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Ramalingam Kalirajan  |8128 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 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
Asked by Anonymous - Jun 17, 2024Hindi
Money

I want to invest 50k. My financial targets more than one lakh(one year) which diversification i need to follow to get better returns low risk. sip or mutual funds or direct shares(equity)? Can any one suggestion me detailed. Thank You in Advance. Without lock in period ? is it possible please guide me breifly

Ans: You want to invest Rs 50,000 and aim to get more than one lakh in a year. Doubling your money in one year is practically impossible. It is crucial to understand that high returns come with high risks, and such goals can lead to significant losses.

Firstly, it’s commendable that you are thinking ahead and planning your investments. Not everyone takes such proactive steps. Your goal shows a strong desire to grow your wealth and secure your financial future. I appreciate your ambition and understand the importance of achieving your financial targets.

The Reality of Returns
The Truth About Doubling Money Quickly
Doubling your money in a year is extremely challenging and unrealistic. Most investments that promise such high returns are either very high-risk or outright scams. Get-rich-quick schemes can wipe off your principal completely. Investments that seem too good to be true often are.

Understanding Market Returns
Stock Market: Historically, the stock market returns around 12-15% annually. While it can sometimes deliver higher returns, it can also result in losses.

Mutual Funds: Equity mutual funds can yield 10-12% on average over the long term. However, these returns are not guaranteed and vary with market performance.

Debt Instruments: Instruments like bonds or fixed deposits offer lower returns (5-7%) but are much safer compared to equities.

Disadvantages of Chasing High Returns
High Risk and Volatility
Investments promising high returns are often highly volatile. The higher the potential return, the greater the risk. You could end up losing a significant portion of your investment.

Market Fluctuations: Stock prices can be unpredictable and can drop suddenly due to various factors.

Economic Changes: Changes in interest rates, inflation, or political instability can impact your investments negatively.

Stress and Anxiety
Chasing high returns in the short term can cause stress and anxiety. Constantly monitoring volatile investments can be emotionally draining.

Emotional Decisions: High-risk investments often lead to emotional decision-making, which can result in poor investment choices.

Lack of Sleep: The stress of potential losses can affect your health and well-being.

Importance of Long-Term Investments
Power of Compounding
Compounding means earning returns on both your initial investment and the returns earned over time. The real power of compounding shows its magic over the long term.

Exponential Growth: Small, consistent investments grow significantly over time.
Reinvestment: Reinvested earnings generate their own returns.

Diversification Strategy
Diversification spreads risk across various investments. A balanced portfolio reduces risk while aiming for better returns.

Suggested Diversification:

30% in Equity Mutual Funds: Higher returns with managed risk.
30% in Debt Mutual Funds: Stability and lower risk.
20% in Hybrid Funds: Combination of equity and debt.
20% in Direct Shares: High growth potential with careful selection.
Understanding Investment Options
Systematic Investment Plan (SIP)
SIP is a method of investing a fixed amount regularly in mutual funds. It is ideal for building wealth over time.

Advantages:

Disciplined Investing: Encourages regular investing.
Rupee Cost Averaging: Buys more units when prices are low and fewer when prices are high.
Low Entry Point: You can start with small amounts.
Disadvantages:

Market Risk: Returns depend on market performance.
Long-Term Commitment: Best suited for long-term goals.
Mutual Funds
Mutual funds pool money from many investors to invest in stocks, bonds, or other securities. There are various types of mutual funds, including equity, debt, and hybrid funds.

Advantages:

Diversification: Spreads risk across various securities.
Professional Management: Managed by expert fund managers.
Liquidity: Easy to buy and sell.
Disadvantages:

Management Fees: Charges for professional management.
Market Risk: Returns are subject to market conditions.
Direct Shares (Equity)
Investing directly in shares involves buying stocks of companies listed on the stock exchange.

Advantages:

High Returns: Potential for significant gains.
Ownership: Direct ownership in companies.
Liquidity: Easy to buy and sell.
Disadvantages:

High Risk: Can be volatile and risky.
Time-Consuming: Requires constant monitoring and research.
No Diversification: High risk if investing in a few stocks.
Actively Managed Funds vs. Index Funds
Actively Managed Funds
Managed by professional fund managers who aim to outperform the market.

Advantages:

Expert Management: Professional fund managers make strategic decisions.
Potential for Higher Returns: Aim to beat market indices.
Disadvantages:

Higher Fees: Management fees and expenses.
Not Always Better: May not always outperform the market.
Index Funds
Tracks a specific market index like the Nifty or Sensex.

Disadvantages:

Limited Growth: Cannot outperform the market.
No Active Management: Lacks the benefit of professional fund managers.
Direct vs. Regular Funds
Direct Funds
Invest directly without intermediaries.

Disadvantages:

No Guidance: Requires personal knowledge and research.
Higher Risk: More prone to errors without expert advice.
Regular Funds
Invest through a mutual fund distributor (MFD) or certified financial planner (CFP).

Advantages:

Professional Guidance: Expert advice and management.
Better Asset Allocation: Helps in achieving optimal asset allocation.
Importance of Professional Guidance
Investing without professional guidance can be risky. A certified financial planner (CFP) can help you make informed decisions and manage your investments effectively.

Benefits of Mutual Funds
Categories of Mutual Funds
Equity Funds: Invest in stocks, high risk, high return.
Debt Funds: Invest in bonds, low risk, stable returns.
Hybrid Funds: Combine equity and debt, balanced risk and return.
Advantages of Mutual Funds
Diversification: Spreads risk across various securities.
Professional Management: Managed by experienced fund managers.
Liquidity: Easy to buy and sell.
Flexibility: Various options to suit different risk profiles and goals.
Risks of Mutual Funds
Market Risk: Returns depend on market performance.
Credit Risk: Risk of default by bond issuers in debt funds.
Interest Rate Risk: Impact of interest rate changes on bond prices.
Strategic Investment Plan
Step 1: Assess Your Risk Tolerance
Understand your risk tolerance to choose suitable investments.

Step 2: Define Your Financial Goals
Clearly define your goals to create a focused investment plan.

Step 3: Create a Diversified Portfolio
Diversify your investments across various asset classes to manage risk.

Step 4: Monitor and Review
Regularly review your portfolio to ensure it aligns with your goals and make adjustments as needed.

Achieving Your Financial Target
Investing Rs 50,000 to achieve more than one lakh in one year is ambitious. However, with a strategic and diversified approach, you can aim for the best possible returns within your risk tolerance.

Final Insights
Achieving high returns with low risk in one year is challenging. A balanced, diversified portfolio with professional guidance can help you make informed decisions and optimize your returns. Regular monitoring and adjustments are essential to stay 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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Ans: Dear Anonymous,
Many people have disliked the 'work from home' option that involves a lot of virtual interface. But do remind yourself: What is the need of the hour? There are a lot of things that you may dislike as eating options but you do anyway knowing that they are good for health, right?
When you start obsessing over something that you don't want, it makes it bigger in your mind to tolerate and that can cause you a lot of struggle. So, why not instead find ways of dealing with the inevitable?
How can you make things better for yourself when you have virtual meets and presentations? What are the advantages/perks of doing these virtually? When you start to look at the brighter side of things, the disinterest kind of starts to fade away and it makes it easier for you to be a part of what your work demands.

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Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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Asked by Anonymous - Mar 13, 2025
I had a 2 years relationship with a girl. Last year she left me for another guy and gave him her virginity and got pregnant. After getting abortion that guy left her. Now she came back to me and talked to me for about 2 months just as friends but i loved her so much that i forgave her and accepted her and we got in relationship. But one night she told me about all her past with her 2nd boyfriend. Now i don't want to keep relationship as her past makes me shiver and i promised her for marriage but i can't get over the fact that she cheated me and lost virginity to another guy then came back and wants me to marry her. So if i am not sure of marriage should i involve in physical activities with her ( we never envolved in physical activities before ) or should i avoid doing that until i am sure of marrying her.
Ans: Dear Anonymous,
You are not even sure whether you want to accept her past with the other guy. If you have not made peace with this, why talk of marriage and indulging in physical stuff with her? It's not her this time; it's YOU!
So, take a break from this association, clear your mind space on what you want from life and a life partner. If she is the person you know that fits the description, then perhaps the past will not matter. Mere love is not enough, what you value in a relationship is in question now...so, take time to think i through and then make a decision on it.

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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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