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Investing in Mutual Funds at 43: Where should I invest my 10k SIP?

Ramalingam

Ramalingam Kalirajan  |8327 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 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
John Question by John on Jul 15, 2024Hindi
Money

Hello there. I am 43 now and very late in commencing my journey in MFs view till now I was into FDs and secure instruments like LIC and post office. Now I wish to do MFs post persuasion by colleagues on what I missed in past viz significant growth potential of MFs. I have started 6k SIP in UTI nifty 200 momentum 30 direct find for past 6 months and now I wish to do 10k per month in diversified fund and add-on 10% per annum. I request you to kindly suggest me better prospects for adding on my SIP basket. My financial horizon is max 12-14 years. Thanks in advance.

Ans: Starting your journey into mutual funds at the age of 43 is a positive step towards wealth creation. You’ve primarily invested in fixed deposits, LIC policies, and post office schemes. These instruments offer safety but come with limited growth potential. Now, with a financial horizon of 12-14 years, it's the right time to diversify your portfolio with mutual funds.

You’ve already started a SIP of Rs. 6,000 in a momentum-based index fund. Adding Rs. 10,000 per month in a diversified fund is a sound plan. With your aim to increase the SIP amount by 10% annually, your investment will compound over time, helping you build a substantial corpus by retirement.

Evaluating Your Existing SIP Investment
Momentum-Based Index Fund
The fund you have chosen follows a momentum strategy, investing in stocks that have shown strong performance in the recent past. While momentum investing can lead to good returns during bull markets, it can be risky during volatile periods. Since you are relatively new to mutual funds and have a long-term horizon, it’s essential to balance your portfolio with funds that offer stability along with growth.

The Importance of Diversification
Diversification is crucial in managing risk while striving for growth. A well-diversified portfolio spreads investments across different asset classes and sectors, reducing the impact of market fluctuations. Here’s how you can diversify your mutual fund investments:

Equity Mutual Funds for Growth
Given your long-term horizon, equity mutual funds should form the core of your portfolio. Here’s how you can structure your investments:

Large-Cap Funds: These funds invest in well-established companies with strong market capitalization. Large-cap funds are less volatile and provide stability. They are ideal for long-term investors seeking steady growth.

Multi-Cap or Flexi-Cap Funds: These funds invest across companies of different sizes – large, mid, and small-cap. They offer a balanced mix of growth potential and stability, making them suitable for your investment horizon.

Mid-Cap Funds: Mid-cap funds invest in medium-sized companies with high growth potential. While they carry more risk than large-cap funds, they offer higher returns over the long term. You can allocate a portion of your SIPs to mid-cap funds for higher growth.

Balanced or Hybrid Funds for Stability
As you are new to mutual funds, balanced or hybrid funds provide a safe entry point. These funds invest in both equity and debt instruments, offering a balanced risk-reward profile. They provide stability with some growth potential, making them suitable for conservative investors.

Equity-Oriented Hybrid Funds: With a higher allocation to equity, these funds offer growth while maintaining stability through debt investments. They can be a good addition to your portfolio for moderate risk-taking.
Debt Mutual Funds for Security
As you approach retirement, shifting a portion of your investments to debt mutual funds is advisable. Debt funds provide regular income and are less volatile than equity funds. They are essential for capital preservation, especially as you near your financial goal.

Short-Term Debt Funds: These funds are ideal for conservative investors seeking stability. They are less sensitive to interest rate changes and provide steady returns.
Structuring Your SIP Plan
Given your plan to invest Rs. 10,000 per month with an annual step-up of 10%, you can allocate your SIPs across different mutual fund categories. Here’s a suggested structure:

Large-Cap Fund: Rs. 3,000 per month – This should be the core of your portfolio, offering stability and steady growth.

Multi-Cap or Flexi-Cap Fund: Rs. 3,000 per month – These funds provide diversification across market capitalizations, balancing growth and risk.

Mid-Cap Fund: Rs. 2,000 per month – Allocate a smaller portion to mid-cap funds for higher growth potential.

Balanced or Hybrid Fund: Rs. 2,000 per month – This will add stability to your portfolio, reducing overall risk.

The Benefits of a Systematic Investment Plan (SIP)
A Systematic Investment Plan (SIP) is an effective way to invest in mutual funds, especially for long-term goals. SIPs allow you to invest small amounts regularly, averaging out the cost of your investments over time. This reduces the impact of market volatility and helps in disciplined investing.

Year-on-Year (YOY) Step-Up
Your plan to increase your SIP amount by 10% annually is a smart move. This will help you take advantage of increasing income and compound your investments more effectively. The step-up ensures that your investment grows in line with your income, maximizing the benefits of compounding.

The Disadvantages of Direct Funds
You are currently investing in a direct fund, which typically has a lower expense ratio. However, direct funds require active monitoring and decision-making. If you are new to mutual funds, managing a direct fund might be challenging. Investing through a Certified Financial Planner (CFP) provides professional guidance, regular reviews, and adjustments to your portfolio. This ensures that your investments stay aligned with your goals and risk tolerance.

Final Insights
Starting your mutual fund journey at 43 is a great decision, and you are on the right track. Your existing investments in fixed deposits, LIC, and post office schemes have provided safety. Now, with a 12-14 year horizon, mutual funds will add the necessary growth to your portfolio.

Diversifying your investments across large-cap, multi-cap, and mid-cap funds will provide a balanced mix of growth and stability. Adding a balanced or hybrid fund will further stabilize your portfolio. As you approach retirement, consider shifting a portion of your investments to debt funds to preserve capital.

A Systematic Investment Plan (SIP) with an annual step-up is the most effective way to grow your investments over time. This disciplined approach, combined with professional guidance from a Certified Financial Planner (CFP), will help you achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Asked on - Aug 21, 2024 | Answered on Aug 24, 2024
Listen
Sir thanks for your reply. Could you kindly advice some funds too for these categories. I want to commence my journey with your guidance if possible . Regards...
Ans: I appreciate your trust in my guidance. However, the best funds for you will depend on your specific goals, risk tolerance, and time horizon. I highly recommend consulting with a Certified Financial Planner (CFP). A CFP can provide customized suggestions tailored to your unique financial situation and future 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  |8327 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2025

Asked by Anonymous - May 09, 2025
Money
Dear Sir, I am 55 and I am a stage 4 cancer patient for the past 5 years. Presently working with a salary of Rs.30 LPA. I have Rs.75 L in SB account. Rs.25 L in shares out of which Rs.12 L is loss. Rs.12 L in mutual funds. Rs.3 L in EPF. No commitments or liabilities. I need to know how I can get Rs. 70 K per month in case I lose my job. Kindly advise.
Ans: I truly appreciate your courage and clarity even in the face of health challenges. With your current financial resources and the need to secure a monthly income of Rs. 70,000, a detailed and careful plan is very much possible.

Let me give you a full 360-degree solution below, step-by-step.

Understanding Your Present Financial Picture
You are 55 years old and have been living with stage 4 cancer for 5 years.

You are still employed and drawing a salary of Rs. 30 lakhs per year.

You have Rs. 75 lakhs in your savings bank account.

You hold Rs. 25 lakhs in shares, with Rs. 12 lakhs in losses.

You have Rs. 12 lakhs in mutual funds.

Rs. 3 lakhs is in your EPF account.

You have no loans or financial commitments.

Your main concern is to receive Rs. 70,000 every month if the job stops.

You are not looking to take risks.

You want regular, reliable income without physical involvement.

Step 1: Emergency Medical and Health Fund
Health comes first. Keep money aside just for medical needs.

This fund should cover two years of your full household and medical costs.

Keep Rs. 15 to 20 lakhs aside for this purpose.

This money should be in ultra-safe places.

Prefer a savings bank account and liquid mutual funds.

This should remain untouched unless truly needed.

This emergency buffer gives peace and avoids panic in tough times.

Step 2: Generate Rs. 70,000 Monthly Income
Rs. 70,000 monthly means Rs. 8.4 lakhs needed per year.

Aim for post-tax cash flow from your investments.

Break your funds into income generation buckets.

Use your Rs. 75 lakhs from savings bank as the core capital.

Avoid keeping the full amount idle in SB account.

Allocate funds into low-risk, stable return instruments.

Prefer investment avenues offering quarterly or monthly payouts.

Choose options where you can withdraw in parts if needed.

Step 3: Structured Investment Allocation
Short-Term Bucket: 1 to 2 Years

Set aside Rs. 18 to 20 lakhs for short-term needs.

Put this money into highly liquid options.

Use only those that protect capital and give fixed income.

These funds will generate stable income for the next two years.

Prefer options offering monthly or quarterly payouts.

This will help replace your salary if job stops.

You don’t need to sell any shares or mutual funds right away.

You get time to think clearly, plan calmly.

Medium-Term Bucket: 3 to 5 Years

Keep around Rs. 25 to 30 lakhs here.

Invest in actively managed hybrid mutual funds.

Choose regular plans through a mutual fund distributor with CFP credentials.

Do not go for direct funds.

Direct plans do not come with personalised guidance.

There is no one to help you rebalance, switch or review.

Regular plans through a Certified Financial Planner offer ongoing support.

With hybrid funds, risk is moderate and returns are better than FDs.

Use SWP (Systematic Withdrawal Plan) to get monthly income.

You can set up SWP of Rs. 40,000 to 50,000 from this bucket.

These funds will last for years while also growing gradually.

Long-Term Bucket: 5+ Years

Keep Rs. 10 to 15 lakhs for the long-term.

This is not for current income, but for inflation beating growth.

Invest in actively managed large cap or balanced advantage funds.

Again, use regular plans with Certified Financial Planner.

These funds will build wealth for later stages.

You can shift gains to the medium bucket after 5 years.

Step 4: Shareholding Review and Action Plan
You have Rs. 25 lakhs in shares.

Out of this, Rs. 12 lakhs are in losses.

Do not sell them in a hurry.

Some may recover if you wait patiently.

First, make a list of all companies and their quality.

Exit poor-quality stocks even at a loss.

Retain good quality stocks with strong future.

If the whole portfolio is confusing, take help from a Certified Financial Planner.

You can harvest the loss now to set off gains later.

Book losses smartly to reduce future capital gains tax.

After cleaning up, move the proceeds to your medium bucket.

Step 5: Mutual Fund Review
You hold Rs. 12 lakhs in mutual funds.

Find out the type of each fund.

If these are equity funds, hold them long-term.

If returns are low or risk is high, shift to hybrid funds.

Avoid investing in index funds.

Index funds cannot protect capital in falling markets.

They simply copy the market blindly.

Actively managed funds are safer.

Professional fund managers take timely actions.

They reduce your risk and improve consistency.

Step 6: EPF Strategy
You have Rs. 3 lakhs in EPF.

EPF earns stable tax-free interest.

Do not withdraw unless it’s urgent.

Keep it as part of your long-term reserve.

Step 7: Monthly Income Setup
Use short-term and medium-term buckets to get income.

Start SWP from mutual funds for Rs. 40,000 monthly.

Use fixed income tools for Rs. 30,000 more.

Review this every year with a Certified Financial Planner.

Adjust amounts if needed based on inflation.

Step 8: Tax Planning and Awareness
Income from mutual funds is taxable.

Long-term capital gains above Rs. 1.25 lakhs taxed at 12.5%.

Short-term gains taxed at 20%.

Debt fund gains taxed as per your slab.

Plan redemptions to avoid tax shocks.

Harvest profits in a planned manner.

Step 9: Avoid These Common Mistakes
Do not invest in real estate.

It is illiquid and needs physical handling.

Do not buy annuities.

They give poor returns and lock your money.

Do not fall for insurance + investment combos.

If you already hold such policies, review them.

Consider surrender if return is poor.

Reinvest the proceeds into mutual funds.

Step 10: Use a Certified Financial Planner
A Certified Financial Planner gives structured and unbiased advice.

They help you with fund selection, SWP setup, rebalancing.

They guide you with tax-saving and risk control.

Their ongoing service is crucial at your life stage.

Choose someone with experience and clear credentials.

Finally
You are in a better financial position than many.

You have no loans, no dependents, and have built good savings.

With a calm and simple plan, you can replace your income safely.

You do not need to take risky steps now.

You have already shown strength by managing your life and job for 5 years.

Now your money should serve you with peace and stability.

Break your capital into buckets.

Get monthly income through safe withdrawals.

Review regularly with a Certified Financial Planner.

Avoid unnecessary complexity or noise.

You deserve a peaceful financial life.

Your health is precious. Let money be your quiet support.

Invest safe. Withdraw smart. Sleep well.

You are already doing well. Just add clarity and structure.

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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