Home > Money > Question
Need Expert Advice?Our Gurus Can Help

Feeling Overwhelmed with Diverse Investments? Seeking Expert Advice on Optimizing Portfolio Strategy for Retirement and Child's Education

Ramalingam

Ramalingam Kalirajan  |6568 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 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
Pratik Question by Pratik on Sep 18, 2024Hindi
Money

Hello sir, With your earlier suggestion to achieve 5Cr for retirement and my 3yr old son's education, I'm planning the following monthly investment ( apart from current Parag, Nippon and Mirae investment of 10L+ 10L in PPF): Son's Parag: 8 My Parag:10 Mirae nifty ev & new age:30 Quant Infra:15 Nifty500 Manufacturing:10 Small cap:10 Mid cap:10 NPS vatsalaya:5(giving 25L) Term plan of 3Cr:8K Monthly in-hand savings:15k Plz suggest if I'm over diversifying & suggestion for small and mid cap fund

Ans: You have a good balance between long-term goals, such as retirement and your son's education, with monthly investments across multiple funds.

Investing Rs 15,000 of monthly savings alongside current investments and having Rs 10 lakh each in Parag and PPF is commendable. This shows discipline in securing your financial future.

Portfolio Overview
Let’s assess the diversification of your portfolio:

Son's Parag: Rs 8,000/month
This could be a good long-term investment for your child's future.

Your Parag: Rs 10,000/month
This adds value to your retirement goal.

Mirae Nifty EV & New Age: Rs 30,000/month
Investing Rs 30,000 in a thematic fund is a bold move. However, ensure this is for the long-term, as sector-specific funds can be volatile.

Quant Infra: Rs 15,000/month
Infrastructure is a good bet for growth in India. However, similar to thematic funds, it can be cyclical.

Nifty500 Manufacturing: Rs 10,000/month
Manufacturing is an essential part of India’s growth story. Still, its performance can depend on broader economic factors.

Small Cap: Rs 10,000/month
Small caps provide high growth potential but come with higher volatility. Keep a horizon of at least 7-10 years.

Mid Cap: Rs 10,000/month
Mid-cap investments are good for growth, but they too require a longer horizon.

NPS Vatsalaya: Rs 5,000/month
A good addition for retirement, as it provides long-term benefits and pension security.

Term Plan of Rs 3 crore: Rs 8,000 premium
This is a necessary expense to ensure your family’s financial security in your absence.

Assessing Over-Diversification
While diversification reduces risk, too much of it can dilute returns. Your portfolio seems slightly over-diversified.

Consider reducing thematic exposure (Mirae Nifty EV & Quant Infra) as they make up a large portion of your investments.

It might be more beneficial to concentrate on core funds like small caps, mid caps, large caps, and a flexi-cap fund for diversification across market caps without the risks of being overly thematic.

Small Cap and Mid Cap Suggestions
For small cap funds, consider selecting ones with a consistent performance history and a good track record in handling market volatility.

For mid cap funds, those that have shown steady growth across different market conditions will be a safer bet for building long-term wealth.

Instead of focusing on individual scheme names, select funds with a solid investment team, strong processes, and consistent performance.

Direct vs Regular Funds
Switching to Direct Funds might seem like a good idea due to the lower expense ratio. However, this shift means losing the valuable guidance of a Certified Financial Planner (CFP) who can help you optimize your investments over time.

By sticking with Regular Funds through a professional MFD (Mutual Fund Distributor), you get personalized advice, monitoring of your investments, and support with tax-saving strategies. Regular funds also provide better handholding, which is crucial in volatile times.

Disadvantages of DIY Platforms
Platforms like MF Central or Zerodha may look attractive for their lower fees, but they have their drawbacks:

Complexity: Managing your portfolio without professional help can be complicated, especially when it comes to tracking performance, rebalancing, or adjusting investments based on changing goals.

Lack of Tax Optimization: Without professional guidance, you may not optimize for taxes, potentially losing out on gains.

No Personalized Advice: Unlike a Certified Financial Planner, DIY platforms will not provide you with tailored advice for your financial goals, leaving you to manage everything yourself.

Long-Term Return Expectations
Your current mutual funds are performing well, but you must be prepared for market volatility. While returns can be 20% in short-term spurts, a more realistic long-term average would be around 12-15%. This will help in planning more effectively for your goals like your son’s education and your retirement corpus of Rs 5 crore.

Final Insights
Your disciplined approach and allocation to mutual funds and NPS are excellent for long-term wealth building. However, fine-tuning your portfolio for better efficiency and consolidation will enhance your returns.

Review the Thematic Funds: Consider reducing your exposure to thematic funds like EV, infrastructure, and manufacturing. These sectors can be volatile and may require active monitoring.

Stick with Regular Funds through an MFD: While direct funds may seem appealing, sticking with regular funds and leveraging the expertise of a Certified Financial Planner ensures you won’t miss out on personalized advice and tax optimization.

Focus on Core Funds: Keep a balanced allocation towards small-cap, mid-cap, and large-cap funds to ensure you cover different market cycles and benefit from market growth.

Adjusting for Volatility: Remember that 20% returns might not be sustainable over the long term. It's safe to plan for 12-15% average returns for your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Asked on - Sep 27, 2024 | Answered on Sep 27, 2024
Listen
Thanks for insights, I recently went into NPS detail and with its annuity non attractive feature - I will discontinue from next yr(3yrs). And as per suggestion I'll like to twist to more safer side- Son's Parag(1L annual), My Parag sip-20,Mirae SIP-20,MIRAE NIFTY EV-5,QUANT INFRA-5,TATA NIFTY500 MULTICAP-10 & now adding some guaranteed funds like Max Smart wealth guaranteed SIP(12yrs for 1Cr)-15 & Tata Retirement SIP for 10yrs-20k(6Cr tax free). How do you think the distribution after adding guaranteed portion?
Ans: While guaranteed products like Max Smart Wealth Guaranteed SIP and Tata Retirement SIP offer certainty, they typically come with lower returns compared to pure equity investments over the long term. These products often have high costs, which can erode returns. Moreover, the promise of a "guaranteed" amount may not account for inflation, potentially lowering the real value of your investment.

Instead, focusing on diversified equity mutual funds with a long-term horizon provides better growth potential, flexibility, and tax efficiency. Over 10–20 years, well-chosen equity investments generally outperform guaranteed products.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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.
Money

You may like to see similar questions and answers below

Nikunj

Nikunj Saraf  | Answer  |Ask -

Mutual Funds Expert - Answered on Oct 10, 2022

Listen
Money
My age is 27 and i am planning for my retirement so i am investing 20K every month in sip and will step up 10% every year . I am expecting 15% return on my investments. I started investing in MF from march 2022 and I have also investing 10K in EPF and 1.5 L in LIC. I have added all my mutual funds below , please reveiw and share ur opinion. If it’s over diversified suggest me which fund i need to remove from my portfolio. Small cap funds – 4( 6500 ) 1. Axis Small Cap Fund Direct Growth-2000 2. Kotak Small Cap Fund - Direct Plan - Growth (Erstwhile Kotak Mid-Cap) -1500 3. NIPPON INDIA SMALL CAP FUND - DIRECT -1500 4.Quant Small Cap Fund - Direct Plan Growth -1500 Mid cap Funds – 4 (4500) 1. PGIM India Midcap Opportunities Fund - Direct Plan – Growth- 1000 2. Quant Mid Cap Fund – Growth -1500 3. Invesco India Midcap Fund - Direct Plan Growth -1000 4. Axis Mid Cap Fund - Direct Growth -1000 Blue chip & Growth -2 (2500) 1. Mirae Asset Emerging Bluechip Fund - Direct Plan-1500 2. Axis Growth Opportunities Fund Direct Growth -1000 Sectorial Diversification -6 (4500) 1. ICICI Prudential Technology Fund - Direct Plan – Growth - 1000 2. ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund Direct Plan Growth -500 3. ICICI Prudential Banking and Financial Services Fund - Direct Plan – Growth -500 4. Mirae Asset Great Consumer Fund - Direct Plan -1500 5. Quant infrastructure fund - 1000 US market (2500) 1.    Navi US Total Stock Market Fund of Fund Direct Plan Growth – 2500
Ans: Hello swami. The detailed overview of your MF portfolio indicates over-diversification with 20k SIP. Hence, I would suggest reconsidering, pruning, and reshuffling your portfolio. 

As part of the portfolio reshuffle, make sure to have AMC diversification as well.

Limit yourself to 1-2 schemes in each category.

I can see several schemes in different categories for each AMC. I recommend reconsidering the scheme for Navi US scheme to better scheme in same category.

..Read more

Latest Questions
Nayagam P

Nayagam P P  |3811 Answers  |Ask -

Career Counsellor - Answered on Oct 13, 2024

Listen
Career
Sir the median package at ssnce for cse core is less than rvce ise .So does it make more viable option considering placement in mind .I have a dream of becoming software engineer from my childhood. But my seniors are advising for rvce ise.what to do should I follow my dream or placement.I am a Bangalore resident and Tamil is my mother tongue.
Ans: Ashwin, my son, graduated from RVCE in 2023 and secured employment through campus placement with a reputable software company. Despite being among the highest achievers in COMEDK, he opted for ECE instead of the more accessible CSE. We did not compel him to join CSE. Following his second year, he progressively shown an interest in software and obtained several certifications through NPTEL, Internshala, and similar platforms. Regarding his experience, while ISE is commendable, CSE is the superior option. Simply enter 'RV placement statistics 2024'. Select the initial result to get the Placement Statistics of RV directly. The top placements are for Computer Science Engineering, followed by Electronics and Communication Engineering, and then Information Science Engineering. The recommendations of your seniors, your personal interests, and the branch with the highest placement statistics are distinct considerations. Kindly review the Course Curriculum for both CSE and ISE and make a decision. Kindly review one of my detailed responses below, in which I have explicitly outlined the stages, recommendations, and methods that a first-year engineering student should adhere to till their fourth year for campus placement. All the BEST for Your Prosperous Future.

To know more on ‘ Careers | Education | Jobs’, ask / follow Us here in RediffGURUS.

...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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x