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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 24, 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
Darshan Question by Darshan on Jun 24, 2024Hindi
Money

Hello sir, I am 32 yrs old, I want your advice as to the distribution of investments. How much in MF, equity, gold, etc.

Ans: At 32, it's great that you're thinking about asset allocation. Here’s a breakdown to help you navigate your investments effectively:

1. Assessing Your Goals and Risk Profile
Financial Goals: Identify and prioritize your financial objectives. Common goals might include:

Retirement Savings: Building a nest egg for retirement.
Home Purchase: Saving for a down payment on a house.
Education Fund: Funding your or your children’s education.
Emergency Fund: Ensuring you have enough liquidity for unforeseen expenses.
Risk Tolerance: Your risk tolerance depends on factors like age, income stability, and personal comfort with market fluctuations. Typically, younger investors can afford to take on more risk because they have more time to recover from potential losses.

2. Optimal Allocation Strategy
Balanced Approach: At 32, a balanced portfolio might lean more towards growth-oriented investments like equities but also include safer assets like debt instruments. Here’s a rough guideline:

Equities: 60-70%
Debt Instruments: 20-30%
Gold and Other Assets: 5-10%
3. Equity Mutual Funds
Understanding Equity Mutual Funds: These funds invest in stocks of various companies, offering diversification and professional management. The primary types include:

Large-cap Funds: Invest in large, well-established companies.
Mid-cap Funds: Focus on medium-sized companies with potential for growth.
Small-cap Funds: Target smaller companies with higher growth potential but also higher risk.
Active vs. Passive Funds:

Active Funds: Managed by professionals who make decisions to try to outperform the market.
Passive Funds: Track a market index like the Nifty 50 or S&P 500, generally with lower fees.
4. Benefits of Active Management
Potential for Higher Returns: Active managers aim to outperform the market through strategic stock selection and market timing.
Risk Management: Managers can shift investments to safer assets during market downturns.
Research and Expertise: Active funds benefit from the fund managers’ research and market insights.

5. Gold Investments
Gold as a Hedge: Gold is traditionally considered a safe-haven asset. It performs well during inflationary periods and economic uncertainty.
Gold ETFs: Exchange-Traded Funds (ETFs) that invest in physical gold offer the benefits of liquidity and ease of trading without the hassles of owning physical gold.

6. Avoiding Real Estate
High Capital Requirement: Real estate investments often require significant upfront capital.
Liquidity Issues: Selling property can take time, making real estate less liquid compared to other asset classes.
Market Knowledge: Successful real estate investing requires substantial knowledge and expertise.

7. Consider Debt Instruments
Types of Debt Instruments:

Debt Mutual Funds: Invest in government and corporate bonds, providing steady returns.
Fixed Deposits (FDs): Offer guaranteed returns over a fixed period, typically with lower risk.
Benefits: Debt instruments provide stability and regular income, making them ideal for balancing the risk in your portfolio.

8. Diversification Strategy
Why Diversify?: Diversification reduces risk by spreading investments across various asset classes, sectors, and geographies.
How to Diversify: Invest in a mix of equities, debt, gold, and possibly international assets to protect against market volatility.

9. Review and Rebalance
Regular Review: Periodically (at least annually) review your portfolio to ensure it still aligns with your goals and risk tolerance.
Rebalancing: Adjust your investments to maintain your desired asset allocation. For instance, if equities have grown significantly, you might sell some and invest more in debt instruments to rebalance.

10. Insurance Policies like LIC and ULIPs
Evaluate Performance: Assess the returns and costs associated with insurance-cum-investment products like LIC policies and ULIPs.
Consider Surrendering: If these policies are underperforming or have high costs, it might be wise to surrender them and reinvest in more efficient investment vehicles like mutual funds.

11. Seek Professional Advice
Certified Financial Planner (CFP): A CFP can help tailor a personalized financial plan considering your specific circumstances, goals, and risk tolerance.
Holistic Advice: Professional advice can provide a comprehensive view, including tax planning, retirement planning, and estate planning.

Final Insights
Stay Informed: Keep up-to-date with market trends and changes in economic conditions.
Stay Diversified: Ensure your investments are spread across various asset classes to mitigate risk.
Regularly Reassess: Life circumstances and financial goals can change, so regularly reassess and adjust your financial plan accordingly.

By following this detailed approach, you can build a robust investment portfolio tailored to your goals and risk profile, setting yourself up for a secure financial future.

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  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 06, 2024

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Hi I am 39 years old, I would like to invest in mutual funds. Below is my portfolio Have one Flat worth 1cr and i am staying in that. Have 3 plots each worth 50Lacs. And have loan of 42 Lac Emi is 43000 and expense is 30K. And 2Lac school fee every year for kid one Monthly take home is 1.3Lac Mutual funds have 1Lac investment. PPF 5Lac, PF 21Lac, NPS 10Lac. Sukanya 5Lac. Current Savins EPF 20000pm, NPS - 10000pm, Mutual funds- 8K. Term insurance 1cr, health insurance 10lac i have I would like to create corpus for retirement, kids education and marriage, have two kids 7 and 1 year. Please suggest how to allocate . Following is my Mutual fund portfolio, 1000sip in all categories, large cap, mid cap, small cap, multi and flexi cap, balanced advantage fund.
Ans: It's wonderful to see your proactive approach to financial planning, especially considering your family's future needs and goals. Let's discuss how to allocate your investments to create a solid corpus for retirement, kids' education, and marriage:

• First, let's address your existing assets – your flat and plots. These are valuable assets that can contribute to your overall net worth.
• However, it's crucial not to rely solely on real estate for your investment portfolio diversification.

• With regards to your loans, it's advisable to prioritize paying off high-interest debts, like your loan with a 42 lakh balance.
• By reducing debt, you can free up more funds for investments and increase your financial flexibility.

• Now, let's focus on your monthly expenses, including your child's school fees and other living expenses.
• It's essential to budget wisely and ensure that your investment contributions don't compromise your day-to-day financial stability.

• Your existing investments in PPF, PF, NPS, and Sukanya are commendable. These provide a solid foundation for your financial future.
• You can continue contributing to these instruments while also exploring additional investment avenues to diversify your portfolio.

• Considering your investment horizon and risk tolerance, mutual funds offer an excellent opportunity for long-term growth.
• Your current SIP portfolio across different categories – large cap, mid cap, small cap, multi, and flexi cap – is well-diversified.

• As a Certified Financial Planner, I would suggest reviewing your asset allocation and ensuring it aligns with your financial goals.
• Allocate a portion of your monthly savings towards increasing your SIP contributions to mutual funds, aiming for a balanced mix across categories.

• Additionally, consider increasing your contributions to retirement-focused instruments like NPS, which offer tax benefits and long-term wealth accumulation.
• For your children's education and marriage goals, consider setting up separate SIPs or investment accounts dedicated to these objectives.

• Lastly, ensure you have adequate insurance coverage, including term insurance and health insurance, to protect your family's financial well-being.
• Regularly review your financial plan, adjust as needed, and stay committed to your long-term goals.

By following these steps and staying disciplined with your investments, you'll be well-prepared to achieve your financial aspirations and provide for your family's future needs. Keep up the good work, and remember that consistency and patience are key to success!

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Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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I am 48 yrs old l am investing 7k per month in MF from last 2 years. Rs 1000 each in DSP Multi Asset allocation fund. Canara robeco bluechip equity fund. Mirae asset large and midcap fund. Motilal oswal nifty next 50 index fund. Kotak Emerging equity fund. Quant smallcap fund. Parag parikh flexi cap fund. My horizon is 10 yrs.
Ans: That's a great start! Investing Rs. 7,000 monthly for the past 2 years shows discipline. Let's analyze your portfolio for your 10-year investment horizon.

Diversification is Key

Your portfolio has a good mix of fund types:

Multi-Asset: Provides diversification across asset classes for stability.
Large & Mid-Cap: Offers growth potential with established and growing companies.
Small-Cap: Carries more risk but has the potential for high returns.
Index Fund: Tracks a market index, offering market-related returns.
Actively Managed vs. Index Funds

While your Motilal Oswal Nifty Next 50 is an index fund, your other choices are likely actively managed. These funds have managers who try to outperform the market. This approach can be beneficial, but also carries inherent risks.

10-Year Timeframe Advantage

A 10-year horizon allows you to ride out market ups and downs. Equity funds, though volatile in the short term, have the potential for higher growth over the long term.

Points to Consider:

Overall Asset Allocation: Review the percentage allocation across each fund type to ensure it aligns with your risk tolerance.
Fund Performance: Track the performance of each fund and compare it to its benchmark.
Role of a CFP Professional

A Certified Financial Planner (CFP) professional can offer a more personalized assessment. They can help you:

Analyze Asset Allocation: Ensure your portfolio mix matches your risk tolerance and goals.
Review Fund Performance: Identify any underperforming funds and suggest adjustments.
Rebalance Regularly: Periodically rebalance your portfolio to maintain your desired asset allocation.
Remember:

Market performance can impact your returns. However, your diversified portfolio and long-term focus are positive steps.

Next Steps:

Consider consulting a CFP professional for a detailed portfolio review.
Monitor your fund performance and rebalance as needed.
Keep investing for the long term!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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I am 53 years old and my name is loganathan.my earnings per month rs.25000. I have invested 20% of salary in mutual funds. Large cap 10%, small cap rs.10%,flexi cap 10% and remaining liquity funds. Is it right way or need any changes sir.
Ans: Loganathan, you are 53 years old and earn Rs. 25,000 per month. You invest 20% of your salary in mutual funds. Your current allocation is as follows:
• Large Cap: 10%
• Small Cap: 10%
• Flexi Cap: 10%
• Liquidity Funds: Remaining
Your dedication to investing is commendable. Let's review and suggest improvements.
Large Cap Mutual Funds
Benefits
• Lower risk compared to small cap funds
• Stability due to investment in established companies
Recommendation
• Keep your large cap allocation.
• Ensure the fund has a strong track record.
Small Cap Mutual Funds
Benefits
• High growth potential
• Higher returns over the long term
Risks
• Higher volatility
• Greater risk compared to large cap funds
Recommendation
• Continue with small cap investments.
• Ensure it aligns with your risk tolerance.
Flexi Cap Mutual Funds
Benefits
• Flexibility to invest across market caps
• Diversification within a single fund
Recommendation
• Flexi cap funds are a good choice.
• They provide balance and flexibility.
Liquidity Funds
Benefits
• Low risk and high liquidity
• Ideal for emergency funds
Recommendation
• Maintain liquidity funds for emergencies.
• Ensure easy access to these funds.
Suggested Changes
Balanced Portfolio
• Consider reallocating your investments.
• Balance between risk and stability.
Increase Large Cap Allocation
• Large cap funds offer stability.
• Consider increasing allocation to 20-25%.
Adjust Small Cap Allocation
• Small caps are riskier.
• Reduce allocation to 5-10%.
Maintain Flexi Cap Allocation
• Flexi caps offer flexibility.
• Maintain current 10% allocation.
Increase Liquidity Fund Allocation
• Ensure sufficient liquidity.
• Increase allocation to 20-30%.
Additional Considerations
Diversification
• Diversify across different asset classes.
• Reduces overall portfolio risk.
Professional Guidance
• Consult a Certified Financial Planner.
• Tailored advice based on your goals.
Regular Review
• Review your portfolio regularly.
• Adjust based on market conditions and life changes.
Long-Term Focus
• Focus on long-term growth.
• Avoid short-term market fluctuations.
Retirement Planning
Importance
• Retirement planning is crucial at your age.
• Ensure you have enough savings for retirement.
Pension Funds
• Consider investing in pension funds.
• Provides regular income post-retirement.
Health Insurance
• Ensure you have adequate health insurance.
• Covers medical emergencies without impacting savings.
Emergency Fund
Importance
• Keep an emergency fund.
• At least 6 months of expenses.
Liquid Assets
• Maintain liquidity in your portfolio.
• Use liquid funds or savings account.
Tax Planning
Tax-Saving Investments
• Invest in tax-saving instruments.
• Reduces tax liability and boosts savings.
ELSS Funds
• Consider Equity Linked Savings Scheme (ELSS).
• Provides tax benefits under Section 80C.
Risk Management
Assess Risk Tolerance
• Understand your risk tolerance.
• Invest accordingly to avoid stress.
Diversify Investments
• Spread investments across various funds.
• Reduces risk and enhances returns.
Finally
Loganathan, your current investment strategy is good. However, slight adjustments can improve your portfolio. Increase your large cap and liquidity fund allocations. Reduce small cap exposure slightly. Maintain your flexi cap investments. Regularly review and consult a Certified Financial Planner for personalized advice.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Hi Milind I am 46 years old and living in Germany, I am planning to start investing in MFs from this month onwards. My question to you is that how to distribute 100k INR per month? Should i go for 10k INR per fund per month? Or 10 funds are too much diversification? These are the funds suggested by my Advisor 1 ICICI PRUDENTIAL LARGE AND MID CAP FUND - GROWTH 2 Nippon India Multi Cap Fund - Growth Plan 3 HDFC Banking and Financial Services Fund - Regular Growth 4 AXIS Mid Cap Fund - Regular Growth Plan 5 ICICI Prudential Nifty Next 50 Index Fund - Growth 6 ICICI Prudential Multi Asset Fund - Growth 7 ICICI Prudential Manufacturing Fund Regular Plan Growth 8 Kotak Flexi Cup Fund - Growth 9 Nippon India Growth Fund - Growth Plan 10 Nippon India Small Cap Fund - Growth What is your take on both questions? Please let me know Rajesh
Ans: Hello;

I am presuming that this investment is from long term perspective of 10 years+ horizon and you are comfortable with high risk exposure.

Equal weight allocation to 10 funds is avoidable.

I propose to you 5 funds with the proportionate allocation as given:

1. PPFAS flexicap fund: 25%

2. Mirae Asset Large and Midcap fund: 25%

3. Nippon India Small cap fund: 20%

4. HDFC balanced advantage fund: 15%

5. ICICI Pru Multi asset allocation fund: 15%

Funds have been recommended based on their long term returns in their respective category.

Happy Investing!!

You may follow us on X at @mars_invest for updates.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

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What is your monthly contribution to EPF, NPS and MFs?

Please clarify so as to advise you suitably.

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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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