My age is 31. I am trying to save up to 5,000 per month. I wanted to know if my current strategy is correct or not and if the funds are right. Pl advice what should I do. Whether I should continue or switch over to other schemes.

SIPs:

1. Franklin India Smaller Companies Fund - Gr - Rs.2000/-

Lumpsum investments:

1. Axis Focused 25 Fund - Gr - Rs.50,000/- From 19-03-2020
2. BNP Paribas Focused 25 Equity Fund - Gr - Rs.5000/- From 11-02-2021
3. Nippon India Liquid Fund - Gr - Rs.50,000/- From 27-03-2019
4.Nippon India Low Duration Fund - Gr - Rs.5000/- From 19-12-2016

Ans: Continue but with lesser funds; four to six funds are adequate for diversification purpose, after that it drags down the returns of the portfolio.

Ans: Continue but with lesser funds; four to six funds are adequate for diversification purpose, after that it drags down the returns of the portfolio.

 

Ans: Continue but with lesser funds; four to six funds are adequate for diversification purpose, after that it drags down the returns of the portfolio.

 

Ans: Your plan for savings and investments is impressive. With a monthly saving rate of Rs 4 lakhs, you've built a strong financial foundation. Let's review your current investments and your future strategy to ensure you're on the right track.

Current Investments
National Savings Certificate (NSC):

You've invested Rs 1.5 crores in NSC. These are secure government-backed investments with fixed returns.
Fixed Deposit (FD):

You have Rs 35 lakhs in FDs. FDs offer safety but lower returns compared to other investments.
Stock Market Equity:

Your equity investments amount to Rs 1.6 crores in large-cap stocks. These include reputable companies like TCS, Infosys, Asian Paints, Bajaj Finance, L&T, LTIMindtree, Tata Steel, Tata Power, ICICI, Kotak Bank, and Tech Mahindra.
Future Investment Plan
You plan to save Rs 1.2 crores in mutual funds through SIP or lumpsum over the next three years and start Systematic Withdrawal Plan (SWP) in 2030.

Mutual Funds
Categories of Mutual Funds:

Equity Mutual Funds: Invest in stocks, suitable for long-term growth.

Debt Mutual Funds: Invest in fixed-income securities, suitable for stability and regular income.

Hybrid Mutual Funds: Invest in a mix of equity and debt, offering balanced returns and risk.

Advantages of Mutual Funds
Professional Management:

Managed by experienced fund managers who make informed investment decisions.
Diversification:

Mutual funds invest in a variety of assets, reducing risk.
Liquidity:

Easily buy and sell mutual fund units, offering liquidity.
Systematic Investment Plan (SIP):

Invest small amounts regularly, benefiting from rupee cost averaging and compounding.
Risk and Returns
Equity Mutual Funds:

High risk but potential for high returns. Ideal for long-term investment.
Debt Mutual Funds:

Lower risk, stable returns. Suitable for conservative investors.
Hybrid Mutual Funds:

Moderate risk and returns. Good for balanced risk appetite.
Power of Compounding
Compounding significantly grows your investments over time. Starting early and investing regularly maximizes this benefit.
Evaluating Your Plan
Strengths:

Strong savings rate and diversified investments.

Long-term approach with a clear plan for SWP.

Areas for Improvement:

Consider reviewing the proportion of FD and NSC. Diversify more into mutual funds for better returns.
Systematic Investment Plan (SIP) vs. Lumpsum Investment
SIP:

Pros: Regular investment, reduces market timing risk, benefits from rupee cost averaging.

Cons: May not capture large market movements if markets rise sharply.

Lumpsum:

Pros: Immediate investment, potential for higher returns in rising markets.

Cons: Higher market timing risk, potential for loss if markets decline.

Systematic Withdrawal Plan (SWP)
Advantages:

Regular income stream.

Flexibility in withdrawal amount.

Tax efficiency compared to traditional fixed-income products.

Implementation:

Start SWP in 2030. Choose funds with consistent performance and stability.
Reviewing Equity Investments
Large-Cap Stocks:

Your portfolio includes strong large-cap stocks. These companies are leaders in their industries with stable performance.
Holding Period:

Holding till 2040 aligns with long-term wealth creation. Large-cap stocks generally provide steady growth over long periods.
Suggestions for Improvement
Increase Mutual Fund Allocation:

Gradually increase your mutual fund investments. This will provide a balanced portfolio with higher growth potential.
Regular Portfolio Review:

Regularly review and rebalance your portfolio. Ensure it aligns with your financial goals and risk tolerance.
Certified Financial Planner (CFP):

Consult a CFP for personalized advice. They can help optimize your investment strategy and ensure you stay on track.
Final Insights
Your financial planning is commendable. You've built a strong foundation with diversified investments. By focusing more on mutual funds and regularly reviewing your portfolio, you can achieve your financial goals with greater efficiency.

Key Takeaways:

Diversify more into mutual funds for better returns.

Utilize SIP for regular investments and SWP for regular withdrawals.

Hold your equity investments for long-term wealth creation.

Consult a Certified Financial Planner for personalized advice.

Your approach shows discipline and foresight. With these improvements, you’re well on your way to a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in