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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 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
Souhreed Question by Souhreed on May 10, 2024Hindi
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Hello - Please assess my mutual fund portfolio. Below are the details: Age-31yrs; Portfolio Age - 7 years (started with a lesser number of funds in 2017 at 5k); Amount Invested - 16.45L Current Value - 25.70L; Monthly SIP - 85k; Portfolio Annualized Return - 20.20%; Increase in SIP - 5-10% annually; Goal - 15cr by 2042; (a).SBI Blue Chip Fund-4k (b).Mirae Asset Large Cap Fund-1k (c).ICICI Prudential Large and Midcap Fund-10k (d).SBI Large and Midcap Fund-10k (e).HDFC Mid-Cap Opportunities Fund-10k (f).KOTAK SMALL CAP FUND-5k (g).Nippon India Small Cap Fund-5k (h).ICICI Prudential Value Discovery-5k (i).HDFC Balance Advantage Fund-5k (j).PARAG PARIKH FLEXI CAP FUND-25k (h).UTI NIFTY INDEX FUND GROWTH PLAN-5k

Ans: Your mutual fund portfolio demonstrates a commendable commitment to long-term wealth accumulation, especially given the significant growth in value and the impressive annualized return of 20.20%. Let's assess your portfolio components and make some recommendations:
1. SBI Blue Chip Fund: With a conservative approach, this fund provides stability and growth potential through investments in large-cap companies. Your allocation of 4k seems reasonable for diversification.
2. Mirae Asset Large Cap Fund, ICICI Prudential Large and Midcap Fund, SBI Large and Midcap Fund: These funds offer exposure to both large and mid-cap segments, providing diversification across market capitalizations. Your allocations are well spread out, contributing to portfolio resilience.
3. HDFC Mid-Cap Opportunities Fund, KOTAK SMALL CAP FUND, Nippon India Small Cap Fund: These funds target mid and small-cap segments, which historically offer higher growth potential. However, they also come with increased volatility. Considering your risk appetite, you might want to review your allocations and ensure they align with your risk tolerance.
4. ICICI Prudential Value Discovery: This fund follows a value-oriented investment strategy, focusing on undervalued stocks with the potential for long-term growth. It adds depth to your portfolio diversification.
5. HDFC Balance Advantage Fund: This dynamic asset allocation fund aims to provide stable returns by adjusting equity exposure based on market valuations. It serves as a hedge during market downturns, enhancing portfolio stability.
6. PARAG PARIKH FLEXI CAP FUND: Known for its flexible investment approach across market capitalizations, this fund complements your portfolio well. Its exposure to international equities adds diversification benefits.
7. UTI NIFTY INDEX FUND GROWTH PLAN: While index funds offer low-cost exposure to market indices, they lack the potential for outperformance compared to actively managed funds. Given your diversified portfolio, it's advisable to review the need for this fund and potentially reallocate the investment to actively managed funds with higher growth potential.
Considering your goal of achieving 15cr by 2042, it's crucial to maintain a disciplined approach towards savings and investment. You're already on the right track with your increasing SIP contributions annually. Regularly review your portfolio's performance and rebalance if necessary to stay aligned with your long-term objectives.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Asked on - May 10, 2024 | Answered on May 10, 2024
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Thank you, Sir, for the thorough review of my portfolio. It would be very helpful if you could recommend a fund where I can re-allocate the 5k from 'UTI NIFTY INDEX FUND GROWTH PLAN'
Ans: It's not advisable to recommend a fund in an online forum without understanding the full background of the individual's financial situation and investment goals for several reasons:

Risk Profile: Each investor has a unique risk tolerance based on factors such as age, financial obligations, income stability, and investment experience. Recommending a fund without considering these factors can lead to investments that are unsuitable or too risky for the individual.
Investment Goals: Investors have different financial goals, such as wealth accumulation, retirement planning, or saving for a specific milestone. The recommended fund should align with these goals and the investment timeframe. Without understanding the investor's objectives, recommending a fund may not serve their long-term interests.
Financial Circumstances: Factors like income level, existing investments, debt obligations, and emergency savings influence an individual's capacity to invest and tolerate market fluctuations. Recommending a fund without considering these factors may not be appropriate for their financial circumstances.
Tax Considerations: Tax implications vary based on the type of investment, investment duration, and the investor's tax bracket. Recommending a fund without knowledge of the individual's tax situation may lead to suboptimal tax planning.

In summary, recommending a fund without understanding the full background of the investor can lead to suboptimal investment decisions, potential risks, and regulatory issues. It's essential to conduct a thorough assessment of the investor's financial situation, risk tolerance, investment goals, and regulatory compliance before making any recommendations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2024

Asked by Anonymous - Apr 23, 2024Hindi
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Hello Sir, please review & advise on my mutual fund portfolio. SIP of 5000 each in UTI Nifty 50 index fund, Parag Parikh flexicap, Quant flexi cap & 3000 each in ICICI Midcap 150 index fund & Kotak large 7 midcap fund. All Started since 4 months, current age 42 & can do SIP for 2-3 years & plan to keep the accumulated amount as it is for next 5 years. I have some investments in equity shares(25%), SGB(25%) & FD's(50%) as well. Expecting to retire in next 6-7 years. Thanks
Ans: Your mutual fund portfolio appears to be well-diversified across different categories, offering exposure to large-cap, flexi-cap, and mid-cap segments. Let's delve into some insights and recommendations:
1. UTI Nifty 50 Index Fund: Investing in an index fund tracking the Nifty 50 provides broad exposure to India's top 50 companies. It's a reliable choice for long-term wealth accumulation, especially considering its low expense ratio and consistent performance.
2. Parag Parikh Flexi Cap Fund: This fund follows a flexible investment approach, allowing it to invest across market capitalizations. Its global diversification and focus on quality stocks make it suitable for investors seeking a balanced approach to wealth creation.
3. Quant Flexi Cap Fund: Flexi-cap funds offer the flexibility to invest across market segments based on market conditions. However, Quant Flexi Cap Fund's performance may vary due to its quantitative investment approach. Keep an eye on its performance relative to peers.
4. ICICI Midcap 150 Index Fund: Mid-cap funds have the potential for higher returns but come with increased volatility. Investing in a mid-cap index fund like ICICI Midcap 150 can provide exposure to mid-sized companies while mitigating individual stock risk.
5. Kotak Large & Midcap Fund: This fund combines investments in both large and mid-cap stocks, offering diversification across market segments. It's crucial to monitor the fund's performance and ensure it aligns with your investment objectives.
Active vs. Passive Management:
While you've included both actively managed mutual funds and index funds (ETFs) in your portfolio, it's important to understand the differences between the two. Actively managed funds aim to outperform the market through active stock selection and portfolio management, while index funds passively track a specific index's performance.
Benefits of Actively Managed Funds:
Actively managed funds offer the potential for higher returns compared to index funds, especially during market inefficiencies or when skilled fund managers can identify lucrative investment opportunities. Additionally, active management allows for flexibility in portfolio construction and adjustments based on market conditions.
Potential Disadvantages of Index Funds:
While index funds offer low expense ratios and broad market exposure, they may lack the potential for outperformance compared to actively managed funds. Additionally, they're subject to tracking error, which occurs when the fund's performance deviates from the index it's designed to replicate.
Considering your investment horizon of 2-3 years for SIP and a plan to hold the accumulated amount for the next 5 years, it's essential to review your portfolio periodically. Keep an eye on fund performance, market conditions, and your financial goals to make necessary adjustments.
Given your diversified investment portfolio with equity shares, Sovereign Gold Bonds (SGBs), and Fixed Deposits (FDs), ensure a balanced allocation aligned with your risk tolerance and retirement goals. As you approach retirement in 6-7 years, consider gradually shifting towards more conservative investment options to safeguard capital.
Consulting with a Certified Financial Planner can provide personalized guidance tailored to your financial situation and retirement aspirations.
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 May 09, 2024

Asked by Anonymous - Apr 23, 2024Hindi
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Hello Madam, please review & advise on my mutual fund portfolio. SIP of 5000 each in UTI Nifty 50 index fund, Parag Parikh flexicap, Quant flexi cap & 3000 each in ICICI Midcap 150 index fund & Kotak large 7 midcap fund. All Started since 4 months, current age 42 & can do SIP for 2-3 years & plan to keep the accumulated amount as it is for next 5 years. I have some investments in equity shares(25%), SGB(25%) & FD's(50%) as well. Expecting to retire in next 6-7 years. Thanks
Ans: It's great to see you diversifying your investments through mutual funds. Let's review your portfolio and provide some guidance.

Starting with your SIPs, investing 5000 each in UTI Nifty 50 index fund, Parag Parikh flexicap, and Quant flexi cap offers a balanced approach across different market segments. These funds provide exposure to large-cap, flexi-cap, and multi-cap segments, respectively, allowing for diversification and potential growth opportunities.

Adding 3000 each in ICICI Midcap 150 index fund and Kotak large & midcap fund introduces exposure to mid-cap stocks, which have the potential for higher growth but also come with increased risk. Given your investment horizon of 2-3 years for SIPs and plans to keep the accumulated amount for the next 5 years, it's essential to monitor these funds closely, considering the market conditions and fund performance.

It's commendable that you have investments in equity shares, Sovereign Gold Bonds (SGBs), and fixed deposits (FDs) as well. This diversification helps spread risk and aligns with your retirement goals.

Considering your current age of 42 and the plan to retire in the next 6-7 years, it's crucial to regularly review and rebalance your portfolio to ensure it remains aligned with your financial objectives and risk tolerance.

As you approach retirement, consider gradually shifting your portfolio towards more conservative investments to protect your capital and generate stable income streams.

Overall, your mutual fund portfolio seems well-diversified, considering your investment horizon and retirement goals. However, it's advisable to periodically reassess your portfolio and make adjustments as needed based on changing market conditions and personal circumstances.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

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I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

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Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

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My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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