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Ramalingam Kalirajan |11481 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 08, 2025

Ramalingam Kalirajan has over 26 years of experience in MF distribution and wealth management. He holds an MBA in Finance from the University of Madras and is a CFP (Certified Financial Planner) credentialed professional. He is the Director of Holistic Investment, a Chennai-based AMFI-registered Mutual Fund Distribution (ARN-4188) and APMI-registered PMS Distribution firm (APRN07386), helping clients build long-term wealth through mutual funds and other investment solutions.... more

Question by SyeTen on Aug 29, 2025Hindi

Sir. I can invest 7 lakhs per year. I wanted to select mutual funds with high return but medium risk. Which Mutual funds are the best for me?

Ans: You are already taking a great step by planning structured yearly investments. This shows foresight and discipline. Medium risk with good returns can be achieved when you mix categories in balance. Let us look at this in detail.

» Importance of Balanced Approach
– Medium risk means you want growth but not extreme volatility.
– Chasing only high returns can bring high losses also.
– Balance comes from spreading money across multiple fund categories.
– This helps to reduce shocks when one market side falls.

» Equity Allocation for Growth
– Equity funds are needed for higher growth in long term.
– They are more volatile than debt but give wealth creation power.
– Large cap oriented funds are safer inside equity because they hold top companies.
– Flexi cap funds allow manager to switch between large, mid, and small based on market.
– Balanced exposure to midcap is okay for medium risk investors.

» Debt Allocation for Stability
– Debt funds give stability and predictable growth.
– They are less risky but also return less compared to equity.
– They protect your capital during market corrections.
– Blending debt with equity gives comfort in volatile times.
– Short duration or dynamic style debt funds are better than very long duration.

» Why not Index Funds
– Many people think index funds are safe.
– But index funds just copy the index without active thinking.
– When markets fall, index funds also fall without control.
– They cannot reduce exposure to weak sectors.
– Actively managed funds give a professional chance to protect and outperform.

» Why not Direct Plans
– Direct plans look cheaper because of lower expense ratio.
– But in long term, wrong selection can cost more.
– Without CFP guidance, investors may enter wrong category at wrong time.
– Regular funds with Certified Financial Planner and MFD help you select right mix.
– Advice and monitoring saves more than a few basis points saved in expense.

» Suggested Split for Medium Risk
– Around 60% equity and 40% debt is good balance for your profile.
– In equity, prefer large cap and flexi cap mainly, with some mid cap.
– In debt, keep exposure in short duration or corporate bond style funds.
– Rebalance yearly to maintain this 60-40 ratio.

» Yearly Investment Strategy
– You can split 7 lakhs into monthly SIPs of around Rs.58,000.
– SIPs reduce timing risk because you invest every month.
– Equity part must be invested through SIP for smoother ride.
– Debt part can be parked lump sum and rebalanced yearly.
– Reinvestment of dividends and profits keeps compounding intact.

» Tax Efficiency Angle
– Equity mutual fund gains above Rs 1.25 lakh per year taxed at 12.5% long term.
– Short term gains in equity taxed at 20%.
– Debt fund gains taxed as per your income slab both short and long term.
– Holding longer reduces tax impact and helps compounding.
– Rebalancing yearly may trigger small tax but keeps risk controlled.

» Retirement and Long-term Role
– At medium risk, you can aim to beat inflation comfortably.
– You may target 10-12% annualised return over long period.
– This can build strong retirement corpus if continued for 10 to 15 years.
– SIP discipline is more important than choosing so-called “best” fund.
– Best fund keeps changing, but discipline creates wealth.

» Finally
– Your plan to invest Rs 7 lakhs yearly is powerful.
– With medium risk, balanced equity and debt exposure is best.
– Avoid index funds because they lack protection during market stress.
– Avoid direct plans because expert guidance ensures right decisions.
– Focus on consistent SIPs and yearly rebalancing.
– This approach can give high returns with controlled risk.

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.