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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 23, 2025

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

Question by Shawn on Jul 22, 2025Hindi

Hello Ramalingam kalirajan ji, Thank you so much for your valuable Advice. Actually those regular funds are from my wife's portfolio. Intentionally taken direct fund in my portfolio just to avoid paying extra expense. Hope the collection is okay. ULIP was taken for the property loan amount of 35 lakhs and will remain for another 5 years but the good thing is it will be tax free as it is not beyond 2 lakhs. Also doing prepayments of 1 lakh yearly. Could you suggest a good balanced or hybrid fund ? Should that be regular only?

Ans: You are taking ownership of your finances with clarity and maturity. That itself is rare and inspiring. It shows great commitment towards your family’s future.

You’ve made efforts to split regular and direct mutual fund investments between yourself and your wife. While the intention to save cost is understandable, there are some things to evaluate.

Let’s go step-by-step and give you a comprehensive answer.

? Direct Funds vs Regular Funds – Practical Comparison

– Direct funds save cost on paper
– But they come with no guidance or review
– Most investors pick funds and then forget to track
– Or they panic and redeem at the wrong time

Regular funds through a trusted MFD with CFP credential offer a structured approach. They don’t just sell. They plan, review, and course-correct regularly. This guidance avoids bigger losses caused by wrong fund choices or untimely exits.

A direct fund may save 0.5% annually. But one wrong step can cost 10% or more. Also, direct portals don’t offer help for goal tracking, asset allocation, or rebalancing.

So, saving cost in direct funds is not always actual saving. It’s like skipping a doctor to avoid consultation fee but taking wrong medicine later.

For your personal portfolio also, consider moving to regular mode through a CFP-backed MFD. It brings clarity, consistency, and accountability.

? ULIP for Loan Safety – Should You Continue or Replan?

You mentioned the ULIP was taken in context of the Rs.35 lakh property loan. That shows your intention to manage risk. That’s good.

But we must now assess the usefulness of this ULIP:

– Is the ULIP life cover adequate for the loan?
– Is the return from ULIP better than mutual funds?
– What are the fund charges, mortality charges, and lock-in impact?
– Is it the right tool to secure loan or would term insurance be better?

ULIPs mix insurance and investment. But they do neither very efficiently.

If the policy is still early stage, and fund value is less than premiums paid, you may wait for breakeven.

But if it’s already 5+ years old, and surrender value is better, then consider surrender. Redirect that money to a balanced mutual fund or into goal-based SIPs.

Also, buy a separate term insurance of Rs.1 crore or more. That will give better coverage at lower cost. It will also protect your loan liability better.

? Balanced or Hybrid Fund – Is It Suitable for You Now?

Yes. A hybrid fund is a good fit now. You have medium risk tolerance and long-term goals.

Balanced or hybrid funds offer stability and growth together. They invest partly in equity and partly in debt. This reduces volatility.

Ideal use cases for hybrid funds in your case:

– Wealth building for retirement
– Medium-term goals (5 to 10 years)
– Parking bonus or surplus with moderate growth expectation

They help maintain discipline. They avoid overreaction during market falls.

They are managed by professionals. So asset allocation is adjusted based on market trends.

Also, taxation for equity-oriented hybrid funds is like equity funds:

– LTCG above Rs.1.25 lakh is taxed at 12.5%
– STCG is taxed at 20%

This is manageable if you hold long term.

? How to Choose the Right Hybrid Fund

Avoid selecting just on recent returns. Look at these factors:

– Fund house credibility
– Consistency in 5-year and 7-year rolling returns
– Expense ratio (for regular funds)
– Asset mix of equity vs debt
– Experience of the fund manager

Ask your MFD (who is a CFP) to shortlist a fund that suits your goals and style.

Avoid NFOs or very aggressive hybrid funds. Stick to proven performers with consistent history.

Start SIP or lump sum depending on your cash flow and comfort.

? Should Hybrid Fund Be Regular or Direct?

Go for regular plan through a certified MFD. Here’s why:

– Hybrid funds need ongoing monitoring
– Market and interest cycles impact returns
– Rebalancing needs timing and experience
– Direct plans miss this guidance completely

Also, if you ever stop SIPs or redeem by mistake in a direct fund, no one flags it. In regular mode, a CFP-backed MFD can alert, review, and guide you.

Think of it as a co-pilot for your financial journey. It’s not just cost. It’s confidence and continuity.

Paying 0.5% extra for proper planning is not expense. It is smart investing.

? How Hybrid Funds Fit in Your Bigger Picture

You can use hybrid funds for these purposes:

– Long-term corpus along with equity funds
– Parallel support for retirement
– Buffer fund for kid’s higher education
– Better alternative to fixed deposits or recurring deposits

It is more tax efficient than FDs.

You can even use them for prepayment reserves for home loan. Park Rs.1 lakh bonus every year here and redeem after 3 years for tax efficiency.

Hybrid funds are flexible and have wide use across life stages.

They can be part of core portfolio when equity funds look risky and debt looks unattractive.

They bring peace of mind to first-time mutual fund investors too.

? Additional Tips for Smarter Portfolio Building

– Have clear goals before selecting any fund
– Align each SIP or investment with a named goal
– Always diversify across equity, hybrid, and debt funds
– Don’t keep too many overlapping funds
– Review portfolio every 6 months
– Track how each fund contributes to each goal

Maintain a goal-wise investment tracker. Your MFD can help prepare one.

Avoid switching funds frequently. Stick to quality funds with patience.

Rebalance once a year, not more often.

Never redeem funds without checking tax impact.

Keep some SIPs running even during market dips. That gives long-term advantage.

? Your Existing Portfolio – Some Adjustments to Consider

– Continue wife’s investments in regular mutual funds
– Shift your direct funds gradually to regular route through goal-based plans
– Consider surrendering ULIP if it crosses breakeven and doesn’t serve goal
– Use hybrid fund (in regular mode) for next 5-10 year goals
– Don’t use mutual funds for short-term needs (less than 1 year)
– Keep ULIP-free structure going forward. Pure insurance + pure investment combo is better

Each fund should either support a future goal or act as emergency or debt repayment reserve.

Let your CFP-backed MFD help map this clearly. That way, no fund lies idle or misaligned.

? Review of Your Current Decisions – Positives and Suggestions

– You are doing Rs.1 lakh home loan prepayment yearly. Very good
– You’ve structured insurance to protect loan. But review if ULIP is ideal for that
– You have split portfolios between you and wife. Great for tax efficiency
– Direct funds saved cost, but they also reduced expert support. Consider shifting
– You want hybrid fund for stability. That’s a good next step

With a few fine-tunings, your structure can become a model financial plan.

This also sets a solid financial culture in your family. Your kids will learn from you.

? Finally

You are thinking long term. You are open to learning. That is powerful.

Mutual funds are flexible, tax-friendly and suited for Indian families today.

Hybrid funds are useful, especially when you want balance between growth and protection.

But selection, review, and alignment to goals matter more than past returns or cost savings.

Don’t go solo in a complex market. Use regular funds via a CFP-backed MFD.

It gives structure, reviews, goal tracking, and peace of mind.

Use hybrid funds as a bridge between safety and growth. You can start now and build further in steps.

This 360-degree approach keeps your loans, education goals, retirement needs and family security in harmony.

Let this financial journey be simple, strong and structured.

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

Asked on - Jul 28, 2025 | Answered on Jul 28, 2025

Thank you so much. Will surly consider your suggestions.

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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