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Ramalingam

Ramalingam Kalirajan  |6275 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 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
Subhash Question by Subhash on Feb 29, 2024Hindi
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Hi sir, greetings. Am 46 years old and have recently got a lumpsum amount of around 15 lakhs and want to invest them with a time horizon of around 15+ years. Please suggest me a portfolio for the same. In case if you suggest me to invest the amount in a split manner in the next 1-2 year duration, is it ok to leave the amount in the Savings account (have an option to get 7% per annum in one of the private sector banks) or any other suggestion in this regard please ?

Ans: Congratulations on receiving a lump sum of 15 lakhs! It's an opportunity to strengthen your financial position and work towards your long-term goals.

Considering your time horizon of 15+ years, you have the advantage of investing for the long term, allowing your investments to potentially grow significantly over time.

As a Certified Financial Planner, I would recommend a diversified portfolio that balances growth potential with risk management. This could include a mix of equity, debt, and other asset classes to spread risk and capture growth opportunities.

Leaving the entire amount in a savings account, even with a 7% interest rate, may not be the most prudent choice for long-term wealth accumulation. While it provides safety and liquidity, the returns may not outpace inflation, resulting in a loss of purchasing power over time.

Instead, consider investing the lump sum gradually over the next 1-2 years to benefit from cost averaging and reduce the impact of market volatility. You could divide the amount into smaller portions and invest them systematically at regular intervals.

For the portion not immediately invested, a high-yield savings account or a short-term debt fund could be considered to earn a better return than a traditional savings account while maintaining liquidity.

Remember, investing involves risk, and it's crucial to align your investment strategy with your risk tolerance and financial goals. Regular reviews with your Certified Financial Planner can help ensure your portfolio remains on track to meet your objectives.

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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Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Asked by Anonymous - May 16, 2024Hindi
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I want to invest lumpsum amount of 1 lakh rupees for a period of 10 years. I can take modest risk with returns expected 20 % and above per year. Which is the best fund to invest in? Also can I invest in tax saver ELSS if yes pls suggest one.
Ans: Investment Options for a Lumpsum Amount of ?1 Lakh
Understanding Your Investment Goals
Investing ?1 lakh with a modest risk appetite and a return expectation of 20% annually is ambitious. While aiming high, it's essential to set realistic expectations and diversify your portfolio to mitigate risk.

Equity Mutual Funds
Aggressive Growth Potential:

Equity mutual funds offer high growth potential but come with higher risk.
Investing in funds with a strong performance history can help achieve your return goals.
Diversified Equity Funds:

These funds invest across various sectors and market capitalizations.
They balance risk by diversifying investments, providing moderate risk with potential high returns.
Sector-Specific Funds:

These funds focus on specific sectors like technology or pharmaceuticals.
High returns are possible but come with higher risk due to sector concentration.
Tax Saver ELSS Funds
Benefits of ELSS:

Equity Linked Savings Scheme (ELSS) funds offer tax benefits under Section 80C of the Income Tax Act.
These funds have a lock-in period of three years, providing long-term growth opportunities.
Choosing an ELSS Fund:

Look for ELSS funds with a consistent track record of high performance.
Ensure the fund aligns with your risk tolerance and return expectations.
Modest Risk with High Returns:

ELSS funds are primarily equity-focused, offering high returns with moderate risk.
They are suitable for investors seeking tax benefits along with wealth creation.
Criteria for Selecting the Best Fund
Historical Performance:

Evaluate the fund’s performance over at least 5-10 years.
Consistent performance against benchmarks indicates reliability.
Fund Manager Expertise:

The experience and track record of the fund manager are crucial.
A skilled fund manager can navigate market volatility effectively.
Expense Ratio:

Lower expense ratios can enhance your returns.
Compare the expense ratios of similar funds to ensure cost efficiency.
Risk-Adjusted Returns:

Assess metrics like Sharpe Ratio and Alpha to understand risk-adjusted returns.
High Sharpe Ratio and positive Alpha indicate better performance relative to risk.
Portfolio Composition:

Review the sectors and stocks the fund invests in.
Diversified and well-balanced portfolios can reduce risk and enhance returns.
Consulting a Certified Financial Planner
Personalized Advice:

A CFP can provide tailored investment strategies based on your financial goals.
Their expertise ensures your investments align with your risk tolerance and return expectations.
Ongoing Portfolio Management:

Regular reviews and adjustments by a CFP can help optimize your portfolio.
They monitor market trends and make informed decisions to maximize returns.
Tax Efficiency:

A CFP can guide you on tax-efficient investment options.
ELSS funds offer tax benefits along with high growth potential.
Advantages of Regular Funds through MFD
Expert Guidance:

Mutual Fund Distributors (MFDs) provide professional advice and support.
They help in selecting funds that align with your financial goals.
Convenience and Support:

MFDs handle administrative tasks, making the investment process seamless.
They offer ongoing support and updates on fund performance.
Conclusion
Investing ?1 lakh with the aim of achieving high returns requires careful planning and informed decisions. Equity mutual funds and ELSS funds are suitable options for achieving your financial goals.

Consulting a Certified Financial Planner and investing through a Mutual Fund Distributor can provide the expertise and support needed for a successful investment journey. This ensures your investments are aligned with your goals and risk tolerance, maximizing the potential for high returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6275 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 07, 2024

Money
How I diversified lumpsum of 15 lakh. I can take risk ( medium) and want 30lakh after 6 years. I want them to invest in equity/ mutual fund. I am thinking To invest in middle cap and infrastructure MF. Please suggest if I could invest in better way.
Ans: Investing Rs 15 lakh to achieve Rs 30 lakh in six years is an ambitious but achievable goal. To double your investment, you need to focus on a diversified portfolio, especially in equity mutual funds, considering your medium risk tolerance. Let's explore how you can diversify your investment effectively.

Understanding Your Financial Goals and Risk Appetite
Before diving into specific investment strategies, it’s crucial to understand your financial goals and risk appetite. You want to double your investment in six years, implying a required rate of return of around 12.25% per annum. Considering a medium risk tolerance, a balanced approach involving different mutual funds is ideal.

Importance of Diversification
Diversification is the practice of spreading investments across various financial instruments, sectors, and other categories to reduce risk. A well-diversified portfolio can help you achieve your financial goals while managing risk effectively.

Investing in Equity Mutual Funds
Equity mutual funds are an excellent choice for medium to long-term investments. They offer the potential for high returns but come with higher volatility. Considering your medium risk tolerance, we can focus on the following types of equity mutual funds:

Large Cap Funds:

These funds invest in large, well-established companies. They offer stability and steady returns, making them less risky than mid-cap or small-cap funds.

Mid Cap Funds:

Mid cap funds invest in medium-sized companies with potential for growth. These funds can provide higher returns than large cap funds but come with higher risk.

Small Cap Funds:

Small cap funds invest in smaller companies with high growth potential. These funds are more volatile but can offer significant returns.

Sectoral/Thematic Funds:

These funds invest in specific sectors like infrastructure. While they can offer high returns, they also carry higher risk due to sector-specific volatility.

Balancing Between Large Cap and Mid Cap Funds
A balanced portfolio should include both large cap and mid cap funds. This combination offers growth potential from mid caps and stability from large caps.

Suggested Allocation:
50% in Large Cap Funds:

Allocate 50% of your investment (Rs 7.5 lakh) to large cap funds. This ensures a stable foundation for your portfolio.

30% in Mid Cap Funds:

Invest 30% (Rs 4.5 lakh) in mid cap funds. This portion aims to capture the growth potential of medium-sized companies.

20% in Sectoral/Thematic Funds:

Allocate 20% (Rs 3 lakh) to sectoral or thematic funds, like infrastructure funds. This can provide higher returns but should be monitored closely due to higher risk.

Benefits of Actively Managed Funds
Actively managed funds involve professional fund managers making investment decisions. They aim to outperform the market through research and strategic asset allocation. For a medium risk investor like you, actively managed funds can be beneficial due to their potential for higher returns compared to index funds.

Disadvantages of Index Funds
Index funds passively track a market index and aim to replicate its performance. While they have lower fees, they may not achieve the returns required to meet your goal of doubling your investment in six years. Actively managed funds, despite higher fees, can potentially provide better returns through strategic investments.

Role of Regular Funds
Regular funds, when invested through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential, can offer personalized advice and continuous portfolio management. This helps in adjusting your investments according to market conditions and personal financial goals.

Avoiding Direct Funds
Direct funds bypass intermediaries, reducing expense ratios. However, they require investors to manage their portfolios independently. Given your medium risk tolerance and the complexity of achieving your financial goal, professional guidance from an MFD with CFP credentials can be more advantageous.

SIP vs. Lump Sum Investment
While you have Rs 15 lakh to invest as a lump sum, it's worth considering Systematic Investment Plans (SIPs) for additional investments. SIPs allow you to invest regularly, averaging out the cost of investments and reducing the impact of market volatility.

Monitoring and Rebalancing Your Portfolio
Regular monitoring and rebalancing are essential to ensure your portfolio stays aligned with your goals. Market conditions and personal circumstances change, so periodic reviews are crucial.

Steps for Monitoring:
Quarterly Reviews:

Review your portfolio every quarter to assess performance and make necessary adjustments.

Rebalancing:

If certain funds outperform or underperform, rebalance to maintain your desired asset allocation. This helps in managing risk and optimizing returns.

Importance of Emergency Fund
Before investing, ensure you have an emergency fund covering 6-12 months of living expenses. This provides a financial cushion in case of unexpected events, allowing your investments to grow uninterrupted.

Tax Implications and Planning
Understanding the tax implications of your investments is crucial. Equity mutual funds held for more than one year qualify for long-term capital gains tax, which is currently 10% on gains exceeding Rs 1 lakh per year. Plan your investments and withdrawals to optimize tax efficiency.

Additional Investment Considerations
Diversifying Beyond Equity:

While equity funds are essential, consider diversifying a small portion into debt funds or hybrid funds for stability and risk management.

Monitoring Market Trends:

Stay informed about market trends and economic indicators. This helps in making informed decisions and adjusting your portfolio accordingly.

Professional Advice:

Engage with a Certified Financial Planner (CFP) regularly. Their expertise can guide you in making strategic decisions and achieving your financial goals.

Steps to Implement Your Investment Plan
Assess Your Risk Tolerance:

Re-evaluate your medium risk tolerance to ensure your investment strategy aligns with your comfort level.

Choose the Right Funds:

Select large cap, mid cap, and sectoral funds with a strong track record and consistent performance.

Invest Systematically:

Consider a mix of lump sum and SIP investments to manage market volatility and average out costs.

Review and Adjust:

Regularly review your portfolio, assess performance, and rebalance as needed to stay on track towards your goal.

Conclusion
Achieving your goal of doubling your investment in six years requires a strategic and diversified approach. By investing in a balanced mix of large cap, mid cap, and sectoral funds, and leveraging the expertise of a Certified Financial Planner, you can optimize your chances of success. Remember to monitor your investments regularly, adjust your portfolio as needed, and stay informed about market trends.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6275 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 25, 2024

Asked by Anonymous - Jul 14, 2024Hindi
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Hi, I've a lumpsum of 1.5 lakh right now and I'm looking to invest it somewhere. I'm already actively investing in Quant small cap fund. I'm willing to take some risk in exchange of a higher return. Kindly suggest how can I go ahead with my investment plan.
Ans: 1. Assessing Your Risk Appetite

Understand Your Risk Tolerance:

You are willing to take some risk for higher returns.
This aligns well with your existing investment in a small-cap fund.
Diversification Importance:

Avoid putting all funds in one type of investment.
Diversify to balance risk and return.
2. Exploring High-Risk, High-Return Options

Mid-Cap Mutual Funds:

Growth Potential:

Mid-cap funds can offer high returns.
They invest in medium-sized companies with growth potential.
Volatility:

Higher risk compared to large-cap funds.
Suitable for aggressive investors.
Flexi-Cap Mutual Funds:

Dynamic Allocation:

These funds invest across market capitalizations.
They offer flexibility and potential for high returns.
Risk Management:

Diversification helps manage risk.
The fund manager can shift investments based on market conditions.
Thematic or Sectoral Funds:

Focused Growth:

Invest in specific sectors like technology or healthcare.
High growth potential if the sector performs well.
Higher Risk:

Performance is tied to sector performance.
Suitable for investors with high risk tolerance.
3. Benefits of Actively Managed Funds

Professional Management:

Expertise:

Actively managed funds have experienced fund managers.
They make investment decisions based on research and analysis.
Flexibility:

Managers can adjust portfolios based on market conditions.
This can lead to better performance compared to index funds.
4. Considerations for Investing

Investment Horizon:

Long-Term Perspective:

High-risk investments are better suited for long-term horizons.
Allows time to ride out market volatility.
Goal Alignment:

Ensure investments align with your financial goals.
Consider the time frame for each goal.
Regular Monitoring:

Performance Review:

Regularly review the performance of your investments.
Make adjustments if needed.
Market Trends:

Stay informed about market trends.
This helps in making informed investment decisions.
5. Utilizing SIPs for Additional Investment

Systematic Investment Plan (SIP):

Regular Investing:

Consider starting an SIP with a portion of your lumpsum.
This helps in averaging the purchase cost over time.
Disciplined Approach:

SIPs encourage regular and disciplined investing.
They reduce the impact of market volatility.
6. Avoiding Direct Fund Investments

Disadvantages of Direct Funds:

Complexity:

Requires extensive market knowledge.
Active fund management by a professional is often more beneficial.
Time-Consuming:

Monitoring and managing direct funds is time-consuming.
It may not be suitable for investors with limited time.
Benefits of Regular Funds via Certified Financial Planner (CFP):

Expert Guidance:

Investing through a CFP provides expert advice.
They help in selecting the best funds based on your goals.
Continuous Support:

CFPs offer ongoing support and advice.
They assist in portfolio rebalancing and goal tracking.
Final Insights

Diversify Your Investments:

Spread your lumpsum across various funds.
This balances risk and enhances return potential.
Stay Informed and Review Regularly:

Keep an eye on your investments and market trends.
Regular reviews ensure your portfolio stays aligned with your goals.
Seek Professional Advice:

Consulting a Certified Financial Planner can provide valuable insights.
They offer tailored advice based on your risk tolerance and goals.
Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6275 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 2024

Asked by Anonymous - Jul 19, 2024Hindi
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Hello sir, my age is 35yrs , i work in PSU, i earn 60k net take home. recently i received an amount of 14lakhs from post office RD, i have two daughters aged 7yrs n 7 months . I wanted to invest the above amount in right manner, long term for my children n my retirement purpose. Kindly guide me a plan how to divide the lumpsum so that atleast a portion of my goals like children's education, marriage, my post retirement life in future be attended.
Ans: Current Financial Overview
Age: 35 years
Profession: PSU employee
Net Take Home Salary: Rs 60,000
Recent Lump Sum: Rs 14 lakhs from post office RD
Daughters: Aged 7 years and 7 months
Financial Goals
Children’s Education and Marriage
Retirement Planning
Investment Strategy
Emergency Fund
Allocation: Rs 1 lakh
Purpose: To cover unforeseen expenses and emergencies.
Investment Options: Liquid mutual funds or high-interest savings accounts.
Children’s Education and Marriage
Allocation: Rs 7 lakhs
Purpose: Long-term growth for children’s education and marriage expenses.
Investment Options: Diversified mutual funds.
Suggested Funds Allocation
Equity Mutual Funds: Rs 4.5 lakhs
These funds offer high growth potential over the long term.
Select large-cap, mid-cap, and flexi-cap funds for diversification.
Debt Mutual Funds: Rs 2.5 lakhs
These funds provide stability and lower risk.
Consider short-term and ultra-short-term debt funds.
Retirement Planning
Allocation: Rs 6 lakhs
Purpose: Building a retirement corpus.
Investment Options: Mix of mutual funds and PPF.
Suggested Funds Allocation
Equity Mutual Funds: Rs 4 lakhs
Focus on multi-cap and balanced advantage funds.
These funds balance risk and return, suitable for long-term growth.
PPF (Public Provident Fund): Rs 2 lakhs
Offers tax benefits under Section 80C.
Safe and long-term investment with attractive interest rates.
Additional Considerations
SIP for Regular Investments
Monthly SIP: Rs 10,000
Allocation:
Rs 3,000 in large-cap equity fund
Rs 3,000 in mid-cap equity fund
Rs 2,000 in hybrid fund
Rs 2,000 in debt fund
Insurance Coverage
Life Insurance: Ensure adequate term insurance coverage.
Sum assured should be at least 10-15 times your annual income.
Health Insurance: Comprehensive health insurance for the entire family.
Cover for critical illnesses and hospitalization.
Review and Rebalance
Regular Monitoring: Review your investments annually.
Rebalance Portfolio: Adjust allocations based on market conditions and financial goals.
Final Insights
Diversify Investments: Spread investments across various asset classes to reduce risk.
Long-Term Focus: Keep a long-term perspective for higher returns.
Regular Contributions: Consistent SIPs help in building a substantial corpus over time.
Stay Informed: Keep abreast of market trends and adjust your portfolio accordingly.
By following this comprehensive plan, you can achieve your financial goals, ensuring a secure future for your children and a comfortable retirement for yourself.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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