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Should I withdraw from my tax-saving SIPs as I don't need tax rebate?

Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 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
Anant Question by Anant on Jul 22, 2024Hindi
Money

Hi, i had SIP's in DSP Black Rock Tax Saver & Nippon India Tax Saver funds. As i don't need any Tax Rebate anymore. I had stopped SIP in both fund a year ago. However, i have not withdrawn the funds. Is it wise to keep the amount there or should i withdraw and invest the accumulated amount in any other funds. Just fyi, i am alread investing in Canara Robeco Blue Chip, PGIM Flexi Cap. HDFC MID Cap, ICICI Value Discovery & Nippon India Small Cap Fund.

Ans: You’ve taken a thoughtful step by assessing the need for tax-saving investments. Since you no longer require tax rebates, you've stopped SIPs in tax-saving funds. You now face the decision of whether to leave your investments in these funds or reallocate them.

Your current portfolio includes a diversified mix of large-cap, flexi-cap, mid-cap, and small-cap funds. This is a solid foundation. Let’s explore the best course of action for your discontinued tax-saving funds.

Should You Continue Holding the Tax-Saving Funds?
Performance Evaluation
The first step is to evaluate the historical performance of the tax-saving funds you've stopped. These funds are equity-linked savings schemes (ELSS) and, like other equity funds, their performance can vary.
If these funds have consistently performed well and aligned with your long-term financial goals, there may be no immediate need to withdraw. Even without the tax benefit, they could still contribute positively to your portfolio.
However, if the performance has been subpar, holding them could mean missed opportunities for better returns elsewhere.
Liquidity and Lock-In Period
ELSS funds typically come with a three-year lock-in period. Since you’ve been investing for more than a year, some of your units may be locked in.
Consider whether the liquidity of these funds aligns with your financial needs. If you don’t need immediate access to these funds, holding them might not be a concern.
If liquidity is important, especially in case of any upcoming financial needs, you might consider withdrawing the units that have completed the lock-in period.
Alignment with Financial Goals
Evaluate whether these funds still align with your current financial goals. Since your need for tax rebates has changed, your investment strategy might also need adjustment.
If your focus has shifted to growth-oriented funds, and these tax-saving funds do not fit that strategy, it may be wise to reallocate.
Reallocating to Better Opportunities
Diversifying Further
Your current portfolio includes large-cap, flexi-cap, mid-cap, and small-cap funds. This is a well-rounded approach, but there is always room for fine-tuning.
Consider reallocating the corpus from your tax-saving funds into funds that match your current risk appetite and financial goals. Actively managed funds can offer better returns compared to passive index funds, especially in a market where active management can capture alpha.
Funds focusing on emerging sectors, thematic funds, or sector-specific funds could add a new dimension to your portfolio, provided they align with your goals and risk tolerance.
Reviewing Current Portfolio Overlaps
With multiple funds in your portfolio, check for any overlaps in holdings. Often, different funds may invest in similar stocks, which can reduce the diversification benefits.
If your tax-saving funds have significant overlap with your existing funds, reallocating might be the right move to avoid concentration risk.
Regular vs. Direct Funds
Since you mentioned that you’re not using index funds, it’s essential to highlight the potential drawbacks of direct funds. While direct funds have lower expense ratios, they require active monitoring and decision-making.
Investing through a regular plan via a Certified Financial Planner offers the benefit of expert guidance. This ensures your investments are regularly reviewed and adjusted according to market conditions and personal circumstances.
Strategic Reinvestment Options
Large-Cap Funds
Large-cap funds provide stability and consistent returns, making them an essential part of any balanced portfolio. They invest in established companies with strong market presence.
Reinvesting in a large-cap fund could be a prudent choice, particularly if you prefer stability with moderate returns.
Flexi-Cap Funds
Flexi-cap funds provide the flexibility to invest across large, mid, and small-cap stocks. This flexibility can offer a balanced risk-return profile.
If you’re looking for a fund that adapts to changing market conditions, reinvesting in a flexi-cap fund could be advantageous.
Mid-Cap and Small-Cap Funds
Mid-cap and small-cap funds offer higher growth potential but come with increased volatility. They are ideal for investors with a higher risk tolerance and a longer investment horizon.
If your financial goals align with higher returns and you can withstand short-term fluctuations, these funds can be excellent candidates for reinvestment.
Tax Considerations on Withdrawal
Capital Gains Tax
When withdrawing from your ELSS funds, remember that capital gains tax will apply. Long-term capital gains (LTCG) over Rs. 1.25 lakh are taxed at 12.5% without indexation benefits.

Assess the tax implications of withdrawing your funds. If you decide to withdraw, consider spreading out the withdrawals over a few financial years to minimize your tax liability.
Tax Efficiency in Reinvestment
Consider the tax efficiency of the funds you plan to reinvest in. Some funds may offer better post-tax returns compared to others, especially in the case of debt-oriented funds.
ELSS funds themselves are tax-efficient, but without the need for tax rebates, your focus should shift to funds that provide optimal post-tax returns.
Final Insights
Your decision to stop SIPs in tax-saving funds aligns with your current needs. However, whether to continue holding these funds or reallocate depends on multiple factors. It’s crucial to evaluate the performance of these funds, consider their alignment with your financial goals, and assess any liquidity needs. If you find that these funds no longer fit your strategy, reallocating to funds that offer better growth potential and align with your risk profile could be the right move. Your existing portfolio is already well-diversified, but there’s always room for optimization. Whether you choose to stay invested in these tax-saving funds or move to other opportunities, ensuring that your portfolio remains aligned with your financial goals and risk tolerance is key.

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 Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

Asked by Anonymous - Oct 20, 2023Hindi
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sir, I have invested through SIP in Mirae Asset emerging blue chip fund,(current value 3.5 lakhs) Aditya Birla Sunlife 96 tax relief(current value2.50lakhs), Axis long term Equity fund(current value 1.8 lakhs), Canara Robeco Equity tax saver fund(current value 1.20 lakhs), Sundaram Diversified equity (Current value 1.lakh) and i have stopped SIP 3 years back in all these funds and not withdrawn any amount. suggest to keep the amount in these funds as it is or withdraw and invest lumpsum in some other funds
Ans: Assessing Your Mutual Fund Portfolio for Optimal Growth

Current Portfolio Overview:

Your current mutual fund portfolio comprises several funds across different categories, including Mirae Asset emerging blue chip fund, Aditya Birla Sunlife 96 tax relief, Axis long term Equity fund, Canara Robeco Equity tax saver fund, and Sundaram Diversified equity.

Evaluation of Current Investments:

Your portfolio demonstrates a diversified approach, spanning both large-cap and tax-saving funds.

Assessment of Fund Performance:

Mirae Asset Emerging Blue Chip Fund: This fund has shown consistent performance historically and may continue to deliver good returns over the long term.

Aditya Birla Sunlife 96 Tax Relief: As a tax-saving fund, it offers the dual benefit of tax savings under Section 80C and potential capital appreciation.

Axis Long Term Equity Fund: This ELSS fund has a track record of delivering robust returns and can be considered for long-term wealth creation.

Canara Robeco Equity Tax Saver Fund: Similar to other ELSS funds, it offers tax benefits along with the potential for capital appreciation.

Sundaram Diversified Equity Fund: This fund focuses on diversified equity investments and aims to generate wealth over the long term.

Recommendations:

Review Fund Performance: Evaluate the performance of each fund against its benchmark and peers to ensure it aligns with your investment objectives.

Consider Market Conditions: Assess the current market conditions and economic outlook to gauge the potential performance of your funds in the future.

Consult a Certified Financial Planner: Seek guidance from a Certified Financial Planner (CFP) to review your investment strategy and make informed decisions based on your financial goals, risk tolerance, and investment horizon.

Consolidate and Rebalance: Consider consolidating your mutual fund holdings to streamline your portfolio and reduce overlap. Rebalance your portfolio periodically to maintain an optimal asset allocation mix.

Stay Invested for the Long Term: Avoid making impulsive decisions based on short-term market fluctuations. Stay invested for the long term to benefit from the power of compounding and potential wealth creation.

Final Thoughts:

In conclusion, maintaining a well-diversified mutual fund portfolio is essential for long-term wealth creation. Regularly monitor your investments, review fund performance, and seek professional advice to make informed decisions aligned with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Ramalingam Kalirajan  |7183 Answers  |Ask -

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

Asked by Anonymous - Oct 25, 2023Hindi
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sir, I have invested through SIP in Mirae Asset emerging blue chip fund,(current value 3.5 lakhs) Aditya Birla Sunlife 96 tax relief(current value2.50lakhs), Axis long term Equity fund(current value 1.8 lakhs), Canara Robeco Equity tax saver fund(current value 1.20 lakhs), Sundaram Diversified equity (Current value 1.lakh) and i have stopped SIP 3 years back in all these funds and not withdrawn any amount. suggest to keep the amount in these funds as it is or withdraw and invest lumpsum in some other funds
Ans: Your dedication to investing and the discipline to not withdraw funds is commendable. Let's assess your current portfolio and make informed decisions about the next steps.

Current Portfolio Overview

You have invested in a mix of large-cap, tax-saving, and diversified equity funds. The current value of your investments totals Rs 10.2 lakhs. Stopping SIPs three years ago and holding onto these investments shows patience and long-term thinking.

Evaluating Existing Funds

Mirae Asset Emerging Bluechip Fund: This fund has a good track record and strong performance in the mid-cap segment.

Aditya Birla Sun Life Tax Relief 96: A well-established ELSS fund with consistent returns.

Axis Long Term Equity Fund: Another strong performer in the ELSS category with good returns.

Canara Robeco Equity Tax Saver Fund: Known for its balanced approach in the ELSS category.

Sundaram Diversified Equity Fund: Provides diversification but may not be performing as well as other funds.

Assessing Fund Performance and Strategy

Review the performance of each fund over the last three years. Compare them to their benchmarks and peer funds. Consider the following steps based on this assessment:

Continuing with High Performers

Keep the funds that have shown consistent performance and align with your risk tolerance. These include Mirae Asset Emerging Bluechip, Aditya Birla Sun Life Tax Relief 96, and Axis Long Term Equity.

Re-evaluating Underperformers

Funds like Sundaram Diversified Equity should be re-evaluated. If they consistently underperform, consider switching to better-performing funds.

Lump Sum Investment Strategy

If you decide to switch underperforming funds, invest the proceeds as a lump sum in well-performing funds. Consider the following options:

Diversifying with Large-Cap and Balanced Funds

Invest in large-cap and balanced funds for stability and steady growth. These funds provide less volatility and consistent returns.

Sectoral and Thematic Funds

While sectoral funds can offer high returns, they come with higher risk. Consider them for a small portion of your portfolio.

Advantages of Actively Managed Funds

Actively managed funds adapt to market changes and aim to outperform benchmarks. Professional management can enhance returns compared to passive index funds.

Disadvantages of Index Funds

Index funds merely track market indices and may not perform well during market downturns. They lack the adaptability of actively managed funds.

Benefits of Investing Through a Certified Financial Planner

A Certified Financial Planner provides tailored advice and professional oversight. This ensures your portfolio aligns with your financial goals and risk tolerance.

Disadvantages of Direct Funds

Direct funds have lower expense ratios but lack professional guidance. Investing through a certified planner ensures informed decision-making and portfolio management.

Periodic Review and Rebalancing

Regularly review your portfolio's performance. Rebalancing ensures your investments stay aligned with your financial goals and market conditions. This approach optimises returns and manages risks effectively.

Creating a Comprehensive Financial Plan

Consider other financial aspects like emergency funds, insurance, and tax planning. A holistic financial plan ensures a secure and well-rounded approach to wealth creation.

Monitoring Market Trends

Stay informed about market trends and economic factors. This knowledge helps you make timely adjustments to your investments, maximising returns and mitigating risks.

Conclusion

Your disciplined investment strategy and diversified portfolio are commendable. With regular review and professional guidance, you can optimise your investments and achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 26, 2024

Asked by Anonymous - Jul 18, 2024Hindi
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I HAVE DSP TAX SAVER & NIPPON TAX SAVER FUND IN MY PORTFOLIO. I STOPPED SIP IN BOTH AN YEAR AGO. AS I DON'T NEED ANY TAX REBATE NOW. BUT I HAVE NOT WITHDRAWN THE AMOUNT INVESTED. IS IT GOOD TO LEAVE THE AMOUNT INVESTED FOR A INDEFINITE PERIOD OR SHOULD I WITHDRAW AND REINVEST THE AMOUNT IN NEW FUNDS. IF YES, PLEASE SUGGEST SOME GOOD FUNDS. JUST FOR YOURINFORMATION, I AM ALREADY INVESTING IN CANARA ROBECO BLUE CHIP. HDFC MID CAP, ICICI VALUE DISCOVERY, PGIM FLEXI CAP FUND.
Ans: Review of Current Tax Saver Funds
You have DSP Tax Saver and Nippon Tax Saver funds in your portfolio. You stopped SIPs a year ago but haven't withdrawn the invested amount. It's good to evaluate if you should keep these investments or reinvest them.

Evaluation of Keeping Investments
Performance Review:

Assess the performance of these funds.
Check their returns compared to benchmarks.
If they are performing well, it might be wise to keep them.
Fund Objectives:

These are tax-saving funds (ELSS) with a lock-in of three years.
After the lock-in, you can redeem anytime.
If they align with your long-term goals, consider keeping them.
Reinvestment Consideration
If you decide to withdraw, reinvesting in better-performing funds could be beneficial.

Benefits of Redeeming and Reinvesting
Optimizing Returns:
By switching to high-performing funds, you may get better returns.
Portfolio Realignment:
It allows you to realign your portfolio based on current market conditions and your goals.
Suggested Fund Categories
Since you are already investing in equity and mid-cap funds, consider these categories:

Diversified Equity Funds
Flexi Cap Funds:
These funds invest in large, mid, and small-cap stocks.
They provide balanced exposure to different market segments.
Large Cap Funds
Stability and Growth:
Large-cap funds offer stability with reasonable growth.
They invest in well-established companies.
Multi Cap Funds
Diversified Approach:
Multi cap funds invest across market capitalizations.
They offer a diversified approach with balanced risk.
Actively Managed Funds vs. Index Funds
Actively managed funds have the potential to outperform the market. Fund managers actively select stocks to maximize returns. They provide flexibility in changing market conditions.

Direct Funds vs. Regular Funds
Disadvantages of Direct Funds
Limited Guidance:
Direct funds lack professional advice.
You need to manage investments yourself.
Benefits of Regular Funds
Professional Management:
Regular funds through an MFD with a CFP credential offer expert guidance.
They help in selecting the right funds based on your goals.
Your Current Investments
You are already investing in Canara Robeco Blue Chip, HDFC Mid Cap, ICICI Value Discovery, and PGIM Flexi Cap Fund.

Portfolio Review
Canara Robeco Blue Chip:

Focuses on large-cap stocks.
Offers stability and moderate growth.
HDFC Mid Cap:

Invests in mid-cap stocks.
Higher growth potential but with more risk.
ICICI Value Discovery:

Focuses on undervalued stocks.
Potential for high returns with moderate risk.
PGIM Flexi Cap Fund:

Diversified across market caps.
Balanced risk and growth.
Final Insights
Evaluate the performance of DSP Tax Saver and Nippon Tax Saver.
If they perform well, consider keeping them.
If not, reinvest in diversified equity, large cap, or multi cap funds.
Continue leveraging actively managed and regular funds for better guidance.
Regularly review and realign your portfolio to meet your financial goals.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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How many surya namaskaras can do in a day
Ans: The number of Surya Namaskaras (Sun Salutations) you can do in a day depends on your fitness level, experience, and time availability. Here’s a guideline to help you determine the right number for your practice:

1. For Beginners
Start with 4 to 6 rounds (1 round = 2 sets, right and left side).
Gradually increase to 12 rounds over a few weeks as your stamina and flexibility improve.
2. For Intermediate Practitioners
Aim for 12 to 24 rounds daily, depending on your energy and time.
This takes about 20-40 minutes and provides a full-body workout.
3. For Advanced Practitioners
You can do 50 or more rounds if your body is conditioned for it.
Many practitioners aim for 108 rounds as a meditative or spiritual practice during special occasions or festivals.
Tips for Practicing Safely:
Warm-Up: Begin with light stretches to prepare your body.
Maintain Proper Form: Quality is more important than quantity to avoid injuries.
Listen to Your Body: Stop if you feel tired or experience discomfort.
Stay Hydrated: Keep water nearby, especially for longer sessions.
Cool Down: Finish with restorative poses like Balasana (Child's Pose) and Savasana (Corpse Pose).
Consistency Over Quantity:
Even a small, daily practice of Surya Namaskara can bring immense benefits to your physical and mental well-being. The key is to be regular and mindful.

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Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

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Sir My Age is 38 Now. Running Business In Pune city. Below are the My Assets & Liabilities. Current Values - Assets. Own Industrial Plot - Rs. 2.0 Cr, Business Income Yearly Rs. 24.00 Lack, Own Company Investment ( Machinery, Debtors Etc ) - Rs 2.40 Cr, Mutual Fund & Share Market Investment Rs. 2.10 Cr, Bank FD - Rs. 50.00 Lack, Own 3 Flats in Pune - Rs. 75 lack, 50 Lack & 35 Lack ( Current Values ), Golds - Rs. 25.00 Lack, Land - Agriculture - Rs. 20.00 Lack, Term Insurances - Rs. 20.00 Lack ( Till Date Premium Paid ) Labilities. House Loan - Rs. 30.00 Lack ( EMI 26500.00 PM ) Loan will close after 17 years. Car Loan - Rs. 6.35 lack ( EMI 12500.00 PM ) Loan will close after 5 years. This Assets & investment sufficient for maintain 7 family members Expenses after retirement ? ( 4 Adult + 3 Children (Below 5 Years) ). I will retire at the age of 45.
Ans: Your financial position is commendable, with diverse investments and significant assets. Let's carefully evaluate your portfolio and determine its adequacy for retirement.

Assets Evaluation
Industrial Plot: The industrial plot adds stability to your portfolio. However, it may not generate regular income.

Business Income: Rs. 24 lakh yearly income supports both savings and current expenses. However, this income will stop after retirement.

Company Investments (Machinery, Debtors, etc.): Rs. 2.4 crore in business assets holds potential but depends on liquidity. Ensure your business succession plan is well-structured.

Mutual Funds and Stock Market Investments: Rs. 2.1 crore in equity investments offers excellent growth potential. A well-diversified portfolio aligned with your goals is crucial.

Bank Fixed Deposits: Rs. 50 lakh provides safety but generates lower returns. This can be retained for emergencies or short-term needs.

Real Estate (3 Flats): Your flats have a combined value of Rs. 1.6 crore. Rental income post-retirement can support your expenses.

Gold: Rs. 25 lakh in gold acts as a hedge against inflation. Gold is a strong reserve asset but not an income-generating one.

Agricultural Land: Rs. 20 lakh in agricultural land may have limited liquidity. Future appreciation depends on market conditions.

Term Insurance: Rs. 20 lakh in term insurance offers coverage but is not an investment.

Liabilities Evaluation
House Loan: Rs. 30 lakh house loan with 17 years remaining. This liability will continue into retirement unless paid early.

Car Loan: Rs. 6.35 lakh car loan with five years remaining. Manage this liability to avoid cash flow pressure.

Retirement Planning Considerations
Expenses for 7 Members: Your family size increases post-retirement costs. This includes education and healthcare for children and adults.

Retirement Age of 45: Early retirement reduces your working years and increases the time funds need to last.

Inflation Impact: Rising costs of living must be considered for a long retirement period.

Corpus Utilisation: Your existing investments need to generate regular post-retirement income while growing to beat inflation.

Suggestions for Asset Allocation
Equity Investments: Continue equity investments in mutual funds and stocks for growth. Consolidate under-performing funds and consider active funds for better returns.

Real Estate Management: If rental income is not substantial, consider selling underperforming properties. Reinvest proceeds into diversified financial instruments.

Emergency Fund: Maintain Rs. 6-8 lakh in liquid funds or FDs for unforeseen expenses.

Loan Repayment Strategy: Prepay car and home loans with surplus funds to reduce interest outflow.

Gold and Agricultural Land: Retain as reserves but avoid additional allocation here.

Business Continuity Plan: Create a clear succession plan to ensure business sustainability. This will protect your assets and provide stability.

Additional Recommendations
Mutual Fund Review: Diversify across large-cap, mid-cap, and balanced funds. Avoid excessive exposure to one category.

Life Insurance Review: Ensure your term insurance covers at least 10-15 times your annual income. Consider increasing coverage for better security.

Health Insurance: Cover all family members with adequate health insurance. Opt for a Rs. 20-25 lakh family floater plan.

Children’s Education and Marriage: Start dedicated investments for these goals using equity mutual funds for long-term growth.

Retirement Corpus Calculation: Target a corpus that generates Rs. 3 lakh monthly. Include inflation-adjusted returns and expenses.

Creating a Retirement Income Plan
Systematic Withdrawal Plan (SWP): Invest a portion of equity funds in debt-oriented SWP to generate regular income.

Rental Income: Generate steady rental income from real estate properties to cover a portion of expenses.

Debt Funds: Allocate a portion to debt funds for stable returns. This helps balance equity risks.

Dividend Yield Stocks: Invest in high-dividend stocks for a regular income stream.

Periodic Portfolio Review: Monitor and adjust your portfolio annually to align with changing goals and market conditions.

Final Insights
Your current assets and investments are significant. However, early retirement requires careful planning. Focus on prepaying loans and optimising investments. Protect your family with adequate insurance and create a robust retirement income plan.

With disciplined investments and adjustments, your goal of retiring at 45 is achievable.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

Asked by Anonymous - Nov 29, 2024Hindi
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Money
Can I withdraw Rs 10000 P. M with corpus of Rs 15 lacs in SWP from NPS. As of date the returns is 15%
Ans: You have Rs 15 lakhs as your corpus and intend to withdraw Rs 10,000 per month. Your NPS fund is generating a return of 15%. Let us analyse if this plan is sustainable.

SWP in NPS
The NPS provides flexibility in managing your corpus post-retirement. However, it has specific withdrawal rules:

You can withdraw up to 60% of the total corpus as a lump sum.
The remaining 40% must be used for annuity purchase.
If this withdrawal is planned pre-retirement, restrictions may apply.
Can You Sustain Rs 10,000 Withdrawal Monthly?
1. Initial Assessment
Rs 10,000 monthly equals Rs 1.2 lakhs annually.
This represents an 8% withdrawal rate from your Rs 15 lakhs corpus.
At 15% annual returns, the remaining corpus can grow even after withdrawals.
2. Sustainability of Corpus
High withdrawal rates can deplete the corpus during market downturns.
A withdrawal rate of 4-6% is generally safer for long-term sustainability.
3. Impact of Fluctuating Returns
The current 15% return may not remain consistent.
Lower returns in the future can affect the corpus’s longevity.
Steps to Ensure Sustainable Withdrawals
1. Reallocate Corpus Wisely
Use a mix of equity and debt investments to balance growth and safety.
Allocate funds to equity for growth and debt for stability.
2. Use a Conservative SWP Strategy
Start with a lower withdrawal amount.
Gradually increase withdrawals to match inflation and needs.
3. Monitor Performance Regularly
Review your portfolio performance every six months.
Adjust withdrawal amounts based on returns and market conditions.
Taxation Considerations
Withdrawals from NPS are taxable as per your income tax slab.
Ensure that the tax burden does not reduce your effective monthly income.
Alternatives to Consider
1. Hybrid Mutual Funds
These funds offer a mix of equity and debt for balanced growth.
Use SWP from these funds for steady income and reduced risk.
2. Debt Funds for Stability
Short-term and ultra-short-term debt funds provide regular income.
These funds are ideal for maintaining liquidity and stability.
3. Equity for Long-Term Growth
Retain a portion of your corpus in equity for inflation-beating returns.
Diversify with flexi-cap and large-cap funds for stability.
Final Insights
Withdrawing Rs 10,000 monthly is possible but requires careful planning. A lower withdrawal rate can ensure corpus longevity. Diversify your corpus between equity and debt for optimal growth and stability. Regular reviews and tax-efficient withdrawals can sustain your income needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

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I have been doing an Sip in Quant Active Fund From Last 18 months. I have the following doubts. I request someone to please clarify them:- 1) Quant Active Fund has been underperforming since past year, Also it has a significant percentage of holding in Adani Stocks. 2) Is Quant As an AMC Safe & reliable fir long term?? 3) Should I Continue my Sip in Quant Active Fund? 4) If there any Better alternative than my current fund???
Ans: Your concerns about performance and long-term reliability are valid. Let us address each point carefully to provide clarity.

Recent Performance of Quant Active Fund
Underperformance in the Last Year
Quant Active Fund's underperformance could be due to market corrections. Sectoral biases also play a role. Adani stock exposure adds concentrated risk, which can cause volatility.

Risk of Concentration in Adani Stocks
High exposure to a single group is risky. Diversification reduces such risks, ensuring consistent returns over time.

Is Quant AMC Reliable for the Long Term?
Track Record
Quant AMC has shown consistent growth over recent years. However, it uses aggressive strategies, which can increase risks in volatile markets.

Management Style
The fund follows a dynamic management approach. While innovative, this style might not suit every investor.

Sustainability
Quant AMC's smaller asset size compared to other AMCs raises questions about its long-term stability.

Should You Continue with Quant Active Fund?
Assess Alignment with Goals
Evaluate if the fund aligns with your financial goals. The fund’s risk-reward profile should match your risk tolerance.

Monitor Performance
If underperformance persists over two years, consider alternative funds. Ensure they provide diversification and stability.

Concentration Risk
Examine your overall portfolio exposure. If Adani holdings exceed your comfort level, reconsider this fund.

Better Alternatives to Your Current Fund
Actively Managed Funds for Stability
Switching to an actively managed diversified equity fund may reduce sectoral risk. These funds use a well-diversified strategy across sectors.

Flexicap Funds
Flexicap funds dynamically allocate across market capitalisations. They balance risk and reward effectively.

Large & Midcap Funds
These funds offer a blend of stability and growth. Their moderate risk suits investors with medium-term goals.

Disadvantages of Index Funds
No Protection in Falling Markets
Index funds replicate market movements. In downturns, they cannot protect against losses.

No Outperformance
Index funds aim to match, not outperform, market benchmarks. Active funds can exceed benchmarks with skilled management.

Benefits of Regular Plans over Direct Plans
Guidance from a Certified Financial Planner
Certified Financial Planners (CFPs) provide strategic advice. They tailor investments based on your goals and risk tolerance.

Periodic Portfolio Review
MFDs associated with regular plans review your portfolio. They adjust allocations based on market conditions.

Streamlined Investment Process
Investing through regular plans ensures simpler management of your investments. This support justifies the slightly higher expense ratio.

Tax Implications of Switching Funds
Equity Mutual Funds
LTCG above Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%. Assess tax implications before switching.

Avoid Frequent Switching
Frequent fund switching can increase tax liabilities. Review funds every six months to ensure long-term alignment.

Final Insights
Your concerns about Quant Active Fund are valid. The fund’s high concentration in Adani stocks increases risk. Quant AMC, while innovative, might not suit conservative investors. Consider alternatives like flexicap or large & midcap funds for stability. Shift from direct plans to regular plans for expert guidance and periodic reviews. Ensure your portfolio matches your goals and risk tolerance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

Money
Hi sir I am investing when ever i have money not like in SIP. my most of investments are around 6 L invested in Quant different mutual funds. No a days i can see my all the Quant funds are going down. Im 34 years old female. My plan is 10 years. Can i exit from quant and invest in any some MF rather than getting more loss? Can you please review my portfolian. Do i need to exit from any MF. Since i'm maintaining too many MF. Thanks in advance. Mutual Funds List No' Scheme Name AMC Category Sub-category ISIN 1 DSP Small Cap Direct Plan Growth DSP Mutual Fund Equity Small Cap INF740K01QD1 2 Quant Focused Fund Direct Growth Quant Mutual Fund Equity Focused INF966L01853 3 Parag Parikh Flexi Cap Fund Direct Growth PPFAS Mutual Fund Equity Flexi Cap INF879O01027 4 Mirae Asset ELSS Tax Saver Fund Direct Growth Mirae Asset Mutual Fund Equity ELSS INF769K01DM9 5 JM Flexicap Fund Direct Plan Growth JM Financial Mutual Fund Equity Flexi Cap INF192K01CC7 6 Axis Growth Opportunities Fund Direct Growth Axis Mutual Fund Equity Large & MidCap INF846K01J46 7 Parag Parikh ELSS Tax Saver Fund Direct Growth PPFAS Mutual Fund Equity ELSS INF879O01100 8 Quant Small Cap Fund Direct Plan Growth Quant Mutual Fund Equity Small Cap INF966L01689 9 Canara Robeco Small Cap Fund Direct Growth Canara Robeco Mutual Fund Equity Small Cap INF760K01JC6 10 Motilal Oswal Midcap Fund Direct Growth Motilal Oswal Mutual Fund Equity Mid Cap INF247L01445 11 Nippon India Multi Cap Fund Direct Growth Nippon India Mutual Fund Equity Multi Cap INF204K01XF9 12 Nippon India Small Cap Fund Direct Growth Nippon India Mutual Fund Equity Small Cap INF204K01K15 13 ICICI Prudential Value Discovery Direct Growth ICICI Prudential Mutual Fund Equity Value INF109K012K1 14 Quant Flexi Cap Fund Direct Growth Quant Mutual Fund Equity Flexi Cap INF966L01911 15 Nippon India Small Cap Fund Direct Growth Nippon India Mutual Fund Equity Small Cap INF204K01K15 16 Quant ELSS Tax Saver Fund Direct Growth Quant Mutual Fund Equity ELSS INF966L01986 17 Aditya Birla Sun Life PSU Equity Fund Direct Growth Aditya Birla Sun Life Mutual Fund Equity Sectoral / Thematic INF209KB1O82 18 Quant Mid Cap Fund Direct Growth Quant Mutual Fund Equity Mid Cap INF966L01887 STOCKS LIST: 1 APOLLO TYRES-EQ RE 1 2 ASIAN PAINTS EQ 3 BRITANNIA IND-EQ1/- 4 CG POWER-EQ2/ 5 IRCTCL-EQ2 6 NHPC LIMITED - EQ 7 TATA STEEL-EQ1/ 8 Deepak nitrate 9 LT 10 Narayana Hrudayalaya
Ans: You are actively investing, which is an excellent habit. However, managing too many funds can dilute returns and complicate tracking. Here's a detailed evaluation of your portfolio and suggestions for improvement.

Observations About Your Current Investments
Quant Funds’ Performance: Quant mutual funds have been volatile recently. Market phases can impact returns in the short term. However, their active management style often delivers strong long-term results. Reviewing their performance regularly is key.

Over-Diversification: Your portfolio has too many mutual funds, leading to overlapping investments. This makes tracking performance challenging and reduces overall returns. Consolidation is advisable.

Direct Mutual Funds: While direct plans have lower expense ratios, they require regular monitoring. If you lack time for constant tracking, investing through a Certified Financial Planner (CFP) can be beneficial.

Stock Investments: Your stocks are spread across sectors. While some are strong companies, direct stock investments demand active monitoring and deep analysis. Diversifying further into mutual funds might be better aligned with your long-term goals.

Tax-Saving Funds (ELSS): You have three ELSS funds. This creates unnecessary duplication. A single, well-performing ELSS fund is sufficient for tax-saving needs.

Goal Alignment: Your goal is 10 years. For this horizon, equity-heavy investments are ideal, but they must be consolidated for better returns.

Key Recommendations
1. Consolidate Your Mutual Funds
Having too many funds spreads your investments thinly. Instead, focus on 5–7 funds across categories. This will provide diversification without duplication.

Suggested allocation categories:

Large-Cap: One fund to provide stability and steady returns.
Flexi-Cap: One or two funds for flexibility in market capitalization.
Mid-Cap and Small-Cap: Two funds to capitalise on growth potential.
ELSS: One fund for tax-saving benefits.
Consolidation will reduce overlaps and improve overall efficiency.

2. Retain or Exit Quant Funds?
You can retain Quant Small Cap and Quant Flexi Cap if their long-term fundamentals are strong. Exit from others if performance consistency or fund overlap is an issue. Diversify with funds from other AMCs for better balance.

3. Reduce Stock Exposure
Direct stock investments can be risky without regular tracking. Consolidate your stocks and invest the proceeds into diversified mutual funds. This will reduce risk and improve your portfolio’s stability.

4. Monitor Fund Performance
Review mutual fund performance at least annually. Use metrics like returns, expense ratios, fund manager track record, and consistency in delivering returns.

5. Opt for Professional Guidance
Consider investing in regular funds through a CFP. They can provide personalised strategies, regular reviews, and rebalance your portfolio as needed.

Action Plan for Portfolio Restructuring
Step 1: Exit and Consolidate
Exit from underperforming or duplicate funds.
Retain well-performing funds across categories.
Choose funds with strong track records and low volatility.
Step 2: Suggested Fund Allocation
Allocate Rs 40,000 monthly across consolidated categories:

Large-Cap Fund: 25% allocation for stability.
Flexi-Cap Fund: 25% allocation for market cap flexibility.
Mid-Cap Fund: 20% allocation for growth potential.
Small-Cap Fund: 20% allocation for higher returns.
ELSS Fund: 10% allocation for tax-saving needs.
Step 3: Consolidate Stocks
Exit some stocks and reinvest the amount in mutual funds. Focus on reducing sector concentration.

Step 4: Regular Reviews
Review your portfolio semi-annually. Assess market conditions and align your portfolio with your goals.

Disadvantages of Index Funds and Direct Plans
Index Funds
No Active Management: Index funds lack the ability to outperform markets.
Market Dependent: They perform only as well as the index, with no defensive strategy during downturns.
Direct Plans
Higher Effort: Direct plans demand continuous monitoring.
Lack of Guidance: Regular plans via a CFP provide tailored advice, which direct plans do not.
Tax Implications
Keep in mind the new capital gains tax rules:

Equity Funds: LTCG above Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%.
Debt Funds: Gains are taxed as per your income slab.
Consider tax-efficient withdrawals when restructuring your portfolio.

Final Insights
You are on the right track by actively investing for your goals. However, managing fewer, well-performing funds can simplify your journey. Consolidating your portfolio will improve returns, reduce redundancy, and make monitoring easier.

Focus on aligning your investments with your 10-year goal. Use this opportunity to balance risk and returns effectively.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

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Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

Asked by Anonymous - Nov 28, 2024Hindi
Money
I am currently 48 years old and aiming to retire by the age of 55. I am debt-free, having fully paid off my house, and my financial assets include an EPF balance of ?32 lakhs, a fixed deposit worth ?30 lakhs, and mutual fund investments totaling ?82 lakhs. I contribute ?2.5 lakhs per month through SIPs into a portfolio comprising funds like Canara Robeco Bluechip Equity, SBI Magnum Mid Cap, Kotak Small Cap, Parag Parikh Flexi Cap, Nippon India Multi Cap, HDFC Short Term Debt, and Bandhan Banking & PSU Debt Fund. Additionally, I hold positions in various mutual funds such as Axis Bluechip, Axis Mid cap, DSP Mid cap, SBI Blue Chip, SBI Focused Equity, SBI Magnum Mid cap, and HDFC Ultra Short Term, though I no longer make new investments in them. With monthly expenses of ~?2 lakhs, I seek guidance on how much income I should target post-retirement to sustain my current lifestyle. My goal is to accumulate at least ?10 crores by retirement, and I am curious if my current strategy and investments will help me achieve this. I would also like recommendations on mutual funds suitable for a one-time bonus or lump sum investment to ensure optimal growth and diversification. Finally, any advice on optimizing my portfolio for better returns would be greatly appreciated.
Ans: You have an impressive financial setup and clear retirement goals. Being debt-free, with a house fully paid off, strengthens your financial independence. Below, I provide a 360-degree analysis to ensure your current strategy aligns with your retirement goals.

Key Strengths in Your Financial Portfolio
Debt-Free Status: This ensures no liabilities and a focus on wealth creation.

Disciplined SIP Contributions: Rs 2.5 lakhs monthly SIP demonstrates disciplined investing.

Diversified Assets: Investments in equity, debt, and EPF balance enhance portfolio stability.

Defined Retirement Corpus Target: Rs 10 crores target provides clarity in financial planning.

Income Requirement After Retirement
Current Monthly Expense: Rs 2 lakhs. Assuming a 6% inflation rate, expenses will double in 12 years.

Target Monthly Income: You will need around Rs 4-5 lakhs per month post-retirement to maintain your lifestyle.

Retirement Corpus Utilisation: A mix of equity and debt can ensure regular withdrawals while preserving capital.

Will You Reach Your Rs 10 Crores Target?
Your existing portfolio of Rs 1.44 crores (EPF, FD, and mutual funds) is a strong base.

With Rs 2.5 lakhs monthly SIP, and 6-10% annual returns, reaching Rs 10 crores by 55 is feasible.

Monitor your investments regularly to ensure they are on track.

Portfolio Optimisation for Better Returns
1. Consolidate Overlapping Mutual Funds
Too many funds like Axis, SBI, and DSP midcaps can lead to portfolio duplication.
Retain only the top-performing funds to avoid unnecessary diversification.
Focus on large-cap, mid-cap, and flexi-cap funds for a balanced equity portfolio.
2. Reallocate Fixed Deposits
FDs yield low post-tax returns and may not beat inflation.
Gradually shift FD investments to debt mutual funds or conservative hybrid funds.
3. Increase Equity Allocation
Equity grows wealth over the long term and combats inflation.
Maintain a 60-70% equity allocation in your portfolio pre-retirement.
Suggestions for Lump Sum Investments
1. Dynamic Asset Allocation Funds
These funds adjust automatically between equity and debt based on market conditions.
They provide stability and growth for one-time investments.
2. Flexi-Cap Funds
Flexi-cap funds can invest across market capitalisations for better growth potential.
They ensure diversification and capital appreciation for lump sums.
3. Debt Funds for Short-Term Goals
For safety and stability, consider short-term debt funds or ultra-short-term funds.
These are ideal for funds needed in 1-3 years.
Tax-Efficient Investing
Equity Mutual Funds: LTCG above Rs 1.25 lakh taxed at 12.5%. Plan redemptions accordingly.
Debt Mutual Funds: Gains taxed as per your income tax slab. Monitor impact on post-tax returns.
Use tax-saving instruments like ELSS for further benefits if required.
Optimising Your SIP Portfolio
Your SIP funds already include large-cap, mid-cap, small-cap, and flexi-cap categories.
Consider reducing underperforming or overlapping funds to enhance efficiency.
Add international funds for global diversification, focusing on dollar-denominated growth.
Emergency and Risk Management
1. Emergency Fund
Keep 6-12 months' expenses in liquid or ultra-short-term funds.
This ensures you are prepared for unexpected financial needs.
2. Insurance Coverage
Ensure adequate health insurance coverage for yourself and family.
A term insurance plan can protect your family in case of unforeseen events.
Regular Portfolio Monitoring
Review your portfolio’s performance every six months.
Make adjustments based on market conditions and fund performance.
Seek guidance from an MFD with CFP credentials to align your portfolio with goals.
Final Insights
Your financial foundation is strong, and your Rs 10 crore target is achievable. Consolidate and optimise your portfolio for better returns. Maintain discipline and review investments regularly to ensure long-term success. Focus on inflation-proofing your retirement corpus with a balanced equity-debt mix.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

Asked by Anonymous - Nov 28, 2024Hindi
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Dear Sir, request to review following SIPs of portfolio. Which ones I should stop and in which fund to start as alternate. My age is 47 years. 1.ABSL frontline equity_ reg. _1000 14.77% (Since Aug 2014) 2. Bandhan flexicap_ Reg._ 2000_ 13.62% ( Since Aug 2014) 3. Sundaram Midcap_ Reg_ 1000_18.64% (Since June 2014) 4. Sundaram Large &midcap_Reg_2000_ 16.01%(Since Aug 2014) 5. ICICI pru Bluechip_Reg_1000_16.65%( Since June 2014) 6. Nippon India small cap_ reg_1000_ 33.31%(Since Oct 2021) 7. Nippon India Smallcap_ dir_4000_ 36.09%(Since Feb 2023) 8.Tata smallcap_Reg_1000_32.14% (Since Oct 2021) 9. Quant smallcap_ dir_ 8000_29.87%(Since Feb 2023) 10.Kotak emerg equity_dir_5000_34.68%(Since Aug 2023) 11. ICICI Focussed equity_ dir_ 2000_33.75%( since Feb 2023) 12.ICICI Pru Large& midcap_dir_2000_29.86%( since Feb 2023) 13.Quant midcap_dir_4000_ 23.39%(since Feb 2023) 14.Axis Bluechip_ reg_1000_14.20%(since Oct 2021)
Ans: Your portfolio reflects diversity across categories. However, optimisation is needed to align with financial goals. Below is a detailed review:

SIPs in Actively Managed Regular Plans
1. ABSL Frontline Equity (Rs 1000)

Returns: 14.77% since 2014
Assessment: Decent long-term performer in large-cap space. Consider retaining this SIP for stability.
2. Bandhan Flexicap (Rs 2000)

Returns: 13.62% since 2014
Assessment: Performance consistent, but alternatives may offer better opportunities. Explore other flexicap funds with dynamic management.
3. Sundaram Midcap (Rs 1000)

Returns: 18.64% since 2014
Assessment: Impressive returns; retain for potential in midcap growth.
4. Sundaram Large & Midcap (Rs 2000)

Returns: 16.01% since 2014
Assessment: Balanced fund delivering good returns; recommend continuing.
5. ICICI Pru Bluechip (Rs 1000)

Returns: 16.65% since 2014
Assessment: Steady performer in large-cap category. Retain for portfolio stability.
6. Nippon India Smallcap (Rs 1000)

Returns: 33.31% since 2021
Assessment: High returns in a short time; small-cap investments suit higher risk tolerance. Consider continuing if goal aligns.
7. Tata Smallcap (Rs 1000)

Returns: 32.14% since 2021
Assessment: Small-cap volatility is high. Retain only if long-term horizon exceeds 7-10 years.
8. Axis Bluechip (Rs 1000)

Returns: 14.20% since 2021
Assessment: Underperforming in the large-cap category; better options are available.
SIPs in Direct Plans
9. Nippon India Smallcap (Rs 4000)

Returns: 36.09% since 2023
Assessment: Excellent short-term returns. Evaluate if overlapping with your existing small-cap holdings.
10. Quant Smallcap (Rs 8000)

Returns: 29.87% since 2023
Assessment: Volatility typical of small-cap funds; ensure no over-allocation to this segment.
11. Kotak Emerging Equity (Rs 5000)

Returns: 34.68% since 2023
Assessment: Promising returns; align with your risk and time horizon before continuing.
12. ICICI Focused Equity (Rs 2000)

Returns: 33.75% since 2023
Assessment: Focused equity funds bring concentration risks. Consider reducing allocation to balance risk.
13. ICICI Large & Midcap (Rs 2000)

Returns: 29.86% since 2023
Assessment: Diversified strategy suits mid-term goals. Consider holding for stability.
14. Quant Midcap (Rs 4000)

Returns: 23.39% since 2023
Assessment: Reasonable performance in a short period. Retain for midcap exposure.
Key Recommendations
Surrender Direct Funds: Direct plans lack the professional guidance of an MFD or CFP. Transition to regular plans to gain insights, periodic review, and holistic advice.

Consolidate Small-Cap Investments: You hold multiple small-cap funds. Retain 1-2 for high-risk, high-reward potential. Allocate surplus to other categories.

Replace Underperformers: Axis Bluechip and Bandhan Flexicap are candidates for reallocation. Replace them with actively managed funds showing stronger performance.

Ensure Category Allocation: Maintain a balanced allocation between large-cap, midcap, and small-cap funds.

Additional Insights
Tax Efficiency: Ensure tax planning aligns with your goals. For equity funds, LTCG above Rs 1.25 lakh attracts 12.5% tax. STCG is taxed at 20%.

Reassess Goals: Match fund selection to financial milestones like retirement, children’s education, or asset creation.

Review Regularly: A portfolio review every six months ensures alignment with financial goals and market conditions.

Final Insights
Your portfolio is diversified but needs fine-tuning. Transition to regular funds for professional guidance. Consolidate small-cap holdings to reduce overlap. Focus on long-term wealth creation through a balanced strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

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I want invest 40000 per month for 20 years suggest 4 to 6 mutual fund name
Ans: Investing Rs. 40,000 per month in mutual funds for 20 years is a solid financial decision. With this approach, you can achieve significant wealth accumulation and meet long-term goals. Below, I’ve structured a professional guide with insightful recommendations for a diversified portfolio of mutual funds.

Asset Allocation Strategy for Long-Term Growth
A 20-year horizon allows you to take calculated risks for higher returns. Here's an allocation strategy to consider:

Large-Cap Funds: Stability and consistent growth
Mid-Cap Funds: Balanced risk and return potential
Small-Cap Funds: High-growth opportunities over the long term
Hybrid Funds: Cushion during market volatility
This combination ensures balanced growth with reduced risks.

Categories to Include in Your Portfolio
Here are recommended categories with explanations:

Large-Cap Equity Funds (Rs. 10,000 Monthly)
Focus on investing in funds with a history of stability and steady returns.
Large-cap funds invest in established companies with consistent growth.
Suitable for risk-averse investors aiming for dependable performance.
Three-line space.

Mid-Cap Equity Funds (Rs. 10,000 Monthly)
Mid-cap funds provide a good mix of growth and moderate risk.
These funds invest in companies with strong growth potential.
Ideal for investors with a medium-to-high-risk appetite.
Three-line space.

Small-Cap Equity Funds (Rs. 8,000 Monthly)
Small-cap funds are volatile but offer the highest long-term returns.
Investing in small-cap funds requires patience to handle market swings.
These funds are best suited for wealth creation over 15–20 years.
Three-line space.

Hybrid Funds (Rs. 7,000 Monthly)
Hybrid funds diversify across equity and debt for balanced growth.
They provide stability during market downturns.
Suitable for achieving consistent performance with controlled risk.
Three-line space.

Sectoral or Thematic Funds (Rs. 5,000 Monthly)
Sectoral funds invest in specific sectors like technology or healthcare.
Thematic funds follow emerging market trends, enhancing returns.
Only allocate if you are comfortable with higher risk.
Why Avoid Index Funds?
Index funds mimic the market and lack active management. Here's why they might not suit your portfolio:

Limited Upside Potential: They merely track benchmarks without seeking higher returns.
No Downside Protection: Lack of proactive management can lead to higher losses in downturns.
Higher Taxation Impact: Active funds offer better post-tax returns with consistent rebalancing.
Instead, actively managed funds deliver better performance, especially in volatile markets.

Direct Plans vs. Regular Plans: Which Is Better?
While direct plans have lower expense ratios, regular plans offer critical advantages:

Expert Guidance: Regular plans through Certified Financial Planners (CFPs) come with professional advice.
Time-Saving: You save time by relying on CFPs for fund selection and rebalancing.
Better Decision-Making: Regular plans ensure informed decisions for long-term growth.
By investing through regular plans with an experienced CFP, you can maximise returns.

Benefits of Your 20-Year Investment Plan
Your Rs. 40,000 monthly investment over 20 years offers significant advantages:

Compounding Power: The longer the investment, the greater the compounding effect.
Financial Independence: Helps achieve life goals like retirement or children’s education.
Inflation Protection: Equity funds outpace inflation over the long term.
Taxation Rules to Keep in Mind
Understanding tax implications ensures better planning:

Equity Funds: Long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.
Debt Funds: Both LTCG and STCG are taxed as per your income tax slab.
Hybrid Funds: Taxation depends on equity allocation within the fund.
Keep track of tax-efficient withdrawal strategies after 20 years.

Important Considerations for Your Portfolio
Rebalance Regularly: Review your portfolio every 6–12 months.
Diversify Smartly: Avoid over-allocation in any single category.
Stay Disciplined: Stick to your plan regardless of market fluctuations.
Consult a CFP: Regular consultation ensures alignment with financial goals.
Final Insights
Your decision to invest Rs. 40,000 monthly reflects strong financial foresight. By diversifying into different fund categories, you can build a solid portfolio for long-term growth. Avoid chasing short-term trends and remain committed to your strategy.

Investing through a Certified Financial Planner ensures tailored advice for your unique needs. Stay consistent, review periodically, and let time work in your favour.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

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

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Ramalingam

Ramalingam Kalirajan  |7183 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 29, 2024

Asked by Anonymous - Nov 28, 2024Hindi
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I am having a SIP of 2000 on Bandhan flexicap_regular plan since 2014. Its XIRR is 13.6%. But, presently, many Flexicap funds like HDFC/Motilal Oswal/Patag Parikh is giving better return (>20%, 5 year). Should I consider to stop this SIP and start in another Flexicap fund for better return.
Ans: You have consistently invested Rs 2,000 per month in a flexicap fund since 2014. With an XIRR of 13.6%, this SIP has delivered a strong, inflation-beating return over time. This consistency reflects disciplined investment behaviour. However, it is natural to compare returns with other funds offering better short-term performance.

Let us analyse the situation and guide your next steps.

Strengths of Your Current Investment
Long-Term Investing: Staying invested since 2014 has leveraged the power of compounding.

Steady Returns: The fund has provided a stable 13.6% XIRR over nine years.

Market Phases: The fund has weathered various market cycles, proving its resilience.

Should You Switch to a New Fund?
Switching funds requires careful consideration. A short-term performance comparison alone is not enough.

1. Check Consistency Over Time
Review the 10-year and 15-year performance of your current fund.
Consistent performers in all market cycles are more reliable.
2. Assess Fund's Risk and Style
A high return in another fund may come with higher volatility or risks.
Evaluate the investment style and portfolio diversification of alternatives.
3. Impact of Capital Gains Tax
Selling your current investments may trigger long-term capital gains (LTCG) tax.
LTCG above Rs 1.25 lakh is taxed at 12.5%. Factor this into your decision.
4. Transaction Costs
Consider exit loads or transaction charges if applicable.
Regular switching can erode returns through such costs.
Benefits of Staying Invested
1. Avoid Market Timing
Timing the market by chasing high-return funds can lead to losses.
Patience with a consistent performer usually pays off in the long term.
2. Power of Compounding
Long-term SIPs maximise compounding benefits.
Frequent fund changes interrupt this growth cycle.
When Should You Consider Switching?
If the fund consistently underperforms its benchmark and peers over 5-10 years.
If there are major changes in fund management or strategy.
Alternative Approach Instead of Switching
1. Diversify Across Funds
Start a SIP in another flexicap fund without stopping the existing one.
This ensures better diversification without disrupting current investments.
2. Review Portfolio Overlap
Avoid funds with overlapping portfolios to ensure diversification.
3. Seek Expert Guidance
Invest through an MFD with CFP credentials for personalised fund selection.
Active management ensures funds align with your financial goals.
Disadvantages of Direct Funds
Direct funds do not offer advisory support.
You may miss crucial rebalancing opportunities without professional guidance.
Investing through regular plans with an MFD ensures expert monitoring and timely actions.
Final Insights
Your existing SIP has delivered steady, long-term returns. Do not switch based on short-term fund performance alone. Evaluate long-term consistency and risk before making changes. Consider starting a new SIP in another fund to diversify instead of stopping your current SIP.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Milind

Milind Vadjikar  |725 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 29, 2024

Asked by Anonymous - Nov 28, 2024Hindi
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Hi Milind, Hope this mail finds you well ! I plan to invest for my daughters aged 12 & 6 years old. I plan do STP for 10 years from a debt fund (where I will regularly keep adding money) into Flexicap & Small Cap fund, 10000 each per month . Inorder to save taxes I plan to get PAN card & Bank accounts of my children and invest in their name. To start with, I have identified HDFC Flexicap & Tata Small Cap fund. Are these equity funds good ? Which debt fund should I select for STP so that we get some interest and also keep investing for 10 years ? Is my strategy of investing in my children's name a good way of avoiding taxes or is there any risk in this approach ? Please advise.
Ans: Hello;

Source fund(debt) for STP has to be from the same fund house where your target fund(equity) belongs.

You may select liquid type debt fund for your STP, from risk and liquidity standpoint.

My suggestion would be to select funds from the top quartile in performance and from a big, reputed fund house.

Apply this yardstick to your fund selection.

To ensure neutrality of this forum, specific comments about xyz fund is generally avoided. Hope you appreciate this point.

Since kids are minor you or your spouse may have to be guardian for the minor folio and your KYC will be used to open and operate the same.

In case withdrawal is made before kids attain major status, tax implication will rest with the guardian.

Also after attaining major status fresh KYC of kids is mandatory before further contributions.

I suggest joint holding folios, for eg one folio may have kid as first investor with you as guardian and your spouse as joint/second investor and vice versa.

It may sound tedious but it's a one time thing and in the best interest of kids.

Happy Investing;
X: @mars_invest

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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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