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At 62, is my SIP in these 9 MFs a smart move for 8-10 years?

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 08, 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 - Aug 02, 2024Hindi
Money

I am 62 years old and recently started investing through Sip in below mutual fund. I intend to invest for 8-10 years. 1) Edelweiss Balance Advantage G - Rs.5K 2) HDFC Defence G - Rs.5K 3) Mirae ELSS G - Rs.5K 4) Motilal Oswal Large & Midcap G - Rs.5K 5) Nippon India Power & Infrastructure G - Rs.5K 6) Quant Flexicap G - Rs.5K 7) Quant Midcap G - Rs.5K 8) Quant Value G - Rs.5K 9) UTI Nifty 200 Momentum 30 Index G - Rs.5k Please suggest if the selected funds are good to invest for 8- 10 years period.

Ans: Assessing Your Current Mutual Fund Portfolio

Your portfolio has a diverse mix of funds across various categories. At 62, planning for an 8-10 year investment horizon is commendable. This approach allows you to benefit from market growth while also preparing for retirement. Let's evaluate your selected funds and provide insights into the effectiveness of your portfolio strategy.

Diversification and Fund Categories

You’ve spread your investments across different categories. This is generally a good strategy. But, it’s important to assess if these funds align with your financial goals and risk tolerance. Here’s a breakdown:

Balanced Advantage Fund: This type of fund balances equity and debt exposure. It helps manage risk, especially as you approach retirement.

Sectoral Funds (Defence, Power & Infrastructure): These funds focus on specific sectors. They can be volatile, as their performance is tied to the sector's health. Holding sector-specific funds can lead to concentration risk. It’s crucial to monitor their performance regularly.

Equity Linked Savings Scheme (ELSS): This is a tax-saving instrument. It has a lock-in period of three years. It’s good for long-term wealth creation with the added benefit of tax savings.

Large & Midcap Funds: These funds invest in both large and mid-sized companies. They offer a balance of stability and growth potential. But, they can be subject to market volatility.

Flexicap Fund: This fund has the flexibility to invest across market capitalizations. It allows the fund manager to adapt to market conditions.

Midcap Fund: Midcap funds focus on medium-sized companies. They have high growth potential but also come with increased risk.

Value Fund: This fund invests in undervalued stocks. It has the potential for significant returns but requires patience. Value stocks may take time to realize their potential.

Index Fund: Index funds replicate a market index. They provide broad market exposure. However, they lack the active management that could help navigate market fluctuations.

Key Considerations

While your portfolio is diversified, there are some points to consider for optimization:

Sectoral Exposure: Sector-specific funds like Defence and Power & Infrastructure are high-risk. If the sector performs poorly, these funds can underperform. It’s advisable to limit exposure to such funds.

Index Fund Disadvantages: Index funds like the UTI Nifty 200 Momentum 30 have a passive management style. They can’t adapt to market changes. This could limit potential returns during volatile market conditions. Actively managed funds, guided by experienced fund managers, offer better chances for growth.

Direct Funds vs. Regular Funds: Direct funds have lower expense ratios but require a hands-on approach. If you prefer professional guidance, regular funds through a Certified Financial Planner (CFP) are more suitable. Regular funds also provide access to expert advice, helping you make informed decisions.

Optimizing Your Portfolio

To align your investments with your goals and risk profile, consider these adjustments:

Reduce Sectoral Exposure: Consider reducing your investments in sectoral funds. These funds are more volatile and can impact your portfolio's overall stability. A more diversified approach can help mitigate risk.

Focus on Actively Managed Funds: Shift focus towards actively managed funds. These funds have professional managers who can make decisions based on market conditions. This could potentially offer better returns compared to index funds.

Review Flexicap Allocation: The Flexicap fund in your portfolio provides flexibility in capitalization exposure. Ensure this fund aligns with your overall investment strategy. It should complement rather than overlap with other funds in your portfolio.

Rebalancing and Monitoring

Regular Reviews: At 62, it’s essential to regularly review your portfolio. Ensure your investments align with your evolving financial needs. Consider rebalancing your portfolio annually to maintain your desired risk level.

Risk Management: As you approach retirement, it’s wise to gradually reduce exposure to high-risk assets. This helps protect your capital while still allowing for some growth.

Consult a Certified Financial Planner: Engaging with a CFP can provide personalized advice. They can help tailor your portfolio to your specific needs. This ensures that your investments are optimized for your retirement goals.

Final Insights

Your current portfolio is diverse, which is a positive aspect. However, it’s important to consider the risks associated with sectoral and index funds. Shifting focus towards actively managed funds and reducing sectoral exposure can help optimize your portfolio for better returns. Regular reviews and adjustments will ensure your investments remain aligned with your financial goals.

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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Asked by Anonymous - Jan 03, 2024Hindi
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Hi I am 37 years ole and investing in the following mutual funds via monthly SIP's for the past 2 years 1. Aditya Birla Sun Life Digital India Fund (1.5k) 2. Bandhan Tax Advantage ELSS Fund (1k) 3. Canara Robeco ELSS Tax Saver (1k) 4. DSP ELSS Tax Saver Fund (1k) 5. ICICI Prudential Technology Fund (2k) 6. Mirae Asset ELSS Tax Saver Fund (2k) 7. Nippon India Small Cap Fund (1.5k) Please suggest if all these funds are good to continue in the future. Additionally, I plan to increase the monthly SIP by another 5k per month from January 2024. Let me know if Parag Parikh Flexi Cap and Quant Small Cap are good options, or should I continue to invest more in the existing funds?
Ans: It's great to see that you're investing regularly in mutual funds for your future financial goals. Here are some insights and suggestions regarding your current investments and future plans:

Review Existing Investments: It's essential to periodically review the performance of your current mutual fund investments to ensure they are aligned with your financial goals and risk tolerance. Evaluate factors such as fund performance, expense ratios, fund manager track record, and portfolio diversification.

ELSS Funds: ELSS (Equity Linked Savings Scheme) funds offer tax benefits under Section 80C of the Income Tax Act, along with the potential for long-term capital appreciation. Since you're investing in multiple ELSS funds, ensure that they have a consistent track record of performance and are managed by experienced fund managers.

Sectoral Funds: Funds like Aditya Birla Sun Life Digital India Fund and ICICI Prudential Technology Fund invest in specific sectors (digital/technology). While these funds can offer high growth potential, they also carry higher risk due to sector-specific volatility. Make sure to monitor these funds closely and be prepared for fluctuations in returns.

Small Cap Fund: Nippon India Small Cap Fund invests in small-cap stocks, which have the potential for high returns but are also more volatile. Given the risk associated with small-cap funds, ensure that they align with your risk appetite and investment horizon.

Future SIP Increase: Increasing your SIP amount is a prudent move to accelerate wealth accumulation over time. Before adding new funds or increasing existing SIP amounts, assess your overall portfolio diversification and risk exposure.

New Fund Consideration: Parag Parikh Flexi Cap Fund is known for its diversified investment approach across different market caps and sectors, making it suitable for long-term wealth creation. Quant Small Cap Fund focuses on small-cap stocks and can complement your existing small-cap allocation.

Asset Allocation: Ensure that your overall portfolio is well-diversified across different asset classes, such as large-cap, mid-cap, small-cap, and flexi-cap funds, to mitigate risk and optimize returns.

Professional Advice: Consider seeking advice from a certified financial planner or investment advisor who can provide personalized recommendations based on your financial goals, risk profile, and investment horizon.

In summary, while your current investments appear diversified, it's essential to monitor their performance regularly and make adjustments as needed. Increasing your SIP amount and considering additional funds like Parag Parikh Flexi Cap and Quant Small Cap can enhance diversification and potentially improve long-term returns. However, ensure that any new additions align with your investment objectives and risk tolerance.

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 04, 2024

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Hello sir , I am 40 years old , I have below investment. FD - 60 lacs. Mediclaim - 10 lacs NPS - 50K Per year PPF - 150K Per Year I am investing in below mutual funds through SIP. ( 22K) ICICI balanced Advantage 2K HDFC Balanced Advantage 3K Tata Midcap and Largecap 3K Nippon India Small Cap 2K Motilal Midcap 2K ICICI Prudential Commodities 5K Quant Small Cap 5K Is it good funds for long terms ( Horizon of 8/10 years) ? I want to invest more 10K in SIP then which fund should I chose ? Thanks
Ans: It's great to see your disciplined approach towards investments. Let's assess your portfolio and potential additions:

Your current SIP portfolio seems well-diversified across different market segments, which is beneficial for long-term growth.
Given your investment horizon of 8 to 10 years, these funds offer a mix of growth potential and stability.
Considering adding another 10K to your SIP, you may want to focus on funds that complement your existing portfolio.
Look for funds with a track record of consistent performance and a strong investment thesis aligned with your financial goals.
Consider funds that provide exposure to sectors or themes with potential for future growth.
Consult with a Certified Financial Planner to evaluate your risk tolerance, financial goals, and investment strategy before making any changes.
Remember, investing is a long-term journey, and staying disciplined and diversified is key to achieving your financial objectives.
By carefully selecting additional funds and staying focused on your long-term goals, you can continue to build a robust investment portfolio that serves your needs effectively.

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 2024

Asked by Anonymous - Aug 02, 2024Hindi
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Hi Sir, I am 34 years old and a salaried person. Following are my SIP in mutual funds which I had started recently. 1) Quant Smallcap G (Growth)- Rs.5K 2) Quant ELSS G - Rs.5K 3) Quant Midcap G - Rs.5K 4) Quant Value G - Rs.6K 5) Quant Active G - Rs.5K 6) Quant Infrastructure G - Rs.5K 7) Tata Digital G - Rs.2.5K 8) HDFC Defence G - Rs.5K 9) Motilal Oswal Nifty Microcap 250 G - Rs.2.5K 10) Nippon India Power & Infrastructure G - Rs.4K I intend to invest for 15-20 years thus please suggest whether mentioned Funds are good for long term. I intend to generate corpus of INR.5 crores.
Ans: Assessing Your Current SIP Portfolio
Your SIP portfolio is quite diversified, which is a positive step towards achieving your goal. You’ve chosen a mix of funds, which shows your interest in different sectors. However, it's important to assess whether this diversification aligns with your long-term goal of generating Rs. 5 crores in 15-20 years.

Portfolio Evaluation
Sectoral Exposure:
Your portfolio has significant exposure to sectoral and thematic funds, such as infrastructure and defence. While these funds can perform well in certain market conditions, they also carry higher risk due to their sector-specific nature.

Over-diversification Risk:
You've invested in 10 different funds. This might lead to over-diversification, where the benefits of diversification are diminished. Managing and tracking too many funds can also become complex over time.

Need for Core Funds:
While you have thematic and sectoral funds, it's essential to have a strong foundation in core funds like large-cap or flexi-cap funds. These funds provide stability and long-term growth, essential for achieving your Rs. 5 crore target.

Recommendations for Improvement
Focus on Core Funds:
Consider reallocating some of your SIPs to core funds that provide consistent growth. Actively managed flexi-cap or large-cap funds can offer better risk-adjusted returns over the long term.

Reduce Sectoral Concentration:
While sectoral funds can boost returns during specific market phases, they should not dominate your portfolio. Consider reducing your allocation to these funds and balancing it with diversified equity funds.

Avoid Direct Funds:
If you're investing in direct plans, consider switching to regular plans through a Certified Financial Planner. Regular plans offer professional guidance, which is crucial for long-term wealth creation.

Steps Towards Achieving Rs. 5 Crore Goal
Increase SIP Contribution:
To achieve Rs. 5 crores, you might need to gradually increase your SIP amount. Consider a step-up SIP strategy, where you increase your contribution by a fixed percentage annually.

Stay Committed to Long-Term:
Your goal aligns with a 15-20 year horizon, which is ideal for equity investments. Stay committed to your SIPs, even during market volatility, to benefit from the power of compounding.

Regular Portfolio Review:
Conduct an annual review of your portfolio with a Certified Financial Planner. This will help you stay on track with your goal and make necessary adjustments as needed.

Final Insights
Your current SIP portfolio has a mix of opportunities and risks. By refining your investments, focusing on core funds, and regularly reviewing your strategy, you can increase your chances of reaching your Rs. 5 crore goal in the next 15-20 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 24, 2024

Money
Hello sir , I am 40 years old , I have below investment. No EMI No Loan. FD - 60 lacs. Mediclaim - 15 lacs ( 20K per year) NPS - 50K Per year ( Since last 5 years) PPF - 150K Per Year ( Since Last 5 years) I am investing in below mutual funds through SIP. ( 32K Total) - Since last 3 Years ICICI balanced Advantage 2K HDFC Balanced Advantage 3K Tata Midcap and Largecap 3K Nippon India Small Cap 2K Motilal Midcap 2K ICICI Prudential Commodities 5K Quant Small Cap 5K HDFC Top 100 5K Parag Parikh Flexi 5K Is it good funds for long terms ( Horizon of 8/10 years) ? My income is arround 1.80 lac monthly , no home loan and emi. Shall I increase my SIP and my concern is 60 lacs is in FD ..Please suggest.
Ans: You have built a strong investment foundation, which is commendable. Here’s a detailed assessment of your current investments and strategies for the future.

1. Current Financial Situation

Monthly Income: Rs 1.80 lac
No EMI or Loans: This situation gives you a financial advantage.
Your financial discipline is evident through your savings and investments. This stability allows you to take calculated risks.

2. Investment Breakdown

Fixed Deposits (FD): Rs 60 lac

FDs provide safety but low returns.
Current interest rates may not beat inflation.
Mediclaim: Rs 15 lac (Premium: Rs 20,000/year)

Health insurance is crucial for financial security.
Ensure coverage is adequate as you age.
National Pension System (NPS): Rs 50,000/year

Good for retirement savings with tax benefits.
Ensure you know about the exit rules.
Public Provident Fund (PPF): Rs 1.5 lac/year

PPF is a safe investment with decent returns.

It helps in long-term savings and tax planning.

3. Mutual Fund SIP Investments

You are investing Rs 32,000 through SIPs in various funds. Here’s a brief look at the types:

Balanced Advantage Funds:

These funds balance equity and debt.
They adjust allocation based on market conditions.
Midcap and Largecap Funds:

Midcaps can provide higher growth potential.
Largecaps offer stability and lower volatility.
Small Cap Funds:

Higher risk with potential for greater returns.
Suitable for a long-term horizon.
Commodity Funds:

These are good during inflationary periods.
Be cautious, as they can be volatile.
Flexi-cap Funds:

Flexibility in investing across market caps.
Potential for strong long-term growth.
Overall, your choices reflect a diversified approach. This diversification can help manage risk while aiming for growth.

4. Long-Term Investment Horizon

Your investment horizon of 8 to 10 years is positive. Long-term investments can weather market fluctuations.

Market Volatility:

Historically, equities outperform in the long run.
Staying invested can yield significant returns.
Inflation Impact:

Equity mutual funds can help beat inflation.

FDs may not provide enough growth over time.

5. Increasing Your SIP

Given your stable income and lack of liabilities, consider increasing your SIP.

Extra Savings:

You can allocate more to mutual funds.
A higher SIP can lead to a larger corpus.
Inflation Hedge:

Increasing SIPs can help counter inflation.
Regular investments in equities can boost wealth.
Financial Goals:

Align your investments with future goals.

Think about retirement, children’s education, and other aspirations.

6. Concern About Fixed Deposits

Your Rs 60 lac in FDs is concerning for several reasons:

Low Returns:

Current FD rates are generally low.
Returns may not keep pace with inflation.
Opportunity Cost:

Money in FDs could generate better returns elsewhere.

Consider reallocating some funds to equity or balanced funds.

7. Suggested Investment Strategy

Here’s a 360-degree approach to enhance your investment strategy:

Reallocate Fixed Deposits:

Consider moving a portion to mutual funds.
This can provide better growth potential.
Increase SIP Amount:

Gradually raise your SIP from Rs 32,000 to Rs 50,000 or more.
This increase can significantly impact your long-term wealth.
Monitor and Adjust:

Regularly review your portfolio.
Adjust based on market conditions and personal goals.
Diversification:

Keep diversifying among sectors and funds.
Avoid putting all funds in one type of investment.
Emergency Fund:

Maintain a fund for unexpected expenses.

Ideally, this should cover 6-12 months of living expenses.

8. Tax Implications on Mutual Funds

Be aware of the tax implications when selling your mutual fund investments:

Equity Mutual Funds:

Long-term capital gains (LTCG) above Rs 1.25 lac are taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.
Debt Mutual Funds:

LTCG and STCG are taxed per your income tax slab.
Understand these rules to maximize returns and minimize tax liabilities.

Final Insights

Your current investment strategy shows a good mix. However, the heavy reliance on fixed deposits limits growth.

Consider increasing your SIP and reallocating some of your FD money to mutual funds. This strategy can help you achieve better long-term returns.

Stay informed about your investments and keep an eye on market trends. Regular reviews are essential for a successful investment journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

..Read more

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