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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 05, 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 - Sep 08, 2023Hindi
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Dear Sir, I am 51 years old. I have been investing in SIP for 3 years and planning to invest for coming 7 years. My Present SIPs are Axis Blue Chip Fund Regular Growth @2000/- Axis Mid Cap Regular Growth @2000/- Mirae Asset Emerging Fund Regular @2000/- UTI Flexicap Fund Regular Growth @2000/-, HDFC TOP 100 Regular Growth @2000/-. Any advise for the portfolio.

Ans: Your current SIP portfolio appears well-diversified across different categories like large-cap, mid-cap, and flexi-cap funds, which is good for long-term wealth creation. Since you have a 7-year investment horizon, you may consider the following suggestions:

Review Asset Allocation: Ensure your asset allocation aligns with your risk tolerance and financial goals. Since you're in your early 50s, you may want to tilt slightly towards more conservative options while still maintaining exposure to equities for growth potential.

Consider Adding Debt Funds: Given your age and investment horizon, consider adding debt funds to your portfolio to reduce overall risk. Debt funds can provide stability and income generation while complementing the growth potential of equity funds.

Regularly Monitor and Rebalance: Keep track of your portfolio's performance and periodically rebalance if needed to maintain your desired asset allocation. As you approach your investment goal, consider gradually shifting towards more conservative investments to protect your capital.

Seek Professional Advice: Consider consulting with a financial advisor who can provide personalized recommendations based on your specific financial situation, goals, and risk tolerance. They can help optimize your portfolio for better returns while managing risk effectively.
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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Asked by Anonymous - Jan 02, 2024Hindi
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I am 42yo and started SIP a year ago. My current SIPs (all Direct-G) 1) Mirae Asset ELSS (2000), 2) Quant ELSS (2000), 3) Canara Robeco ELSS (2000), 4) PPFAS ELSS (1500), 5) Nippon Multicap (1500),6) Quant Smallcap (3500), 7) PGIM Midcap (1000), 8) Quant Flexicap (2000), 9) Quant BFSI (5000). Altogether, my monthly SIP amounts to Rs. 20500. Additionally I am contributing 4000/m in NPS. I have a term plan of 25 Lakh, Health Insurance of 25 Lakh, Life Insurance of 6 lakhs. I have an EPF balance of 2 lakhs and contributing. Pls review my SIP portfolio and suggest. I want to stepup my SIP 10% annually. I have a investment horizon of 10 yrs for daughters education and 15 yrs horizon for retirement corpus. I am OK with High Risk considering 10 & 15 yrs horizon. Please suggest funds for an aggressive portfolio to accumulate 1 cr in 10 yrs.
Ans: Your current SIP portfolio seems well-diversified, but you may consider some adjustments to align with your goals and risk appetite. Given your long-term horizon and willingness to take high risk, you can consider the following suggestions:

Increase Allocation to Equity: Since you have a higher risk tolerance, you may consider increasing your allocation to equity funds, especially small-cap and mid-cap funds, which have the potential for higher returns over the long term.

Review ELSS Funds: While ELSS funds offer tax benefits, ensure you're comfortable with the lock-in period. You may want to diversify across different categories within equity funds for better risk management.

Evaluate NPS Contribution: Assess the performance and suitability of NPS vis-a-vis other retirement-focused investment options like equity mutual funds, considering your risk appetite and return expectations.

Regularly Review and Rebalance: Given your investment horizon, regularly review your portfolio's performance and make adjustments as necessary. Consider rebalancing your portfolio annually to maintain the desired asset allocation.

Consider Professional Advice: Given the complexity of investment decisions and tax implications, consider seeking advice from a certified financial planner who can provide personalized recommendations based on your financial goals, risk tolerance, and investment horizon.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

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Dear Sir/Madam, Greetings, I am Nirav Joshi, 34 years old physiotherapist, residing in Abu dhabi, UAE for the last 8 years. I started my SIPs in 2017 which are as follows: 1) Axis Bluechip- 12500 per month 2) Mirae Asset Large and Midcap (previously known as Bluechip fund)- 14000 per month 3) Kotak Flexicap- 15000 per month 4) Nippon India small cap- 16000 per month All funds are direct mode, growth option. I have initiated SIPs with a lesser amount, increasing by some percentage every year. The current valuation stands around 38.2L with a 26% p.a. return. My goal is to achieve a portfolio of 5cr by 2035. I would like to request you to kindly review my portfolio. I have a few questions in my mind. what should i do with axis bluechip and kotak flexicap? Both are under performing. Should I stop SIP and keep my units intact? and start SIP to better options? Should I SWP or STP to other funds? If yes, should i go with same fund house? Kindly advice with some fund examples. Thank you
Ans: Dear Nirav,

Greetings! I appreciate the detailed information you've shared about your investment journey. It's great to see your proactive approach to achieving your financial goals. You've done well by starting early and increasing your SIP contributions annually.

Current Portfolio Assessment
Your current SIPs are as follows:

Axis Bluechip: Rs. 12,500 per month
Mirae Asset Large and Midcap: Rs. 14,000 per month
Kotak Flexicap: Rs. 15,000 per month
Nippon India Small Cap: Rs. 16,000 per month
With a current portfolio value of Rs. 38.2 lakhs and an impressive 26% annual return, you're on a solid path toward your goal of Rs. 5 crores by 2035.

Evaluating Underperforming Funds
You mentioned that Axis Bluechip and Kotak Flexicap are underperforming. This can be concerning, but it's essential to assess the reasons and decide the best course of action.

Axis Bluechip Fund
Bluechip funds typically invest in large-cap companies, which are stable but might not offer high growth compared to mid or small-cap funds. If Axis Bluechip isn't meeting your expectations, consider the following steps:

Performance Comparison: Compare its performance with other large-cap funds over the same period.
Market Conditions: Large-cap funds may underperform during specific market cycles but provide stability in volatile times.
Fund Management: Evaluate the fund manager's track record and the fund's expense ratio.
Kotak Flexicap Fund
Flexicap funds invest across market capitalizations. If Kotak Flexicap isn't performing well, consider:

Diversification: Ensure the fund's sectoral and stock diversification aligns with your risk appetite.
Historical Performance: Look at its long-term performance compared to peers.
Economic Factors: Consider macroeconomic factors that might be affecting its performance.
Strategic Moves
Given your concerns, here are some strategies:

Stopping SIPs and Switching
If you decide to stop SIPs in underperforming funds, keep the units intact. This ensures you benefit from any future upturns.

New SIPs: Start SIPs in funds with better performance and strong management.
Fund Houses: You can choose funds from different fund houses to diversify further.
Systematic Transfer Plan (STP)
STP allows transferring a fixed amount from one fund to another periodically. This helps in averaging costs and reducing risk.

Within Same Fund House: Transferring within the same fund house might reduce exit load and tax implications.
Example Funds: Look for funds with consistent performance and strong management teams.
Fund Examples for Consideration
While I won't name specific schemes, here's what to look for:

Large-Cap Funds: Consistent performers with a low expense ratio.
Flexicap Funds: Funds with flexible allocation strategies and good historical returns.
Mid-Cap and Small-Cap Funds: High growth potential but be mindful of higher volatility.
Benefits of Regular Funds
You mentioned investing in direct funds. While direct funds have lower expense ratios, regular funds through a Certified Financial Planner (CFP) offer:

Professional Guidance: CFPs provide tailored advice based on your financial goals and risk tolerance.
Holistic Planning: They help in comprehensive financial planning, including tax and estate planning.
Active Monitoring: Regular reviews and adjustments based on market conditions and your changing needs.
Final Insights
Nirav, your disciplined investment approach and regular SIP increments are commendable. Addressing underperforming funds and considering strategic reallocation can enhance your portfolio's performance. Remember to review your portfolio periodically and consult a Certified Financial Planner for personalized advice.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Avoid Index Funds?

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

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

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

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

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

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

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

Provide exposure to equity while minimising downside risk.

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

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

Gold serves as a hedge against inflation and currency depreciation.

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

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

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

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

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

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

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

Allocate assets thoughtfully:

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

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

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

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

Be mindful of the new taxation rules for mutual funds:

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

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

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

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

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

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

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

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

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

Analyse your current investments and recommend improvements.

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

Provide periodic reviews to ensure you stay on track.

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

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

Build a diversified portfolio with equity and debt mutual funds.

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

Stay consistent with your SIPs and review your investments regularly.

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

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

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

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

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