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Ramalingam Kalirajan |6240 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 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

Question by Sandip on Jul 18, 2024Hindi

Sir, I am 55 years old. I want to invest in Mutual funds. I have presently one lakh to invest. I have planned to invest lumpsum in the following: 1. 50% in Large cap mutual fund 2. 20% in Mid cap mutual fund 3. 15% in Small cap mutual fund 4. 15% in Flexi cap mutual fund I would like to know that whether my above planning is OK or not. Can I do anything else and not doing the above? If my above planning is Ok , then pls suggest which mutual fund to opt for different categories mentioned above.

Ans: Assessing Your Investment Plan

Your plan to invest Rs 1 lakh in mutual funds is a good start. Let's assess your allocation strategy and provide recommendations for each category.

Allocation Strategy

Large Cap Mutual Funds (50%): These funds invest in large, well-established companies. They offer stability and moderate returns.

Mid Cap Mutual Funds (20%): These funds invest in medium-sized companies. They offer higher growth potential but come with more risk.

Small Cap Mutual Funds (15%): These funds invest in smaller companies. They have high growth potential but are very risky.

Flexi Cap Mutual Funds (15%): These funds invest across market capitalizations. They offer flexibility and can adapt to market conditions.

Evaluation of Your Allocation

Diversification: Your allocation provides a good mix of stability and growth. This helps in balancing risk and returns.

Risk Management: Allocating 50% to large caps provides a stable base. Mid and small caps add growth potential.

Flexibility: Including flexi cap funds adds flexibility to your portfolio. It allows for adaptation to market changes.

Suggestions for Improvement

Review Fund Selection: Regularly review and choose funds with a consistent track record.

Avoid Direct Funds: Direct funds may seem cost-effective but lack professional guidance. Investing through a Certified Financial Planner ensures better fund management.

Diversify Further: Consider adding debt funds for further risk management. They provide stability and income.

Disadvantages of Direct Funds

Lack of Guidance: Direct funds do not offer professional advice. This can lead to suboptimal fund selection.

Time-Consuming: Managing direct funds requires time and expertise. Regular funds managed by professionals save you effort.

Fund Recommendations

Large Cap Mutual Funds: Choose funds with a good track record. Look for consistent performance and low expense ratios.

Mid Cap Mutual Funds: Select funds with experienced fund managers. Ensure the fund has a strong performance history.

Small Cap Mutual Funds: Opt for funds with high growth potential. Ensure they have a good track record in managing risks.

Flexi Cap Mutual Funds: Choose funds that dynamically allocate across market caps. Look for flexibility and adaptability to market conditions.

Final Insights

Balanced Approach: Your allocation strategy is well-balanced. It provides a mix of stability and growth.

Regular Review: Review your portfolio regularly. Adjust based on performance and market conditions.

Professional Guidance: Work with a Certified Financial Planner. They can help you choose the best funds and manage your portfolio effectively.

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.