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Ramalingam Kalirajan |7290 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Arun on Jul 14, 2024Hindi

Hello Sir I am now 27 investing in SBI Contra Fund of amount 1111/- , SBI Psu Fund of amount 1111/-, Aditya Birla Psu Equity Fund of Rs 1111/-,Nippon India Large Cap Fund of Rs 1111/-,Tata Small Cap Fund of Rs 1111/-. Also have an daily SIP On Paytm app of Rs 101/- for 30 years as an return expected for Rs 1 crore. Is I am on the right track to achieve my Goal. And also have a question regarding mutual fund SIP That at how many years can I build the wealth for my child for his educational purpose.

Ans: Firstly, let me commend you on your proactive approach towards investing at the age of 27. Starting early gives you a significant advantage in wealth creation due to the power of compounding. You have a diversified portfolio with investments in various mutual funds, including contra funds, PSU funds, large cap funds, and small cap funds. Additionally, your daily SIP through Paytm shows your commitment to regular investing, which is crucial for achieving long-term financial goals.

Assessing Your Investment Portfolio
Diversification and Fund Types
Your portfolio includes a mix of different types of funds:

Contra Funds: These funds invest in undervalued stocks, betting on a turnaround. They can offer high returns but come with higher risk.

PSU Funds: These funds focus on public sector units. They can be stable but might not always outperform the market.

Large Cap Funds: These invest in large, established companies. They are relatively stable with moderate returns.

Small Cap Funds: These invest in smaller companies. They have high growth potential but also come with higher volatility.

While diversification is good, it's essential to ensure that each fund aligns with your overall risk tolerance and investment goals.

Benefits of Actively Managed Funds
It's commendable that you're investing in actively managed funds rather than index funds. Actively managed funds have the potential to outperform the market due to the expertise of fund managers. They can adapt to market changes and invest in high-growth opportunities.

Index funds, on the other hand, simply replicate the market index. They may not capitalize on opportunities that active managers can. By choosing actively managed funds, you benefit from professional management aimed at higher returns.

Disadvantages of Direct Funds
You mentioned investing directly, possibly through platforms like Paytm. While direct funds have lower expense ratios, they lack the personalized advice that comes with investing through a Certified Financial Planner (CFP). A CFP can provide tailored advice, helping you choose funds that align with your financial goals and risk tolerance.

Evaluating Your SIP Strategy
SIP Amounts and Goals
Your SIP amounts are well-structured. Investing Rs 1111 in each fund shows a disciplined approach. The daily SIP of Rs 101 is unique and reflects your commitment to continuous investing. However, it's crucial to periodically review and increase your SIP amounts as your income grows to ensure you meet your long-term goals.

Setting Financial Goals
Goal for Child's Education
Building wealth for your child's education is a noble goal. The duration for achieving this goal depends on several factors, including the amount you invest, the expected rate of return, and the future cost of education.

Typically, education costs rise with inflation. Therefore, it's wise to estimate the future cost and plan accordingly. Regularly reviewing and adjusting your investments can help ensure you stay on track.

Creating a Comprehensive Financial Plan
Assessing Your Risk Tolerance
Understanding your risk tolerance is essential. Since you are young, you can afford to take more risks. However, as you approach significant financial goals, like your child's education, you may want to shift towards more stable investments.

Regular Reviews and Adjustments
It's crucial to review your portfolio periodically. Market conditions change, and so do your financial goals. Regular reviews with a CFP can help you make necessary adjustments to your portfolio.

Importance of a Certified Financial Planner
While direct investments through apps are convenient, they may not offer the comprehensive planning that a CFP provides. A CFP can help you create a detailed financial plan, considering your income, expenses, risk tolerance, and long-term goals. They can offer personalized advice, ensuring your investments align with your objectives.

Building Wealth for Your Child's Education
Time Horizon and Investment Strategy
The time horizon for your child's education will influence your investment strategy. If your child is young, you have a longer investment horizon, allowing for more aggressive investments. As the time for education approaches, you may want to shift towards more conservative investments to protect your accumulated wealth.

I understand that planning for your child's future can be overwhelming. It's commendable that you are taking these steps early on. Investing regularly and seeking professional advice shows your commitment to providing the best for your child's future.

You are doing a fantastic job by starting early and diversifying your investments. Your disciplined approach to SIPs and your commitment to your child's education reflect your dedication and foresight.

Final Insights
In conclusion, you are on the right track with your investments. However, regular reviews and adjustments are essential to ensure you meet your goals. Consider working with a Certified Financial Planner to get personalized advice and make the most of your investments. This approach will help you build a secure financial future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Asked on - Jul 15, 2024 | Answered on Jul 15, 2024

Thank you for your valuable advice and also I have forgot to mention that my child is 3 year old. This is my first stage of investing. Later on some time I will add much more towards my Portfolio.

Ans: Given your child's age of 3, you have ample time to build a substantial education fund. Your diversified portfolio with SIPs in SBI Contra, PSU, and Large Cap funds, along with Tata Small Cap, is a solid start.

Key Points:
Diversification: Your investments span different fund types, which is excellent for balancing risk and return.
Long-term Commitment: Daily SIP of Rs 101 for 30 years is a commendable strategy for leveraging compounding.
Recommendations:
Regular Review: Periodically review and adjust your SIP amounts as your income increases to stay on track.
Professional Guidance: Consider consulting a Certified Financial Planner (CFP) for personalized advice to optimize your investment strategy.
Education Fund Goal: Calculate the future cost of education considering inflation, and adjust your investments accordingly.
You're on the right path. Continue investing and reviewing your portfolio to achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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