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Ramalingam

Ramalingam Kalirajan  |10071 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 17, 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
Arunkumar Question by Arunkumar on Sep 14, 2024
Money

Hello Sir/Madam, I plan to set up an SIP of ~45000 monthly for 5-10 years. Kindly suggest High-growth (risk-acknowledged) Mutual funds that I can spread this monthly amount across

Ans: Setting up a systematic investment plan (SIP) for Rs 45,000 per month is a smart move. It shows you're committed to disciplined investing, especially with a 5-10 year horizon in mind. A well-chosen portfolio of high-growth mutual funds will allow you to capitalize on market opportunities, potentially yielding significant returns over time.

Given your focus on high growth, we will explore actively managed equity funds across different categories. While high growth often entails higher risk, diversification can help manage that risk effectively. Let's dive into the best options for your portfolio.

1. Large-Cap Equity Funds for Stability and Growth
Large-cap funds invest in well-established companies with a proven track record. These companies have the ability to weather market volatility better than their smaller counterparts. Over a 5-10 year horizon, large-cap funds offer relatively stable growth with moderate risk. While large-cap funds may not provide the highest returns, they offer much-needed stability to your portfolio.

Why Large-Cap Funds: They provide a safety net with moderate, stable returns. Even in volatile markets, these funds can help cushion your overall portfolio.

Allocation Suggestion: Consider allocating Rs 10,000 of your monthly SIP into large-cap funds. This will provide a solid foundation and help balance the risks from other aggressive investments.

2. Mid-Cap Funds for Higher Growth Potential
Mid-cap funds invest in companies that are in the growth phase but not as established as large-cap companies. These companies have the potential to scale up, offering significant returns over time. However, mid-cap stocks can be more volatile, particularly in the short term. With your time horizon of 5-10 years, you can capitalize on this volatility for potentially higher returns.

Why Mid-Cap Funds: Mid-cap funds can deliver substantial growth during market upturns. The risk is higher than large-cap funds, but so are the potential rewards.

Allocation Suggestion: Rs 12,000 of your monthly SIP can be allocated to mid-cap funds. This gives your portfolio a growth engine while maintaining a balanced approach to risk.

3. Small-Cap Funds for Aggressive Growth
Small-cap funds focus on smaller companies with immense growth potential. These funds tend to be highly volatile, but they can provide explosive returns in the long run. Given your investment horizon of 5-10 years, small-cap funds can play a crucial role in boosting overall returns, especially if you can ride out short-term market fluctuations.

Why Small-Cap Funds: Small-cap funds offer aggressive growth opportunities. However, they also come with higher risks due to market volatility.

Allocation Suggestion: You could allocate Rs 8,000 of your monthly SIP to small-cap funds. This gives you a good level of exposure to aggressive growth without taking on too much risk.

4. Flexi-Cap Funds for Flexibility Across Market Capitalizations
Flexi-cap funds are highly versatile. They invest across large, mid, and small-cap stocks based on market conditions. This flexibility allows the fund manager to allocate assets where growth opportunities are the best. Over a 5-10 year horizon, flexi-cap funds can help capture gains from different market segments, making them a valuable addition to your portfolio.

Why Flexi-Cap Funds: Flexi-cap funds offer the flexibility to adapt to changing market dynamics, ensuring you benefit from different growth phases in various sectors.

Allocation Suggestion: Rs 7,000 of your SIP can go into flexi-cap funds. This allows you to benefit from the fund manager’s flexibility in choosing the best opportunities across the market.

5. Sectoral and Thematic Funds for Targeted Growth
Sectoral funds focus on specific sectors like technology, pharma, or finance. Thematic funds invest based on a particular theme, such as emerging markets or ESG (environmental, social, governance) trends. These funds come with higher risk because they are dependent on the performance of a single sector or theme. However, if you have strong conviction about the future of a particular sector or theme, these funds can offer outsized returns.

Why Sectoral/Thematic Funds: These funds allow you to tap into the potential of high-growth sectors or trends. They are riskier but can offer substantial returns if the sector or theme performs well.

Allocation Suggestion: Allocate Rs 5,000 to sectoral or thematic funds. This provides a focused exposure to sectors you believe will outperform, but keeps the risk limited within your portfolio.

6. International Equity Funds for Global Diversification
Global markets provide opportunities that may not be available in India. International equity funds give you exposure to companies and sectors across the world, which can be beneficial when the Indian market underperforms. Moreover, international funds help diversify your portfolio and reduce country-specific risk.

Why International Funds: International funds allow you to benefit from global opportunities. They help reduce reliance on the domestic market and offer exposure to emerging global trends.

Allocation Suggestion: Rs 3,000 can be allocated to international equity funds. This small exposure helps diversify your portfolio while focusing on high-growth areas outside India.

7. Hybrid Funds for Balance Between Equity and Debt
While your goal is high growth, hybrid funds can play an important role by providing a balance between equity and debt. These funds invest in both asset classes, which can help reduce volatility, especially in the later years of your investment horizon. Although you are looking for high growth, a small allocation to hybrid funds can stabilize your portfolio.

Why Hybrid Funds: Hybrid funds offer a balance between growth and stability. They provide equity-like returns with the safety of debt.

Allocation Suggestion: Rs 5,000 can be allocated to hybrid funds. This ensures that you have a buffer during volatile times without compromising too much on growth.

8. Focus on Actively Managed Funds Over Index Funds
Actively managed funds can outperform index funds, especially in a growing market like India. Index funds track the market and don’t allow fund managers to take advantage of stock-picking opportunities. On the other hand, actively managed funds let experienced managers identify opportunities for higher returns, providing an edge over passively managed index funds.

Why Avoid Index Funds: Index funds lack flexibility and can’t respond to changing market conditions. Actively managed funds can outperform by choosing the right stocks and sectors.

Suggested Action: Stick to actively managed funds for your high-growth strategy. This allows you to leverage the expertise of fund managers and achieve better results over time.

9. Reinvest FD Interest into Mutual Funds
You’ve mentioned that you hold FDs and plan to reinvest the interest earned upon maturity. This is a great approach as mutual funds, particularly equity funds, generally offer better returns than FDs in the long run. You can reinvest this amount into your existing SIP funds to further compound your returns.

Why Reinvest in Mutual Funds: FDs offer safety but low returns. Reinvesting in mutual funds allows your money to grow faster over time.

Suggested Action: As the FD matures, reinvest the interest into your current high-growth funds. This can help increase your overall corpus by the time you reach your financial goals.

10. Regular Portfolio Review is Key
Investing is not a one-time decision. Regularly reviewing your portfolio ensures it stays aligned with your goals, especially as market conditions change. Over the next 5-10 years, certain funds may underperform while others may need an increased allocation. Make sure you review your investments every 6-12 months to rebalance your portfolio if necessary.

Why Regular Review is Crucial: Market conditions change, and so do your personal goals. Regular reviews keep your portfolio on track.

Suggested Action: Keep a close eye on your investments and adjust as needed. You can work with a Certified Financial Planner to review and optimize your portfolio over time.

11. SIP as a Wealth Building Tool
SIPs are one of the best tools for long-term wealth creation. They help you stay disciplined, take advantage of rupee cost averaging, and remove the emotional aspect of investing. By sticking to your Rs 45,000 SIP every month, you ensure that you are consistently building wealth, regardless of market conditions.

Why SIPs Work: SIPs allow you to invest consistently and avoid the pitfalls of trying to time the market. Over time, the power of compounding will help grow your wealth significantly.

Suggested Action: Stick to your SIP strategy and remain consistent, even during periods of market volatility. Over a 5-10 year horizon, your SIP investments will yield strong returns.

Finally
Your Rs 45,000 monthly SIP for the next 5-10 years is a powerful wealth-building strategy. By carefully selecting high-growth mutual funds, you can achieve substantial returns. Your portfolio should focus on a balanced allocation across large-cap, mid-cap, small-cap, and flexi-cap funds, with a small portion allocated to sectoral/thematic and international funds for diversification.

Remember to avoid index funds, as actively managed funds offer better opportunities for high growth in India. Additionally, reinvest the interest earned from your FDs into mutual funds to further compound your returns.

Lastly, don’t forget to review your portfolio regularly with the help of a Certified Financial Planner to ensure it remains aligned with your financial 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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Latest Questions
Ramalingam

Ramalingam Kalirajan  |10071 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 2025

Asked by Anonymous - Jul 06, 2025Hindi
Money
Dear Sir, My home loan is 24.5 LAC. And it's started from last year April 2024, my emi is 30,600 per month for 10 years, if i paid 10 LAC in Jan 2026 it will be beneficial for me or wait for sometime to pay pre closure amount
Ans: Your question is very timely and thoughtful.

You have already completed over one year of EMI payments.

You are also planning a Rs. 10 lakh prepayment in Jan 2026.

This shows strong discipline and intention to reduce debt early.

That is highly appreciated.

Let’s evaluate the benefit from all angles before making the decision.

Let’s assess your EMI schedule, tax benefits, interest savings, and liquidity needs.

We will also look at emotional peace, risk readiness, and overall financial health.

» EMI Tenure and Loan Progress

– Your loan began in April 2024. EMI is Rs. 30,600 for 10 years.

– By Jan 2026, you would have paid 21 EMIs. That is nearly 2 years of repayment.

– You would still have around 99 EMIs pending after Jan 2026.

– Most interest is paid in the first few years. That’s how home loan schedules work.

– So prepayment at this stage can save you substantial interest.

– But, the benefit must be compared with your other financial needs.

– This is not only about saving interest. It is about holistic financial planning.

» Interest Cost Evaluation and Savings Opportunity

– Your home loan interest rate is not mentioned. But let us assume a normal range.

– Most floating-rate loans now charge 8.5% to 9.5% annually.

– Prepaying Rs. 10 lakhs will reduce the outstanding principal sharply.

– As a result, the total interest over the loan period will reduce.

– You may save many lakhs over the long term by doing this early prepayment.

– You will also reduce your EMI period or future EMI amount.

– That helps you become debt-free faster.

– But, timing matters. January 2026 is still over 5 months away.

– You must consider where that Rs. 10 lakhs is now kept.

– Is it earning anything? If kept idle in savings, it gives low returns.

– In that case, prepayment gives better value.

– But if it is growing in mutual funds or long-term instruments, returns may be higher.

– Compare this interest cost versus what you earn from that Rs. 10 lakh.

– You must also think about safety, peace of mind, and future stability.

» Tax Benefits on Home Loan and Prepayment Impact

– Under Sec 24(b), you get deduction of up to Rs. 2 lakhs on home loan interest.

– This reduces your taxable income. Helps especially if you are in the 20% or 30% slab.

– Also, under Sec 80C, you get Rs. 1.5 lakh deduction for principal.

– But that Rs. 1.5 lakh 80C is usually covered by EPF, PPF, insurance, ELSS, etc.

– If you prepay Rs. 10 lakh, your interest in future years may fall.

– Then, the Rs. 2 lakh interest deduction under Sec 24(b) may not be fully used.

– But remember, you are spending Rs. 10 lakhs to save Rs. 2-3 lakhs of tax.

– That alone should not decide the choice.

– Interest saved is usually more than tax benefit lost in the long run.

– Prepayment still makes sense. But only if you are not compromising other goals.

– Always assess tax benefit as a secondary aspect, not the main reason.

» Your Liquidity and Emergency Readiness

– The biggest question is: Will you have enough money left after prepayment?

– Will you still have emergency funds of 6 to 12 months of expenses?

– Will you have cash for job loss, health issues, or family needs?

– Rs. 10 lakh is a big amount. Once paid, you cannot get it back easily.

– Banks do not refund prepayments. So you must be ready for cash crunch.

– If you have other liquid savings of at least Rs. 3 to 5 lakhs, then it is safe.

– But if this Rs. 10 lakh is your full backup, wait before prepaying.

– You must not become asset-rich but cash-poor.

– Also, do not disturb investments set for your long-term goals.

– Check how your mutual funds, PF, PPF, child goals, and retirement are aligned.

– Your financial safety net should never be at risk due to a home loan prepayment.

» Emotional Peace and Debt Reduction Mindset

– Paying off loans early gives peace of mind.

– Mentally, it feels lighter to reduce your EMI burden.

– For many families, freedom from loans matters more than returns from investment.

– If this Rs. 10 lakh is not required for your next 5 years, then prepaying is peaceful.

– But if the same money is helping you sleep better by keeping it in hand, wait.

– Your comfort and security are more important than any math.

– Financial planning is not only numbers. It is also emotional readiness.

– A good Certified Financial Planner balances both head and heart.

– If you feel better seeing lesser EMIs or faster closure, then go ahead with prepayment.

– If you fear losing liquidity or missing opportunities, then wait.

– In either case, the aim is to stay financially strong, not just interest-efficient.

» Other Choices to Use That Rs. 10 Lakh

– If you are not fully prepared for long-term goals, this Rs. 10 lakh may help.

– Retirement corpus, child education, spouse goals — all need investment.

– If those are underfunded, invest this Rs. 10 lakh in mutual funds.

– But not in index funds or direct funds.

– Index funds may look cheap, but they follow the market blindly.

– They underperform in volatile or sideways markets.

– Actively managed mutual funds by experienced managers adapt better.

– Direct funds also seem cheaper on surface.

– But there is no support, guidance, or review.

– Regular plans through a qualified MFD with CFP guidance add long-term value.

– The extra 0.5% cost gives better selection, periodic review, and mistake-avoidance.

– That brings better return than direct, unmanaged investing.

– So if you delay prepayment, don’t keep that Rs. 10 lakh idle.

– Put it to work through a long-term, diversified, tax-aware mutual fund portfolio.

– Match it to your goals, age, and risk appetite.

– Use only debt funds for less than 3 years. Use equity for more than 5 years.

– Also follow the updated capital gains tax rules now in force.

– These will apply when you exit mutual funds later.

– If this Rs. 10 lakh is not required in near future, investing may grow your wealth.

– If this feels unsafe, then home loan prepayment is still a good call.

» Ideal Approach Based on Situation

– If you have no major upcoming expense, then early prepayment is useful.

– If your emergency fund is untouched, then this move is secure.

– If your long-term goals are already funded, prepayment clears debt faster.

– If interest rate is above 9%, prepayment becomes even more beneficial.

– If job is stable and no income interruption is foreseen, go ahead.

– But if any of these are weak or uncertain, do not hurry.

– Wait for 6-12 months. Observe how rates, income, and expenses move.

– Meanwhile, invest that Rs. 10 lakh in a short-term fund with liquidity.

– Let that money earn better than savings account.

– If situation remains strong by Jan 2026, you may prepay with full confidence.

– Else, you can decide again at that point based on comfort and readiness.

– Either way, you are still progressing.

– Both options — prepayment or investing — are productive, if handled with thought.

» Finally

– You are thinking in the right direction. That’s the best start already.

– You are not ignoring the EMI burden. You want to plan ahead.

– That is very encouraging.

– Do not feel forced to prepay or delay.

– The right answer depends on your comfort, liquidity, and goals.

– Early prepayment is good if your financial base is ready.

– But there is no harm in waiting a few more months and reassessing.

– Peace and clarity are more important than urgency.

– You can also take part prepayment route. Pay Rs. 5 lakh in Jan 2026.

– Keep another Rs. 5 lakh for emergency or mutual fund.

– That brings the best of both.

– Stay debt-free, but also stay liquid and goal-focused.

– A Certified Financial Planner can help you model both paths and take balanced action.

– The right move is one that fits your full financial picture — not just the EMI part.

– Keep going strong.

– You are already ahead of many by asking this question today.

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

...Read more

Ramalingam

Ramalingam Kalirajan  |10071 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 2025

Asked by Anonymous - Jul 05, 2025Hindi
Money
I am 35yrs old and my monthly salary is 75k. I am married and I have family health insurance of 10 lakhs, I have a daughter and a son and we are expecting the third child in the month of December. I have started with SIP of 1k 3 months back. I am taking mortgage loan of 30 lakhs on the house for 13 % interest from IIFL kindly suggest me to utilise the loan amount properly in various ways possible to invest. I am planning to utilise for the coaching centre development and 10 lakhs is taken for my brothers kidney transplant treatment expenditure.
Ans: – You are managing family, career, and investments together.
– Starting SIP early is a very positive step.
– Taking responsibility for your brother’s treatment shows great strength.
– Planning coaching centre development is a wise idea.
– Having family health cover is also a good base already.

» Analysing the Loan and Its High Interest Rate

– Rs. 30 lakhs loan at 13% interest is quite costly.
– This means high EMI and high total interest outgo.
– Every rupee must be used carefully to avoid wastage.
– Unused funds from the loan must not sit idle.
– Interest burden will continue regardless of usage.

» Immediate Medical Emergency for Brother

– Rs. 10 lakhs for kidney transplant is necessary and unavoidable.
– Keep this amount fully liquid and easily accessible.
– Use savings account or short-term ultra-safe debt fund.
– Avoid locking this amount in business or market-linked funds.
– Medical treatment should be done on priority basis.

» Business Development – Coaching Centre Use

– This is an opportunity for future income growth.
– Plan expansion only after checking location demand.
– Avoid spending large amount at once.
– Phase out business investments over 6 to 12 months.
– Start with essentials like rent, furniture, and staff salary.
– Don’t overspend on branding or decoration initially.
– Use part of loan in setting up technology and marketing.
– Focus on breakeven as early as possible.

» Avoid Spending Full Loan Immediately

– You are not forced to use all Rs. 30 lakhs now.
– Keep a part of loan in low-risk parking place.
– Use short-term debt fund or liquid fund with no exit load.
– Withdraw when business or medical needs arise.
– Don’t allow funds to lie in savings account earning low interest.

» Do Not Use Any Amount for Consumption

– Don’t use loan money for personal luxury or lifestyle.
– No electronics, jewellery, or vehicles from this loan.
– You are paying 13% interest, use it only for value creation.
– Avoid giving any part of the loan to others as casual support.

» Managing EMI Alongside Household Budget

– EMI on Rs. 30 lakhs at 13% will be heavy.
– Your Rs. 75k salary will face pressure from EMI, SIP, and family.
– Keep fixed monthly expenses under tight control.
– Review all regular spends and cut non-essentials.
– Prioritise needs over wants for the next 2–3 years.
– Increase SIP only once your EMI is manageable.

» Continue SIP with Discipline

– Though amount is small, your SIP builds wealth habit.
– Don’t stop SIP even if budget becomes tight.
– Increase SIP slowly as income rises.
– Choose actively managed funds, not index funds.
– Index funds don’t protect during market fall.
– Active funds adjust to changes and give better protection.

» Direct Funds Are Not Ideal for You

– Avoid investing in direct mutual funds.
– You get no personalised support or guidance there.
– Wrong decisions can damage long-term wealth.
– Invest via regular plans with an MFD and CFP.
– Get full-time advice, updates, and goal tracking help.

» Emergency Fund is Missing

– You must keep Rs. 1–2 lakhs aside for emergencies.
– This should not come from loan amount.
– Build this over next few months from salary savings.
– Use high-liquidity options like liquid mutual funds or sweep FD.

» Child-Related Future Expenses

– You are expecting third child soon.
– Future expenses like education and health will increase.
– Avoid touching SIP or business funds for school fees.
– Plan separate SIPs for kids’ education goal later.
– Maintain health insurance with maternity cover wherever possible.

» Keep Personal and Business Accounts Separate

– Don’t mix business and personal funds.
– Create a separate bank account for coaching centre.
– Record all income and expense in simple format.
– Use business income to slowly repay loan too.

» Loan Repayment Should Be a Priority

– Try to repay part of loan early if possible.
– Business profit can be used to prepay some part.
– Even Rs. 2–3 lakhs paid early will reduce interest burden.
– Don’t wait for full term of loan.
– Avoid taking another loan till this one is cleared.

» Don’t Invest Remaining Loan in Risky Options

– Don’t try to grow loan money via equity investments.
– You are paying 13% interest.
– Most equity returns are not guaranteed and are market linked.
– If returns go down, you still pay full interest.
– Use loan only for fixed needs like business or treatment.

» Avoid Insurance-Cum-Investment Products

– Don’t use loan money for buying ULIPs or endowment plans.
– They give poor returns and lock your money.
– They mix insurance with investment, which is harmful.
– If you already hold such plans, review and consider surrender.
– Use that money in good mutual funds for better results.

» Long-Term Financial Strategy After Loan Use

– Once business is running, start surplus-based SIPs.
– Create specific SIPs for child education and retirement.
– Review insurance needs again after third child is born.
– Don’t over-rely on health cover from employer.
– Take term insurance separately for family safety.

» Monitoring and Support

– Review all goals every 6 months.
– Track loan balance, business income, SIP growth.
– A CFP can support you across all financial areas.
– Work with MFD for implementation and fund advice.

» Finally

– You are taking bold and smart steps under pressure.
– Rs. 10 lakhs for brother’s health is unavoidable.
– Use it only for that and keep it liquid.
– Use balance money gradually for coaching centre.
– Don’t spend full Rs. 30 lakhs in one go.
– Avoid luxury or emotional spending with loan money.
– Keep EMI low by avoiding misuse of loan.
– Continue SIP without fail.
– Avoid index funds and direct funds.
– Use only actively managed mutual funds through MFD.
– Repay loan as early as possible.
– Start new SIPs once income improves.
– Maintain strong financial habits and discipline.
– Your future will surely improve with right planning.

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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