Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 23, 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 - Dec 26, 2023Hindi
Listen
Money

Hi Sir, I am 47 years and wife is 46 years old and we both are working in SW field. We both have started investing in MF for past 3-4 years and below is the investment done in various MF's( currently our SIP is Rs 53,000) . This is been done as per advice of our bank Relationship manager. Our investment horizon is long term and we intend to build a healthy corpus for our retirement. Please advice if our investment is headed in right direction and do we need to recalibrate this. Currently we have a joint home loan of 18 lacs and our apprx. monthly income is 2.5 lacs. Below is the list of our investments in various funds ( with SIP and duration): 1. Axis Blue Chip Fund Regular Plan- Growth SIP 3000 -( since 54 Months) 2. ICICI Prudential Balanced Advantage Fund - Regular - Growth SIP 3000 (since 32 Months ) 3. ICICI Prudential India Opportunities Fund - Growth SIP 3000 (14 Months) 4. Nippon India Large Cap Fund - Growth - SIP 3000 (54 Months) 5. Aditya Birla Sun Life Frontline Equity Fund - Regular Plan - Growth SIP 4000 (Since 6 Months) 6. Axis Focused 25 Fund Regular Plan - Growth SIP 3000 (27 Months) 7. Canara Robeco Emerging Equites- Regular Plan - Growth SIP 3000 (34 Months) 8. HDFC Balance Advantage Fund - Regular Plan - Growth SIP 6000 (6 Months) 9. ICICI Prudential Multi- asset Fund- Growth SIP 3000 (20 Months) 10. Kotak Equity Opportunities Fund- Regular Plan Growth SIP 5000 (6 Months) 11. Mirae Asset Large Cap Fund Regular Plan Growth SIP 4000 (6 Months) 12. Nippon India Small Cap Fund - Growth SIP4000 (6 Months) 13. SBI Equity Hybrid Fund - Regular Plan - Growth SIP 4000 (32 Months) 14. Tata Multi Asset Opportunities Fund Regular Plan - Growth SIP 5000 (6 Months Total SIP 53000 Lumpsum Investments: 1. Axis Growth Opportunities Fund - Fund Regular Plan- Growth 100000 Done on 21st May 2021 2. Axis Global Innovation Fund of Fund Regular Plan Growth 100000 Done on 21st May 2021 Thanks in Advance

Ans: It's commendable to see your commitment towards building a substantial corpus for your retirement. Your diversified portfolio showcases a mix of large-cap, mid-cap, and hybrid funds, which is a good strategy for long-term growth. However, there are a few considerations to ponder.

Firstly, while diversification is key, it's also essential to ensure that you're not over-diversifying, which could potentially dilute your returns. Assess the overlapping sectors and stocks across your funds to avoid redundancy.

Secondly, given your investment horizon and age, it might be beneficial to gradually shift towards more conservative options as you approach retirement. Rebalancing your portfolio periodically can help align it with your changing risk appetite and goals.

Lastly, consider evaluating the performance of your funds against their benchmarks and peer group regularly. Remember, investing is not just about choosing the right funds but also about monitoring and tweaking your portfolio when necessary.

Stay committed to your financial journey, and remember, it's the discipline and patience that often lead to fruitful outcomes in investing.
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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 31, 2024

Listen
Money
Dear Sir I am 26 years old and started earning 1 year back. My take home salary is little more than 50,000 pm. An amount of Rs.5,600 pm is being deducted from salary by employer on account of EPF and I have also a PPF account having annual deposit of 25,000.00 I have already started investing Rs.5100.00 per month in three different Mutual Funds i.e. Kotak Small Cap Fund, Nippon Large Cap Fund and PP Flexi Cap Fund, each. Now, I am thinking to start investing Rs.5100.00 through SIP in HDFC Balance Dynamic Fund. All the above investments have been started with a very long term view of 25 years since I am planning to retire by the time I reached to 50 years age and my Goal is achieve corpus of atleast 10.00 crores. Kindly suggest, whether :- (1) My current investments (including proposed SIP) are sufficient to achieve the proposed Goal ? (2) Any modification is required in the present investment strategy ? Kindly note that at present I am a bachelor, planing for marriage in next two years and I do not have any requirement of construction/acquisition of permanent asset (residential house) since I am residing in parental home with my parents.
Ans: Your proactive approach to financial planning at the age of 26 is commendable. Building a strong investment portfolio early in life sets a solid foundation for achieving long-term goals. Let’s assess your current investments and proposed plans to ensure you are on the right track to reach your goal of accumulating Rs 10 crores by the age of 50.

Evaluating Your Current Investments
Your monthly income is slightly more than Rs 50,000, with Rs 5,600 deducted for EPF and an additional Rs 25,000 annually in PPF. You are also investing Rs 5,100 per month in three different mutual funds. Let’s break down the effectiveness of these investments.

Employee Provident Fund (EPF)
The EPF is a stable and secure form of savings. It offers tax benefits and a decent rate of return. Over the long term, it will contribute significantly to your retirement corpus.

Public Provident Fund (PPF)
The PPF is another excellent long-term investment with tax benefits. Your annual deposit of Rs 25,000 in the PPF will grow substantially over 25 years due to the power of compounding.

Mutual Funds
Your current investment of Rs 5,100 per month in each of three mutual funds (small cap, large cap, and flexi cap) is well diversified. Small cap funds offer high growth potential, while large cap funds provide stability. Flexi cap funds add flexibility to your portfolio by investing across market capitalizations.

Proposed Investment in HDFC Balanced Dynamic Fund
Adding a balanced dynamic fund to your portfolio is a strategic move. These funds balance equity and debt investments, reducing risk while providing growth. This aligns with your long-term goal and adds a layer of stability to your investments.

Assessing the Adequacy of Your Current Investments
Estimating Future Corpus
To achieve Rs 10 crores by the age of 50, consistent and strategic investments are crucial. Considering the power of compounding and historical market returns, your current investments appear promising. However, regular monitoring and adjustments are necessary to stay on track.

Diversification and Risk Management
Your portfolio is well-diversified across different asset classes and fund categories. This diversification reduces risk and enhances the potential for growth. However, ensure periodic review and rebalancing to maintain the desired asset allocation.

Recommendations for Your Investment Strategy
Continue with Regular SIPs
SIP investments are effective for long-term wealth creation. They mitigate market volatility and inculcate financial discipline. Continue your existing SIPs and proposed investment in the balanced dynamic fund.

Increase Investment Gradually
As your income grows, consider increasing your SIP amounts. Incremental increases in investments will significantly impact your corpus over the long term. Aim to increase your SIPs by at least 10% annually.

Emergency Fund and Insurance
Ensure you have an adequate emergency fund, ideally covering 6-12 months of expenses. Also, consider health and term insurance to protect against unforeseen events. This will safeguard your financial plan and provide peace of mind.

Regular Reviews and Adjustments
Financial planning is not a one-time activity. Regularly review your investments and make necessary adjustments based on market conditions and life changes. Consulting with a Certified Financial Planner can provide professional guidance.

Conclusion
Your current and proposed investments are on a good path towards achieving your goal of Rs 10 crores by age 50. Continue with disciplined investing, regular reviews, and necessary adjustments. Your proactive approach and long-term vision are commendable and will serve you well in your financial journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 2024

Asked by Anonymous - Jul 28, 2024Hindi
Listen
Money
Hello sir, I (33yr) and my wife(30) are earning monthly salary as 3.5L.We are paying monthly 30K EMI for home loan with outstanding of 25L. We are investing below mf's with monthly 40K as SIP and will continue these investments next 10-15 years with annual 5% increase.Currently my portfolio value is 10L with 38% return(35.65% XIRR). And i have invested some amount in real-estate as well.The current market price of that investment is 1.25Cr. 1)Parag Parikh Flexi Cap Fund Direct Growth-5000 2)SBI Contra Direct Plan Growth-10000 3)Nippon India Small Cap-5000 4)Canara Robaco Small Cap-5000 5)Quant Small Cap Fund Direct Plan Growth-5000 6)Tata Digital India Direct Growth-10000 And my wife is investing monthly 15% of basic salary for ESOP in her company(US listed company). The market value of current stocks price is 25L. We have 1yr kid and will plan another one later.Our goal is to create good corpus fund(appx 5-10cr) to maintain kids education and retirement. Are we in current path to reach our goal or need to make any adjustments?
Ans: Financial Situation Overview

Your combined monthly income of Rs. 3.5 lakhs is impressive.
Home loan EMI of Rs. 30,000 with Rs. 25 lakhs outstanding is manageable.
Monthly SIP of Rs. 40,000 shows good commitment to investing.
Your diverse investment portfolio is praiseworthy.

Current Investment Analysis

Your mutual fund portfolio of Rs. 10 lakhs shows good growth.
The 38% return (35.65% XIRR) is excellent. Keep monitoring it.
Real estate investment of Rs. 1.25 crores adds to your wealth.
Your wife's ESOP worth Rs. 25 lakhs is a valuable asset.

Investment Strategy Evaluation

Your mix of flexi-cap, contra, and small-cap funds is well-diversified.
The technology sector fund adds a growth element to your portfolio.
Annual 5% increase in SIP is a good strategy for long-term growth.
Consider adding some mid-cap funds for better balance.

Risk Assessment

Your portfolio seems tilted towards high-risk small-cap funds.
The technology sector fund also carries higher risk.
Consider balancing with some large-cap or multi-cap funds.
Review your risk tolerance as you approach your goals.

Goal Analysis

Your goal of Rs. 5-10 crores for education and retirement is ambitious.
With your current savings rate, you're on a good path.
Consider increasing your investments as your income grows.
Factor in inflation when planning for long-term goals.

Asset Allocation

Your investments are heavily skewed towards equity.
Consider adding some debt funds for stability.
Rebalance your portfolio annually to maintain desired asset allocation.
Don't forget to factor in your real estate investment.

Tax Planning

Ensure you're maximizing tax benefits under Section 80C.
Consider tax-efficient withdrawal strategies for the future.
Review the tax implications of your wife's ESOP regularly.

Insurance Planning

Ensure you have adequate life insurance coverage.
Review your health insurance needs, especially with a growing family.
Consider disability insurance to protect your income.

Emergency Fund

Set aside 6-12 months of expenses in an easily accessible fund.
This will help you avoid disturbing your investments during emergencies.

Child Education Planning

Start a separate fund for your children's education.
Consider education-focused mutual funds for this purpose.
Factor in potential overseas education costs.

Retirement Planning

Your current investments will contribute significantly to retirement.
Consider starting a separate retirement-focused portfolio.
Review your retirement needs and adjust investments accordingly.

Finally

Your financial planning is on the right track. Keep it up!
Regularly review and rebalance your portfolio.
Stay disciplined with your investments, even during market fluctuations.
Consider consulting a Certified Financial Planner for personalized advice.

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

..Read more

Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 06, 2024

Money
Hi Sir, I am 51 year working professional with wife and daughter . I am investing around 70K per month in MF-SIP since last 7-8 years in below MF- 1. Aditya Birla Sun Life multi-cap fund 2. HDFC Flexi fund 3. HDFC top 100 4. Bandhan Flexi Cap 5. Nippon India Growth fund 6. Nippon India small cap 7. SBi Blue Chip I have medical insurance and term plan. My goal are- 1. 1.0Cr. in 5 Years for daughter's higher education. 2. 1.0Cr in 10 Years for daughter's marriage. 3. 3.5 Cr in 8 years for my retirements. I have PPF and Sukanya Samridhi account also. Pls review my investment and guide if this is sufficient to achieve my goals. Thanks
Ans: At 51, you have a structured plan for your family's future, which is commendable. The goals you’ve outlined for your daughter's education, marriage, and your retirement are well-defined, and the fact that you've been consistently investing Rs. 70,000 per month into mutual funds for the past 7-8 years shows that you're disciplined in your approach.

In this comprehensive response, I'll analyze your current portfolio, review your financial goals, and provide detailed insights on how to optimize your investments to ensure you meet these goals without unnecessary risk. My aim is to give you a complete 360-degree financial solution.

Let’s start by addressing each goal and analyzing your current investments in the context of those goals.

Goal 1: Rs. 1 Crore in 5 Years for Your Daughter's Higher Education
Achieving Rs. 1 crore in just 5 years is an ambitious but achievable goal. However, considering the shorter investment horizon, a cautious approach is required. Equity mutual funds, while great for long-term growth, can be volatile over a short to medium-term period, especially when market fluctuations are unpredictable.

Current Investment Strategy: You are invested in a mix of multi-cap, flexi-cap, large-cap, and small-cap funds. While these have performed well over the long term, the risk associated with small-cap and mid-cap funds could be a concern as your daughter’s education approaches. Market corrections could result in lower returns or even potential losses in the short run.

Suggested Approach:

Shift Gradually to Lower Risk Investments: To protect your accumulated wealth, I suggest gradually shifting a portion of your equity investments into safer options like debt mutual funds or hybrid funds. These funds can provide stability and lower volatility while still delivering moderate returns. A good rule of thumb would be to start moving some investments to debt-oriented funds by the third year from now.

Increase Stability Through Hybrid Funds: Consider hybrid funds, which invest in a mix of equity and debt. They offer a blend of growth and security. For example, while large-cap stocks provide moderate growth, the debt portion of the fund ensures stability. This will help you balance risk and reward as the education date nears.

Start with Systematic Transfer Plans (STP): If you want to minimize market timing risk, you can start using STP (Systematic Transfer Plans). STP helps in transferring a fixed amount from an equity mutual fund to a debt fund on a regular basis. This smoothens the volatility and avoids the risk of pulling out your entire investment during a market dip.

Top-Up Your SIP: If you feel that you’re slightly behind in reaching the Rs. 1 crore mark, you can top up your SIPs by an additional 5-10% each year. This will help in offsetting any market underperformance or inflation.

By making these adjustments, you can achieve your Rs. 1 crore goal within 5 years with lower risk, especially as the timeline gets shorter.

Goal 2: Rs. 1 Crore in 10 Years for Your Daughter’s Marriage
Your second goal of Rs. 1 crore in 10 years for your daughter's marriage has a longer investment horizon, which allows you to stay invested in equities for a little longer. Equity funds are known for outperforming other asset classes over a 10-year period, and the market volatility smoothens out over the long term.

Current Investment Strategy: You are invested in large-cap, multi-cap, flexi-cap, and small-cap funds, which offer good growth potential for this 10-year horizon. The flexibility provided by flexi-cap funds (which invest across different market capitalizations) helps to manage volatility, while large-cap funds provide stability.

Suggested Approach:

Stick to Equity Funds for the Next 7 Years: Continue with your equity investments for at least the next 7 years, as equities have the potential to deliver high inflation-beating returns. Large-cap funds provide stability, while multi-cap and flexi-cap funds will offer growth from a mix of mid-cap and small-cap stocks.

Start Transitioning to Debt Funds in Year 7: Around the 7th year, you can start gradually transitioning a portion of your investments into debt funds or hybrid funds. By this time, your portfolio would have benefited from equity market growth, and this shift will protect the wealth you've accumulated from short-term market fluctuations.

Consider Top-Upping SIPs: If you find yourself falling short of the Rs. 1 crore mark, a small increase in SIP contributions each year can help. Even a 5% annual top-up in your SIPs can ensure you meet your goal without compromising on your lifestyle.

Tax Efficiency: Remember, any capital gains from your investments will be subject to taxation. Equity investments held for more than 1 year are taxed at 10% on capital gains exceeding Rs. 1 lakh. Be mindful of this when planning withdrawals.

Goal 3: Rs. 3.5 Crore in 8 Years for Your Retirement
Your retirement goal is to accumulate Rs. 3.5 crore within 8 years. This is a crucial goal as it ensures financial independence in your post-working years. Retirement planning requires a careful balance of wealth accumulation and risk management, particularly as you get closer to your retirement date.

Current Investment Strategy: Your current portfolio mix is aggressive enough to potentially achieve this goal, but as you near retirement, risk management becomes essential. You cannot afford significant losses in the equity market close to your retirement.

Suggested Approach:

Continue with Equity SIPs for the Next 5 Years: Over the next 5 years, continue with your equity SIPs. Equities have historically provided the best inflation-adjusted returns over the long term, which is essential for retirement planning. The large-cap, flexi-cap, and multi-cap funds in your portfolio are well-suited for this purpose.

Start Reducing Risk in Year 5: Around the 5-year mark, you should start transitioning some of your equity investments into lower-risk options. Debt mutual funds, fixed deposits, and other fixed-income securities will help protect the wealth you have accumulated and provide a more stable income stream during your retirement years.

Create a Retirement Income Stream: As you approach retirement, it's important to think about how to generate a steady income from your accumulated wealth. You can consider using systematic withdrawal plans (SWPs) from your mutual fund investments to generate a regular income. This ensures that you get a steady monthly payout while your corpus continues to grow.

Consider Health Care Costs: In retirement, health care costs can increase. Since you have medical insurance, make sure that your coverage is sufficient for potential rising medical expenses. You may want to review your health insurance coverage to ensure that it aligns with your post-retirement needs.

Inflation Protection: Given that inflation can erode the value of your savings, it is crucial that your retirement corpus continues to grow even after retirement. Equities are still a viable option for a portion of your portfolio post-retirement to ensure inflation-adjusted returns.

Reviewing Your Current Portfolio
Let’s look at the mutual funds in which you're currently invested. You mentioned funds such as Aditya Birla Sun Life Multi-Cap Fund, HDFC Flexi Cap Fund, SBI Blue Chip, and Nippon India Small Cap Fund. These funds offer a range of market capitalizations and diversification, which is good for wealth creation. However, it’s also important to evaluate these funds in terms of their performance, fees, and overlap in stock holdings.

Multi-Cap and Flexi-Cap Funds: These funds offer flexibility in investing across large, mid, and small caps. They are a good choice for long-term growth. However, it’s crucial to monitor their performance. Sometimes, funds in these categories may become too focused on one particular segment, defeating the purpose of diversification.

Small-Cap Funds: Small-cap funds can generate significant returns, but they are also highly volatile. Given that you have some short- and medium-term goals (5 and 10 years), you may want to limit your exposure to small-cap funds.

Large-Cap Funds: These provide more stability and are less volatile than small- and mid-cap funds. They should form the core of your portfolio, particularly as you approach your retirement. Large-cap funds are a good fit for wealth preservation while still offering growth.

Diversification and Overlap
While your portfolio is diversified across different market caps, it’s essential to check for overlap in the underlying stock holdings. Overlap occurs when multiple funds hold the same stocks, reducing the diversification benefit. For example, large-cap funds and multi-cap funds may both hold similar stocks, leading to a higher concentration in a few companies.

Action Plan:
Analyze Fund Overlap: Use online tools or consult with a certified financial planner to check the overlap of stocks in your funds. If there’s significant overlap, you may want to adjust your portfolio by reducing exposure to one of the overlapping funds.

Review Fund Performance Regularly: It’s important to review the performance of your mutual funds at least once a year. While long-term investing is the key, underperforming funds should be replaced with better alternatives.

Role of PPF and Sukanya Samriddhi Account
You also have investments in PPF and Sukanya Samriddhi Yojana, which are excellent choices for long-term, risk-free wealth accumulation.

PPF: Public Provident Fund (PPF) is a tax-efficient, risk-free investment with a lock-in period of 15 years. Given its safety and tax benefits, it’s a great addition to your retirement planning. The returns from PPF, though lower than equities, are risk-free and can act as a cushion during market downturns.

Sukanya Samriddhi Yojana: This scheme is an excellent way to save for your daughter’s future, given its attractive interest rates and tax benefits. The yearly Rs. 12,000 contribution is a good start, but if you can increase this contribution, it will help in meeting your daughter’s education and marriage goals more easily.

Insurance Coverage
You currently have insurance policies for yourself, your wife, and your daughter. However, I would suggest revisiting your life insurance coverage. Term insurance is the most cost-effective way to provide financial security for your family in the event of an untimely death.

Review Your Coverage: Ensure that the sum assured is sufficient to cover not just your current expenses, but also your future financial goals. If the coverage seems inadequate, consider increasing it through additional term insurance policies.

Health Insurance: As health care costs are expected to rise, it’s important to have adequate health insurance coverage. Your current medical coverage may not be sufficient in the long run, so consider enhancing it with a super top-up policy to cover higher expenses.

Emergency Fund
You mentioned that you have a small emergency fund. This is important, as it allows you to manage unforeseen expenses without liquidating your long-term investments.

Recommended Fund Size: A good rule of thumb is to keep 6-12 months' worth of living expenses in an emergency fund. Since your monthly expenses are Rs. 11,000, you should aim for at least Rs. 1 lakh in a liquid savings account or a short-term debt mutual fund.
Debt Management
You mentioned a loan of Rs. 8.8 lakh, which is manageable given your income and investment portfolio. However, you should aim to clear this loan as soon as possible. By paying off the loan, you’ll free up more money for investments and reduce your financial stress.

Strategy for Debt Repayment: Focus on repaying this loan in the next 1-2 years, so that it doesn’t interfere with your ability to invest for your financial goals. Once the loan is repaid, the freed-up cash flow can be redirected to your SIPs.
Conclusion
You’ve done an excellent job of building a diversified portfolio, and your disciplined approach to investing is commendable. However, as you get closer to your financial goals, it’s important to shift your strategy from wealth accumulation to wealth preservation. By gradually reducing your equity exposure and moving towards safer investments, you can protect your capital while still generating the returns needed to meet your goals.

Daughter’s Education: Shift to debt funds over the next 3-5 years to reduce risk.
Daughter’s Marriage: Continue with equity for the next 7 years, then transition to safer options.
Retirement: Stick with equities for 5 more years, then reduce risk by shifting to debt and hybrid funds.
Insurance: Ensure adequate life and health insurance coverage.
Emergency Fund: Maintain at least 6-12 months of living expenses in liquid assets.
Loan Repayment: Focus on clearing your loan within the next 1-2 years.
By making these adjustments, you will be well on your way to achieving your financial goals with peace of mind. Remember to review your portfolio regularly and make adjustments as needed.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 25, 2025

Money
Please review my MF portfolio. My monthly SIP is 18000/- per month. Current portfolio value is 1.5 Lakh. 1. ICICI Prudential Bluechip Fund - 4000 2. Parag Parikh Flexi Cap Fund - 4000 3. Nippon India small cap - 4000 4. HDFC balanced advantage fund- 2000 5. Motilal oswal Midcap fund - 2000 6. JM Aggressive Hybrid Fund - 1000 7. Bandhan Nifty Alpha Low Volatility 30 Index - 1000 (NFO) Traditional investments are as follows, and the current value is 15 Lakh. 1. EPF - 44000/- per month 2. NPS - 22000/- per month 3. RD - 20000/- Per month to build an emergency fund. I am planning to increase my SIP from 18000 to 60000 every month. Please let me know if I need any changes in my portfolio. I am planning to build a portfolio of 5 crore in the next 15 years. Currently, I am 35 years and planning to retire by the age of 50 years.
Ans: Your financial plan is well-structured, and your investment discipline is strong. You have a clear retirement goal and an aggressive investment approach. However, there are areas where you can optimize your portfolio for better returns and lower risk.

Let’s analyze your portfolio from a 360-degree perspective.

1. Strengths of Your Current Portfolio
Your investment approach is well-planned. Here’s what you are doing right:

Disciplined SIP investment – You have a regular SIP plan in equity mutual funds.

Diversified portfolio – You have exposure to large-cap, mid-cap, small-cap, flexi-cap, and hybrid funds.

Strong traditional investments – EPF and NPS provide stability in retirement.

Emergency fund planning – Your recurring deposit ensures liquidity for unexpected expenses.

Increasing SIPs – Scaling up SIPs from Rs 18,000 to Rs 60,000 will help wealth creation.

Your financial discipline will help you reach your Rs 5 crore target.

2. Issues in Your Mutual Fund Portfolio
While your portfolio is diversified, some adjustments can improve performance.

Over-Diversification
You have too many funds across categories.

Too many funds dilute returns and make tracking difficult.

Having 4-5 well-chosen funds is better than 7-8 average funds.

Index Fund Exposure
One of your funds is an index fund.

Index funds cannot beat the market, while actively managed funds can.

A Certified Financial Planner (CFP) helps select the best actively managed funds.

Hybrid Funds and Overlapping Categories
You hold two hybrid funds, which can limit aggressive growth.

These funds are not necessary when you have EPF and NPS.

Adjusting these issues will enhance your returns.

3. Optimizing Your Mutual Fund Portfolio
Here’s how you can make your portfolio more efficient:

Reduce the Number of Funds
Keep 4-5 funds for focused wealth creation.

Large-cap, flexi-cap, mid-cap, and small-cap funds provide balanced exposure.

Avoid hybrid funds as EPF and NPS already offer stability.

Exit Index Fund
Actively managed funds provide better long-term returns.

Fund managers adjust portfolios based on market conditions.

An index fund will not protect during market corrections.

Adjust Your Portfolio Allocation
Large-cap fund – 30% allocation for stability.

Flexi-cap fund – 30% allocation for fund manager flexibility.

Mid-cap fund – 20% allocation for higher growth potential.

Small-cap fund – 20% allocation for aggressive wealth creation.

This will balance risk and return effectively.

4. Optimizing Traditional Investments
Your traditional investments are strong, but they can be more efficient.

EPF Contribution
EPF is a safe investment with tax benefits.

However, it provides lower returns compared to equity.

Consider redirecting a small portion towards equity SIPs for higher growth.

NPS Contribution
NPS is a good tax-saving tool but has withdrawal restrictions.

You can keep investing but ensure a higher allocation in equity within NPS.

Recurring Deposit for Emergency Fund
RDs are good for liquidity but offer low returns.

Instead, keep emergency funds in a liquid mutual fund for better returns.

A balanced approach between safety and growth is necessary.

5. Increasing SIPs from Rs 18,000 to Rs 60,000
Your plan to increase SIPs is excellent. However, proper allocation is required.

Large-cap fund – Increase SIP from Rs 4,000 to Rs 15,000.

Flexi-cap fund – Increase SIP from Rs 4,000 to Rs 15,000.

Mid-cap fund – Increase SIP from Rs 2,000 to Rs 10,000.

Small-cap fund – Increase SIP from Rs 4,000 to Rs 10,000.

Liquid fund – Allocate Rs 10,000 for short-term needs.

This ensures strong wealth creation while maintaining liquidity.

6. Expected Growth and Retirement Planning
With disciplined investing, you can achieve your Rs 5 crore goal.

Equity SIPs – Higher allocation ensures compounding benefits.

Traditional investments – EPF and NPS provide stability.

Emergency fund – Ensures liquidity for unexpected needs.

Your current path is excellent. Minor adjustments will enhance your wealth creation journey.

Finally
You are on the right track towards financial freedom. Your disciplined investment approach is commendable. However, some refinements will optimize your returns.

Reduce over-diversification and exit underperforming funds.

Replace index funds with actively managed funds for better returns.

Allocate SIPs strategically for better risk-reward balance.

Re-evaluate traditional investments to maximize efficiency.

Ensure liquidity through a liquid fund instead of an RD.

With these adjustments, you can achieve your Rs 5 crore target confidently.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |8916 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 14, 2025

Asked by Anonymous - Jun 13, 2025
Money
Hi, I am 39 years. My monthly salary is 94000 and I am investing in MF since 2016. I started my SIP with Rs. 8000 per month and presently my monthly SIP contribution is 36000. My present MF Corpus is 35 lacs (XIRR: 18.20). I am monthly invested in following funds at present: SBI Contra Fund: 5000 SBI Small Cap Fund: 6000 SBI Large and Mid Cap: 6000 Parag Parekh Flexi Cap: 5000 ICICI Blue Chip: 4000 Quant Small Cap: 3000 Nippon India Growth: 3000 Nippon India Multi Cap: 4000 My investment in small cap is high as I will be invested for next 15 years. I have my wife and two child aged 7 and 1. I have term plan of 1.5 crs. I also have emergency fund in FD for 6 lacs. Are the savings sufficient to cover my child expenses when they grow up and for my retirement? I am a PSU employee and I have statutory deductions like PF and NPS and my PF balance is 14 lacs and NPS balance is 29 lacs as on date. Presently I have no loans but planning a House purchase for 80 lacs (Margin: 10 lacs). Is it advisable to take loan for House and continue my SIP although my monthly SIP will decrease if I avail loan or shall I reduce loan amount and pay upfront higher amount/margin from my MF/ other savings to purchase house. And any suggestions from your side for funds in which I am investing to add or remove as I have XIRR of above 15% in all the funds I have invested till now. Till 60 years I will be getting leased accomodation from my employer but at the place of posting and we are mostly posted in Tier 2/3 cities or rural places. but I want to purchase a flat in State capital for better future prospect of my children. Our medical needs are taken care by my organization and I don't need to incur any expenses on that front.
Ans: Your dedication toward financial planning is impressive. Let us now take a complete 360-degree look at your current situation and future planning.

Comprehensive Financial Assessment
You are 39 years old with monthly salary of Rs.?94,000.

You have been investing consistently in mutual funds since 2016.

Your SIP began at Rs.?8,000 per month, now reaching Rs.?36,000.

Your mutual fund corpus is Rs.?35?lakhs, delivering XIRR of 18.20%.

You hold seven equity mutual fund schemes across large cap, small cap, flexi cap, and multi cap categories.

You maintain an emergency fund of Rs.?6?lakhs in fixed deposits.

You have term insurance coverage of Rs.?1.5?crore.

You are a PSU employee with PF of Rs.?14?lakhs and NPS of Rs.?29?lakhs.

You plan to buy a house worth Rs.?80?lakhs, keeping Rs.?10?lakhs as margin.

Employer provides housing until age 60, and you live in Tier?2 or rural postings.

Medical expenses are already covered by your employer’s scheme.

Your financial foundation is strong. You started early, and your SIP discipline shows excellent planning traits.

Goal Setting and Time Horizon
To build any effective financial strategy, linking money to goals is essential. You have multiple significant life goals:

Home purchase – Buying a flat in the State capital.

Child expenses – Education and possibly marriage funding.

Retirement – Corpus to support your expenses post retirement.

Let’s break these down.

Home Purchase Goal
You want to buy a flat worth Rs.?80?lakhs, using Rs.?10?lakhs margin and a home loan for the rest.

The loan repayment (EMI) must fit your income without disturbing SIPs and lifestyle.

Child-Oriented Goals
Your children are aged 7 and 1.

School, college, marriage expenses will come over 10 to 20 years.

Return on investment must beat education inflation in metros.

Retirement Goal
You plan to retire around age 60.

That leaves 21 more years of working life.

You will have PF, NPS, mutual funds.

Goal is to build sufficient corpus to sustain post-retirement life.

Linking each fund allocation and financial action to these specific goals ensures clarity and purpose.

Cash Flow and EMI Planning
You earn Rs.?94,000 per month. Let’s examine your outflow structure:

Current investment outflow is SIP of Rs.?36,000 monthly.

PF and NPS contributions are statutory and deducted from salary.

Emergency fund is already in place.

No current EMIs or loans.

But EMI will start post house purchase.

To keep financial plan intact, EMI must stay within comfortable limits—preferably under 40–45% of net income. Let us explore two funding strategies for housing:

Option A: Higher Down Payment
Use margin of Rs.?10?lakhs and an additional Rs.?5–10?lakhs from your savings or mutual funds.

Loan amount reduces accordingly.

EMI becomes more manageable.

But you will partly pause or reduce SIP to fund margin.

Option B: Moderate Margin, Higher Loan
Use only Rs.?10?lakhs margin.

Loan amount increases, raising EMI.

You continue SIP at near current levels.

EMI may cover 40–45% of net income.

Balanced Approach (Preferred)
Use margin of Rs.?10?lakhs plus Rs.?5?lakhs if comfortable.

Loan size becomes manageable.

Keep SIP on track by slightly reducing only during loan repayment stress periods.

Once EMI settles, resume or increase SIP.

With careful planning, EMI and SIP can coexist, preserving your mutual fund growth trajectory.

Emergency Fund and Insurance
You have built a strong emergency fund of Rs.?6?lakhs. This covers around six to seven months of expenses. It gives you financial cushion if your salary faces interruptions or loan EMI starts unexpectedly.

Your term insurance coverage of Rs.?1.5?crore is adequate given your dependents and responsibilities. Employer health insurance ensures no major medical spending needed.

Ensure that after taking home loan, the emergency fund stays intact. Do not use this corpus for house margin or EMI. Keeping this buffer is foundational to financial health.

Equity Portfolio Structure and Risk
You currently have seven mutual fund schemes across small, large, flexi, and multi cap categories. Small cap exposure looks particularly high (~30% of equity allocation). This heavy tilt may be appropriate for long-term goals, but bears higher volatility.

Given your time horizon of 15 years for the property and even longer for children’s future and retirement, equity is suitable. But too much small cap exposure may hurt during downturns.

A long-term investor like you can handle volatility, but also needs prudence.

Suggested Equity to Hybrid Mix
Here is a deeper elaboration on fund mix and rationale:

1. Small Cap Funds
These funds invest in smaller, high-growth firms.

They can give strong returns over time.

But they are vulnerable to market drops and liquidity issues.

We suggest keeping small cap allocation around 15–20% of total equity.

2. Large and Mid Cap Funds
Focused on more stable, growing companies.

Less volatile than small cap.

Good for steady compounding.

Weigh this allocation around 25–30%.

3. Flexi Cap and Multi Cap Funds
Provide diversification across all market caps.

Active fund managers adjust allocations.

They help blunt volatility and provide consistency.

A 30–40% allocation here helps control risk.

4. Balanced or Hybrid Funds
Combine equity and debt in single scheme.

Equity portion provides growth, debt cushions against falls.

Highly useful during market corrections.

A 20–30% allocation here adds resilience to your portfolio.

Such a structure keeps your portfolio growth-oriented yet not over-exposed to high-risk segments.

Fund Consolidation
Holding seven equity schemes plus PF and NPS across different categories adds portfolio complexity. Tracking, rebalancing, and performance evaluation become labour-intensive.

Consider reducing fund count by:

Merging two small cap funds if both are of similar mandate.

Evaluating flexi cap and multi cap funds – keep the ones with better consistency.

Ensuring every fund in portfolio serves a distinct purpose.

Keeping 4–5 equity/hybrid funds makes monitoring simpler and more effective.

Review of Direct Funds
You currently invest in direct mutual funds. These have lower expense ratios, which improves returns. Yet, direct funds come with limited guidance, which can be risky without professional oversight.

Limitations:
No regular review aligned with goals

Risk of emotional decision-making in volatility

Rebalancing burdens fall entirely on investor

Harder to get support during investments or exit planning

Benefits of Regular Funds via MFD + CFP:
Access to expert advice and goal-based allocation

Portfolio reviews aligned with life changes

Support during market dips or financial stress

Better discipline in top-ups, rebalance, and redemptions

Transitioning to regular funds managed through a Certified Financial Planner can provide more holistic guidance and oversight. The small extra cost is often justified by better discipline and risk management.

Index Funds and Active Funds
You have not shown interest in index funds or ETFs, which is wise for your strategy. Index funds simply replicate market performance. They lack flexibility and cannot avoid poor performers. They perform poorly during downturns by tracking every stock.

Actively managed funds like those in your portfolio allow skilled managers to adjust allocations, exit weak companies, and take advantage of upside. This makes them superior during volatile market phases and in generating alpha for long-term investors like you.

Children’s Education and Marriage Corpus
Your children are young now, giving you 16–20 years horizon for their education and marriage planning. Your current SIP and corpus are good building blocks. However:

Education inflation in metro cities may reach 10–12% annually.

Early planning through separate goal-based portfolios is wise.

You can start designated SIPs for each child’s education and marriage objective.

Consider increasing SIP amounts when you get salary increments.

Monitor these SIPs periodically with CFP for mid-course corrections.

Goal-based investing helps track progress and stay motivated. It ensures funds are aligned with need timelines.

Retirement Planning
Your PF and NPS corpus already stand at Rs.?14?lakhs and Rs.?29?lakhs. These are sound foundations. Combined with mutual fund corpus and continued SIPs, you appear well on track to build sufficient retirement wealth.

However, periodic review is essential:

PF and NPS have defined contribution limits and investment rules.

Mutual fund SIPs should continue with strategic allocation mix.

Hybrid funds may be increased as retirement nears to reduce volatility.

Annual fund performance and asset drift must be monitored.

With disciplined saving and periodic review, your retirement corpus can meet inflation-adjusted living requirements.

Loan Strategy vs SIP Commitment
Taking a home loan requires balancing EMI burden with SIP commitments. A loan for Rs.?70 lakhs at typical interest rate over 20 years may have EMI of Rs.?55,000.

You should:

Ensure EMI stays within 45% of net salary.

Continue SIPs without full interruption—either maintain current amount or slightly reduce (not pause).

Once home loan EMI reduces over time, resume SIP top-up.

Avoid using mutual fund corpus or emergency funds for down payment.

Balancing EMI and SIP ensures homeownership does not derail your wealth-building process.

Tax Benefits and Implications
You should factor taxation into investment and withdrawal decisions:

Equity Mutual Funds

LTCG above Rs.?1.25?lakhs is taxed at 12.5%.

STCG within one year is taxed at 20%.

Debt Funds

LTCG and STCG taxed as per income tax slab.

Home Loan

Though loan EMI interest is not deductible, the rent saved can be treated as benefit in kind.

Tax planning strategies around home loan prepayment and eligible deductions apply.

Consult your CFP before making exit or redemption decisions. Timing redemptions post 3-year holding period can help reduce tax liabilities on equity gains.

Regular Reviews & Monitoring
Your financial plan needs regular check-ins:

Review portfolio allocation and performance annually.

Rebalance if equity drift exceeds your desired limits (e.g., small cap exposure grows due to market rally).

Adjust SIP amounts aligned with new salary, promotions, or changing goals.

Keep focus on goal completion timelines and required corpus.

During market volatility, maintain disciplined SIP approach.

Such discipline builds long-term wealth and supports your overall goal framework.

Emotional Discipline & Investor Mindset
Your XIRR of 18.20% reflects strong execution. However:

Past performance is not guaranteed for future.

You must stay committed during market leaps and troughs.

Avoid panicking and selling your equity funds during corrections.

Keep focus on long?term plan rather than daily NAV movements.

Patience and discipline are as critical as returns themselves.

Growing wealth in equity is as much about emotional strength as financial strategy.

Step-Wise Action Plan
Let us summarise the steps for clarity:

Finalize home loan and EMI capacity

Evaluate your comfort with EMI covering

..Read more

Latest Questions
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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x