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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 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 - Apr 13, 2024Hindi
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My age is 32 and I earn 40,000 PM. I invest 11400/ month in MF. My investments are 2000 in UTI index equity fund, 2000 in Parag Parikh Flexi Fund, 2000 Quant Midcap Fund, 1500 Tata Small Cap fund, 1500 Nippon small cap fund, 1200 in Quant flexi cap, and 1200 in Axis Small cap. I have also invested a lump sum of 60,000 in Quant Infrastructure fund. Kindly advise if my portfolio is okay

Ans: Evaluating Your Mutual Fund Portfolio
At 32, investing in mutual funds with a disciplined approach is a commendable step towards building wealth for the future. Let's evaluate your current portfolio to ensure it aligns with your financial goals and risk tolerance.

Portfolio Composition
UTI Index Equity Fund:

Provides exposure to a diversified portfolio of large-cap stocks, tracking the performance of the underlying index. Offers stability and long-term growth potential.
Parag Parikh Flexi Fund:

A well-managed fund with a flexible investment approach across equity and debt securities. Known for its focus on quality stocks and global diversification.
Quant Midcap Fund:

Invests primarily in mid-cap companies with growth potential. Offers the opportunity for higher returns but comes with higher volatility.
Tata Small Cap Fund and Nippon Small Cap Fund:

Small-cap funds focus on companies with small market capitalization, offering high growth potential. However, they are more volatile and suitable for investors with a higher risk appetite.
Quant Flexi Cap and Axis Small Cap Fund:

Flexi-cap and small-cap funds provide flexibility to invest across market capitalizations. Ensure you're comfortable with the risk associated with small-cap investments.
Quant Infrastructure Fund (Lump Sum):

Infrastructure funds invest in companies involved in infrastructure development, such as construction, energy, and transportation. Consider the long-term prospects of the infrastructure sector and the fund's performance.
Assessing Portfolio Diversification
Your portfolio includes a mix of large-cap, mid-cap, and small-cap funds, offering diversification across market capitalizations. However, it's essential to review the overlap between funds to avoid concentration risk and ensure adequate diversification.

Portfolio Review and Optimization
Risk Assessment:

Evaluate your risk tolerance and investment horizon to determine if the current allocation aligns with your financial goals.
Performance Review:

Monitor the performance of individual funds and compare them against their benchmarks and peer group. Consider making adjustments if any funds consistently underperform.
Asset Allocation:

Ensure your asset allocation is balanced and in line with your risk profile. Consider rebalancing if necessary to maintain the desired mix of equity and debt investments.
Professional Advice:

Consider consulting with a Certified Financial Planner to review your portfolio and receive personalized recommendations based on your financial situation and goals.
Conclusion
Your mutual fund portfolio shows a diversified mix of investments across market capitalizations and sectors. Regularly review and assess your portfolio's performance to ensure it remains aligned with your financial objectives. Remember, investing is a long-term journey, and periodic adjustments may be necessary to navigate market fluctuations and achieve your wealth accumulation 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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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

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Hello Sir This Sanjeev Kumar, From Himachal Pradesh. Below are my Investments. Sir I would like to known that Is my portfolio good enough to get better return. I want to accumulate 20 to 30 lakhs in next 10 to 12 years from below investment. Also suggest me that whether, below MF are good enough, or reshuffling is required. 1. Aditya Birla Sun life Multi Cap Fund-regular growth --- Rs 1000/- 2. Invesco India Flexi Cap Fund-regular plan growth ---- Rs 1000/- 3. Invesco Multicap fund-Regular growth --- Rs 1000/- 4. Kotak Emerging Equity fund growth ---- Rs 1000/- 5. Kotak tax saver fund growth (ELSS) ---Rs 500 /- 6. Kotak multi cap fund --------- Rs 1000/- 7. Union long term equity fund growth regular plan ----- Rs 1500/- 8. Nippon India Flexi cap fund ----------- Rs 1000/- 9. LIC ------------------ 51000 /- (Annually). 10. PPF -------------- 1.5 lac (Annually, Since 2015). 11. NPS ------------ 50000 /- (Annually).
Ans: Hello Sanjeev,

Your investment portfolio appears to be diversified with a mix of mutual funds, insurance, and other instruments. Diversification is key to managing risk and potentially achieving better returns over the long term. However, it's essential to periodically review and rebalance your portfolio to ensure it aligns with your financial goals and risk tolerance.

Consider assessing the performance of each mutual fund regularly and comparing it with benchmark indices and peer funds. If any fund consistently underperforms or if your investment goals change, you may consider reshuffling your investments.

Additionally, continue contributing to instruments like PPF and NPS, as they offer tax benefits and long-term wealth accumulation opportunities. Remember, investing is a journey, and staying disciplined while focusing on your goals will increase your chances of achieving financial success.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

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Hi Experts! I am 36 years old, married 1 year ago. I have Rs.223000 invested in Mutual Fund. Per Month 10k in Parag Parikh Flexi Cap Fund, Rs.1250 in DSP ELSS Tax Saver Fund Direct Growth, Rs.1000 in Kotak ELSS Tax Saver Fund Direct Growth, PGIM India Tax Saver Fund Direct Growth, Rs.2000 in Nippon India Small Cap Fund Direct Growth, Rs.2000 in Quant Multi Asset Fund Direct Growth and Rs.2000 in ICICI Prudential BHARAT 22 FDF Direct Growth. Apart from this I pay Rs.10k/month in PPF and 1.5 lac/year in SBI Life Insurance. Please let me know if this is a good portfolio or should I modify anything in this. What kind of Future return I will be expecting here with this portfolio.
Ans: Congratulations on your recent marriage and your proactive approach towards financial planning. It's evident that you're committed to securing your financial future.

Your investment portfolio reflects a diversified approach, which is a positive sign. Diversification helps spread risk and can enhance long-term returns. Let's delve into your portfolio to assess its effectiveness and potential for future returns.

Investing in Parag Parikh Flexi Cap Fund offers exposure to a diversified portfolio across various sectors and market capitalizations. This fund's flexible investment strategy allows it to capitalize on emerging opportunities, potentially leading to attractive returns over time.

ELSS Tax Saver Funds like DSP and Kotak offer tax benefits under Section 80C of the Income Tax Act while providing exposure to equities. These funds have a lock-in period of three years, aligning with your long-term investment horizon.

Nippon India Small Cap Fund and Quant Multi Asset Fund offer exposure to smaller companies and multiple asset classes, respectively. Small-cap funds have the potential for higher growth but come with increased volatility. Ensure they align with your risk tolerance.

ICICI Prudential BHARAT 22 FDF provides exposure to a diversified basket of public sector enterprises and select private sector companies. This fund can add stability to your portfolio while offering growth potential.

Your investments in PPF and SBI Life Insurance contribute to your overall financial security and tax planning. PPF offers stable returns with tax benefits, while life insurance provides protection for your family's future financial needs.

Considering your age and investment horizon, this portfolio has the potential to generate attractive returns over the long term. However, periodically review and rebalance your portfolio to ensure alignment with your financial goals and risk tolerance.

For a more comprehensive analysis and personalized advice, consider consulting a Certified Financial Planner who can tailor recommendations to your specific needs and objectives.

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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