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Should I continue to invest in MFs like DSP, Franklin, SBI, and UTI after 22 years?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 04, 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
Prakash Question by Prakash on Nov 03, 2024Hindi
Money

Dear Sir, I have invested in MFs like DSP,Fraklin,SBI,UTI in 2000. Should I continue or exit,Pl advise.

Ans: Your commitment to mutual funds since 2000 is impressive and shows your long-term vision.

When you hold funds for such a long period, it’s natural to evaluate whether they still serve your financial goals. Here’s a detailed analysis and guidance.

1. Review Fund Performance
Benchmark Comparison: Check if each fund has consistently outperformed its benchmark index. If not, it may be time to reassess its place in your portfolio.

Peer Comparison: Compare your funds with similar funds from other companies. A strong fund will usually perform well against peers.

Historical Returns: Evaluate the long-term returns of each fund. If a fund has consistently delivered below-average returns, consider switching to better-performing options.

2. Consider Portfolio Diversification
Check for Overlap: Holding multiple funds can sometimes lead to asset overlap, which reduces diversification benefits. Assess each fund’s holdings to ensure you’re adequately diversified.

Balanced Allocation: A well-balanced portfolio has a mix of large-cap, mid-cap, and small-cap funds. Ensure your funds provide this balance and are not overly concentrated in one sector.

Avoiding Sector Concentration: If your funds are concentrated in specific sectors, it might increase risks. Choose funds with diversified holdings to spread risk.

3. Active Funds vs. Index Funds
Benefits of Active Funds: Actively managed funds, like yours, are managed by experts who make changes based on market trends. They can provide higher returns than passively managed index funds.

Drawbacks of Index Funds: Index funds lack flexibility and merely mirror the market index. They can underperform during market downturns since they hold all stocks in the index without discretion.

Regular Funds with CFP Support: Opting for regular plans through an MFD with a Certified Financial Planner ensures tailored advice. They monitor your investments and make adjustments as needed, unlike direct plans where investors manage alone.

4. Assess Tax Implications
Equity Mutual Fund Taxation: On equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh attract a 12.5% tax rate. Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Fund Taxation: For debt funds, both LTCG and STCG are taxed as per your income tax slab. This may impact your decision to redeem or hold based on your current tax bracket.

Holding Period Benefits: Since you’ve held these funds for a long time, most of your gains qualify as LTCG, which is generally more tax-efficient than STCG.

5. Identifying Your Financial Goals
Align with Life Goals: Evaluate if these funds still align with your life goals. If they don’t, consider redirecting your investments into funds better suited to your objectives.

Future Needs and Goals: Identify future milestones, such as retirement or children’s education. Funds aligned with these goals should be reviewed to ensure they’re on track.

Emergency Requirements: If you need liquidity, assess which funds can be redeemed with minimal impact on your long-term goals. Aim to keep some funds in lower-risk assets for easy access.

6. Market Conditions and Timing
Current Market Valuation: Exiting during market highs can lock in profits. But if the market seems overvalued, consider a phased withdrawal to mitigate timing risks.

Phased Exit with STP: Use a Systematic Transfer Plan (STP) if you wish to move funds gradually. This reduces market timing risks and provides a smoother transition to other investments.

Avoid Hasty Decisions: Long-term investments are usually best held unless there is a strong reason to exit. Always weigh your options carefully and avoid impulsive decisions.

7. Consider Alternatives for Consistent Returns
Switch to High-Performing Funds: If any funds have consistently underperformed, consider switching to actively managed funds with better historical performance.

Hybrid and Debt Fund Options: Hybrid funds provide a balance of equity and debt. They’re suitable if you want to reduce market exposure without exiting completely.

Avoid Real Estate for Liquidity: Real estate lacks the flexibility and liquidity of mutual funds. Mutual funds provide easier access to funds in times of need.

8. Monitor and Rebalance Periodically
Annual Performance Review: Review your funds annually to ensure they align with your financial goals and risk profile.

Rebalancing Portfolio: Adjust your portfolio allocation based on changing market conditions and your goals. Rebalancing can help optimise returns and manage risks.

Professional Guidance: A Certified Financial Planner (CFP) can help identify underperforming funds and suggest suitable replacements, ensuring your portfolio remains healthy and aligned with your goals.

Final Insights
Your long-term investment journey is truly commendable. By reviewing fund performance, aligning with goals, and rebalancing as needed, you can ensure continued growth. Seek advice from a Certified Financial Planner to maximise your portfolio’s potential.

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.
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Ans: Hello Manoj,

It's great to see that you've been disciplined with your investments and have built a sizable corpus already. To assess if your current investments will help you achieve your goals of 8 crores in the next 10 years, let's take a closer look at your financial situation and goals.

Current Investments:
Mutual Funds: ~30.5 lakhs
Direct stocks: 30k
LIC policies and term insurance: Not considered for investment purposes
Bank FDs: 27 lakhs
PPF: 3 lakhs
Total: ~60.5 lakhs
Monthly SIP investments: ~45k
Now let's analyze your goals:

Children's marriage and education: 2 crores
Buying a home: 2 crores
Retirement life (in 10 years): 4 crores
Total: 8 crores
Assuming an average annual return of 12% on your equity investments, here's a rough projection of your portfolio's growth:

Current investments (60.5 lakhs) in 10 years: ~1.87 crores
Monthly SIPs (45k) in 10 years: ~1.05 crores
Total: ~2.92 crores
Based on this calculation, you would not reach your goal of 8 crores in the next 10 years. However, you can consider making some changes to improve your chances:

Reassess your goals: Consider if your goals are realistic and if there's any flexibility in the amounts or timelines.
Increase your SIP investments: As your salary increases, try to increase your SIP investments to accelerate your portfolio's growth.
Rebalance your portfolio: Regularly review your portfolio to ensure it's aligned with your risk appetite and financial goals. This may involve reducing the number of funds or shifting the allocation between equity and debt.
Monitor fund performance: Keep an eye on the performance of your funds and consider replacing underperforming ones.
Remember that financial planning is an ongoing process, and it's essential to periodically review and adjust your strategy. It's also a good idea to consult with a professional financial advisor to get personalized advice for your specific situation. While it might be challenging to achieve 8 crores within 10 years, these suggestions may help you get closer to your goals.

Best regards,

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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 24, 2024

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I am 🥇 ng these mfs 1.Parag parekh multi cap average invesent per month 6 to 8k in last 8 months ,return 17percent 2. 360 focused equity growth siping rs 2500 since 1.5 years return 20 percent 3. Newly started since 2 months pgim small cap return 4 percent 4. Mirae Blue chip holding 500 units sipped for 2.5 years return 73 percent at present Please advise on the future action like hold or keep investing
Ans: Firstly, it's truly heartening to see your commitment to investing and the returns you've achieved reflect that dedication. You've navigated various market conditions, showcasing resilience and an ability to adapt, which is commendable.

Looking at your portfolio, you've embraced a mix of multi-cap, focused equity, small-cap, and blue-chip funds. Each has its unique characteristics and serves a purpose in a diversified portfolio.

As for your future actions, it's essential to reflect on your investment goals. Are you investing for a specific milestone or a long-term horizon? The returns you've achieved are commendable, but what's the story behind these numbers? Understanding the 'why' behind your investments can guide your future decisions.

For your existing funds, consider reviewing their performance against benchmarks and their alignment with your goals. For new investments, ponder on whether they align with your strategy or introduce a new dimension to your portfolio.

In this journey of financial growth, it's not just about numbers but also about aligning your investments with your aspirations and values. A Certified Financial Planner can provide a holistic perspective, ensuring your investments resonate with your life's broader narrative.

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T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

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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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