 lakhs in liquid funds for emergency use.
– Keep Rs.20–25 lakhs in arbitrage or ultra-short funds for liquidity.
– Move Rs.20–25 lakhs into balanced advantage funds for gradual equity participation.
– Deploy new investments through monthly staggered plans.
– Monitor markets but don’t depend fully on big crashes for entry.
– Let time and discipline work for you.
» Role of Certified Financial Planner in your case
– A Certified Financial Planner can analyse your risk profile and design the right asset mix.
– They can recommend active funds that fit your time horizon and objectives.
– They help you review, rebalance, and optimise taxation regularly.
– They also ensure your investment decisions stay emotion-free and goal-driven.
– Investing through a CFP-linked regular plan gives you professional guidance, not just fund access.
– Over years, this guidance adds more value than the extra cost in regular plans.
» Building a 360-degree wealth plan
– Along with your mutual fund strategy, ensure adequate health and term insurance coverage.
– Build an emergency fund separate from investment funds.
– Review your loans, cash flows, and tax planning annually.
– Define financial goals like retirement, children’s education, or home upgrade.
– Match each goal with specific investment buckets.
– Add estate planning measures such as nomination and Will.
– This holistic approach brings true financial control and confidence.
» Finally
– Your savings discipline and financial awareness are very encouraging.
– You are building wealth steadily and thoughtfully.
– Just replace index-only investing with a mix of active and hybrid funds.
– Avoid waiting endlessly for a perfect crash; let time diversification work.
– Use regular plans through a Certified Financial Planner for continuous review.
– This will ensure better protection, smoother returns, and stronger wealth growth.
– Stay consistent, patient, and goal-focused. Over time, your portfolio will compound beautifully.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
– You have built Rs.22.5 lakhs in mutual funds within a short time.
– You are saving systematically even during market corrections.
– You have a strong cash position of Rs.60 lakhs, showing high financial stability.
– You are thoughtfully waiting for better entry points rather than chasing returns blindly.
– These reflect maturity and financial discipline.
» Understanding your investment pattern
– You invest mainly in index funds across market segments.
– You also park large cash reserves in liquid and arbitrage funds.
– You make irregular SIPs based on short-term market dips.
– Your approach combines market timing and defensive parking.
– It shows awareness but also carries some potential limitations.
» Drawbacks of index fund–only strategy
– Index funds only mirror the market; they cannot outperform it.
– When markets fall, index funds also fall equally without protection.
– There is no active fund manager to identify undervalued sectors or quality companies.
– In volatile phases, actively managed funds can protect capital better by shifting exposure.
– Index funds may seem low-cost but offer limited flexibility.
– You may miss opportunities during market corrections where active management shines.
» Why actively managed funds deserve more allocation
– A skilled fund manager can reduce downside risk during deep market falls.
– Active funds can rebalance towards defensive sectors like FMCG, pharma, or utilities in uncertain times.
– They can also pick quality mid and small caps before the next market upturn.
– Over longer periods, good active funds have historically beaten index returns after costs.
– Diversifying into active funds through a Certified Financial Planner ensures better risk control.
» Disadvantages of direct funds
– You are investing through direct plans, which means you miss personalised monitoring.
– In direct plans, you need to track fund performance, portfolio drift, and rebalancing by yourself.
– This becomes time-consuming and emotionally tiring when markets turn volatile.
– Regular plans through a Certified Financial Planner provide guidance, timely reviews, and emotional discipline.
– The additional expense ratio is like an ongoing advisory fee ensuring constant portfolio alignment.
– It avoids panic selling or mistimed entries during volatile markets.
– So, shifting to regular plans through a qualified CFP helps in 360-degree financial management.
» Evaluating your cash management in liquid and arbitrage funds
– You have rightly split Rs.60 lakhs between liquid and arbitrage funds.
– This provides both safety and short-term liquidity.
– Liquid funds are ideal for emergency and parking cash for 1–6 months.
– Arbitrage funds are tax-efficient for parking funds beyond 6 months.
– However, if your investment horizon is more than one year, there can be better alternatives.
» Alternative options for your crash fund
– Since you expect a market correction before deploying, ensure this fund earns steady returns.
– Instead of parking all Rs.60 lakhs in low-yield options, consider hybrid or short-duration debt funds.
– Balanced advantage funds dynamically manage equity and debt and can partially capture market upside.
– They also provide smoother transition if your expected 15–20% correction takes longer.
– If the market does not correct soon, your cash still earns better returns compared to liquid or arbitrage funds.
– Discuss with a Certified Financial Planner to structure your parking strategy in 3 layers:
Immediate emergency fund (liquid fund).
Short-term parking (arbitrage or ultra-short debt fund).
Dynamic allocation (balanced advantage or equity savings fund).
» The risk of waiting for a deep correction
– Market corrections of 15–20% are rare and unpredictable.
– Waiting for a large fall can lead to long periods of idle cash.
– During such waiting periods, inflation quietly erodes your purchasing power.
– You might miss moderate market opportunities when valuations turn fair, not cheap.
– Timing the market with precision is difficult even for professional fund managers.
– Hence, relying purely on crash-based deployment may delay long-term wealth creation.
» A disciplined phased investment plan works better
– Instead of waiting for one big crash, plan systematic deployment over 6–12 months.
– You can invest fixed portions every month irrespective of short-term corrections.
– This reduces timing risk and ensures participation across different market levels.
– Even if markets correct midway, your later instalments will capture lower prices.
– Over time, the average cost becomes efficient and less volatile.
– You can still keep a smaller reserve for opportunistic lumpsum when deep correction actually happens.
» Aligning your portfolio to financial goals
– It is important to connect your investments with your financial goals.
– Identify time frames: short-term (1–3 years), medium-term (3–7 years), and long-term (7+ years).
– Allocate funds accordingly:
Short-term goals: liquid, arbitrage, or short-duration funds.
Medium-term goals: conservative hybrid or balanced advantage funds.
Long-term goals: diversified active equity funds.
– This ensures you don’t rely on timing but on time-based allocation.
» Taxation aspect of your funds
– For equity mutual funds, long-term gains above Rs.1.25 lakh are taxed at 12.5%.
– Short-term gains are taxed at 20%.
– For debt and liquid funds, both short and long-term gains are taxed as per your income slab.
– Arbitrage funds are treated as equity for taxation, hence remain more tax-efficient.
– Balanced advantage funds also enjoy equity taxation, making them good alternatives for crash fund parking.
» Managing risk exposure properly
– Avoid overexposure to small and microcap segments.
– These categories can fall sharply during corrections.
– Maintain a balanced mix across large-cap, mid-cap, and diversified active funds.
– Ensure your total equity allocation suits your risk tolerance and goals.
– Having 22.5 lakhs in equity with 60 lakhs in low-risk funds shows you are conservative now.
– You can slowly increase equity allocation over the next 2–3 years in a phased manner.
» Psychological discipline in investing
– You are already using a logical correction-based SIP style.
– However, avoid emotional reactions to short-term volatility.
– Markets can fall 10% and recover before you deploy, leaving you behind.
– Maintain a fixed structure rather than a reactive approach.
– Having a Certified Financial Planner monitor your behaviour keeps emotions in check.
– This helps you stay consistent and confident even in unpredictable market phases.
» Rebalancing and monitoring
– Once your deployment is complete, review your portfolio every six months.
– Rebalance between equity and debt based on your asset allocation plan.
– Trim profits from overperforming categories and reallocate to underweighted areas.
– This maintains stability and long-term compounding.
– Regular portfolio reviews through a CFP prevent concentration risk or overlap.
» Importance of liquidity and emergency fund separation
– Do not mix your crash fund and emergency fund.
– Emergency fund should be strictly for unforeseen expenses like job loss or medical needs.
– Keep that separately in liquid fund or bank account.
– Crash fund is a tactical pool for future deployment in equity.
– Mixing both may cause emotional pressure during market volatility.
» Suggested structured approach for next 12 months
– Maintain Rs.10–15 lakhs in liquid funds for emergency use.
– Keep Rs.20–25 lakhs in arbitrage or ultra-short funds for liquidity.
– Move Rs.20–25 lakhs into balanced advantage funds for gradual equity participation.
– Deploy new investments through monthly staggered plans.
– Monitor markets but don’t depend fully on big crashes for entry.
– Let time and discipline work for you.
» Role of Certified Financial Planner in your case
– A Certified Financial Planner can analyse your risk profile and design the right asset mix.
– They can recommend active funds that fit your time horizon and objectives.
– They help you review, rebalance, and optimise taxation regularly.
– They also ensure your investment decisions stay emotion-free and goal-driven.
– Investing through a CFP-linked regular plan gives you professional guidance, not just fund access.
– Over years, this guidance adds more value than the extra cost in regular plans.
» Building a 360-degree wealth plan
– Along with your mutual fund strategy, ensure adequate health and term insurance coverage.
– Build an emergency fund separate from investment funds.
– Review your loans, cash flows, and tax planning annually.
– Define financial goals like retirement, children’s education, or home upgrade.
– Match each goal with specific investment buckets.
– Add estate planning measures such as nomination and Will.
– This holistic approach brings true financial control and confidence.
» Finally
– Your savings discipline and financial awareness are very encouraging.
– You are building wealth steadily and thoughtfully.
– Just replace index-only investing with a mix of active and hybrid funds.
– Avoid waiting endlessly for a perfect crash; let time diversification work.
– Use regular plans through a Certified Financial Planner for continuous review.
– This will ensure better protection, smoother returns, and stronger wealth growth.
– Stay consistent, patient, and goal-focused. Over time, your portfolio will compound beautifully.
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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