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Ulhas

Ulhas Joshi  |266 Answers  |Ask -

Mutual Fund Expert - Answered on Dec 08, 2023

With over 16 years of experience in the mutual fund industry, Ulhas Joshi has helped numerous clients choose the right funds and create wealth.
Prior to joining RankMF as CEO, he was vice president (sales) at IDBI Asset Management Ltd.
Joshi holds an MBA in marketing from Barkatullah University, Bhopal.... more
Sanjeev Question by Sanjeev on Dec 07, 2023Hindi
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Hi, I am investing 5K in HDFC Small cap, 2.5K in HDFC Midcap, 5K in HDFC infrastructure fund, 2.5K in Union small cap, 5k in Aditya Birla pharma and healthcare, 5K in ICICI Pru Small cap, 5K in IIFL focused fund monthly (Total of 30K/month). Is the fund selection good enough to generate 1CR in 10yrs?

Ans: Hello Sanjeev and thanks for writing to me.

I notice that you are investing in 2 thematic funds, ABSL Pharma & Healthcare and HDFC Infrastructure fund. Performance of thematic funds depends can be subject to economic shocks and tailwinds of the particular sector. You can consider pausing investments in these funds increase investment allotments to the other funds.

Assuming that you are able to generate 12% XIRR returns, you will need to increase your investment to Rs.44,000 every month.
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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Ramalingam

Ramalingam Kalirajan  |5193 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 05, 2024

Asked by Anonymous - May 21, 2024Hindi
Money
Hello sir I am single mother of two kids ( one is 7 years old and second is 5 years old) I am investing in mutual funds since 2020 1.) axis ELSS tax saver fund 5k 2.) Axis flexi cap fund 5k 3.) Axis focused fund 5k 4.)kotak flexi cap fund 2.5k 5.) mirae asset large cap fund 2.5k Recently I added three more fund in portfolio Quant small cap fund 2.5k ICICI prudential multi asset fund 1k Aditya Birla sun life PSu EQuity fund 1k Can u pls suggest me is it possible to make 1cr in next 7 years ? And have 15 lakh emergency fund
Ans: Achieving Your Financial Goals: A Detailed Plan for a Single Mother of Two

First of all, I commend you on taking the initiative to invest in mutual funds since 2020. It's impressive and shows your commitment to securing your financial future and that of your children. Managing finances as a single mother can be challenging, but your proactive approach is a significant first step.

Understanding Your Current Investments
Let's analyze your current investment portfolio. You have been investing in several mutual funds which are diversified across different categories:

Axis ELSS Tax Saver Fund: Rs 5,000
Axis Flexi Cap Fund: Rs 5,000
Axis Focused Fund: Rs 5,000
Kotak Flexi Cap Fund: Rs 2,500
Mirae Asset Large Cap Fund: Rs 2,500
Quant Small Cap Fund: Rs 2,500
ICICI Prudential Multi Asset Fund: Rs 1,000
Aditya Birla Sun Life PSU Equity Fund: Rs 1,000
Your portfolio is a mix of large-cap, small-cap, multi-cap, and tax-saving funds. This diversification is good, but we need to ensure it aligns with your goals.

Evaluating Your Financial Goals
1. Goal: Accumulating Rs 1 Crore in 7 Years
To accumulate Rs 1 crore in 7 years, let's first understand the required rate of return. Assuming you continue to invest Rs 24,500 monthly, we need to calculate the growth rate needed to reach Rs 1 crore.

2. Goal: Building a Rs 15 Lakh Emergency Fund
An emergency fund is essential, especially for a single mother. It provides a safety net for unexpected expenses.

Analysing Your Investment Portfolio
1. Portfolio Composition
Your portfolio has a mix of equity mutual funds with varying risk levels. Equity funds generally offer high returns over the long term but come with higher risks.

2. Risk Assessment
Since your goal is to accumulate Rs 1 crore in 7 years, you need a higher exposure to equity. However, it's crucial to balance risk and ensure the portfolio suits your risk tolerance.

Expected Returns and Required Growth Rate
1. Calculating the Future Value of Your Current Investments
To calculate whether you can reach Rs 1 crore, we need to estimate the future value of your investments. Assume an average annual return of 12% for your equity investments.

2. Estimating the Emergency Fund Growth
Your emergency fund should be kept in low-risk instruments. Debt mutual funds or liquid funds are suitable for this purpose, offering stability and liquidity.

Strategies to Reach Your Financial Goals
1. Maximising Returns on Existing Investments
Regular Monitoring and Rebalancing: Ensure you review your portfolio at least once a year. Rebalance based on performance and goals.
Invest in High-Growth Funds: Focus on funds with a strong performance history. Avoid sector-specific or highly volatile funds.
2. Emergency Fund Allocation
Debt Mutual Funds: Allocate a portion of your savings to debt mutual funds for stability.
Liquid Funds: Consider liquid funds for their high liquidity and low risk.
Detailed Analysis of Your Investments
1. Axis ELSS Tax Saver Fund
ELSS funds provide tax benefits under Section 80C. They come with a lock-in period of three years, offering potential high returns due to equity exposure.

2. Axis Flexi Cap Fund and Axis Focused Fund
These funds provide diversified equity exposure, investing across market caps. They offer a balanced approach to risk and return.

3. Kotak Flexi Cap Fund and Mirae Asset Large Cap Fund
Flexi cap and large-cap funds invest in stable, large companies. They provide relatively lower risk compared to mid or small-cap funds.

4. Quant Small Cap Fund
Small-cap funds can deliver high returns but come with significant risk. Suitable for long-term goals with high-risk tolerance.

5. ICICI Prudential Multi Asset Fund
This fund invests in a mix of asset classes, including equity, debt, and gold. It provides diversification and reduces risk.

6. Aditya Birla Sun Life PSU Equity Fund
Invests in public sector companies, which might be volatile but can offer high returns if the sector performs well.

Future Projections and Adjustments
1. Projections Based on Current Investments
Assuming a 12% annual return, you need to regularly invest and monitor the performance to stay on track.

2. Adjustments and Rebalancing
Periodically rebalance your portfolio to adjust for market changes and to align with your goals.

Planning for Children's Education and Other Goals
1. Education Fund
Start a separate fund for your children's education. Consider child education plans or specific mutual funds targeting education savings.

2. Contingency Planning
Ensure you have adequate insurance coverage, including health and term insurance. This provides financial protection against unforeseen events.

Importance of Regular Savings and Investments
1. Systematic Investment Plan (SIP)
Continue with SIPs to instill discipline in saving and investing. SIPs average out market volatility over time.

2. Increasing Investment Amounts
As your income grows, increase your SIP amounts. This accelerates the growth of your corpus.

Seeking Professional Guidance
1. Certified Financial Planner (CFP)
Consulting a Certified Financial Planner can help tailor your investments to your goals and risk tolerance.

Understanding the Role of Active Management
1. Benefits of Actively Managed Funds
Actively managed funds aim to outperform the market through strategic stock selection. They offer the potential for higher returns compared to index funds.

2. Disadvantages of Index Funds
Index funds mirror the market and offer average returns. They lack the potential for above-market gains and are less flexible.

Revisiting and Realigning Financial Goals
1. Regular Review
Set periodic reviews of your financial goals and portfolio performance. Adjust your strategies as needed to stay on track.

2. Aligning with Life Changes
As your children grow, your financial needs may change. Be ready to adjust your investment strategy to meet new demands.

Steps to Build and Maintain an Emergency Fund
1. Setting Aside Funds
Start by setting aside a portion of your monthly income into a liquid or debt fund.

2. Maintaining Liquidity
Ensure that your emergency fund is easily accessible. Avoid locking it in long-term instruments.

Investment Strategy for Wealth Creation
1. Diversification
Continue diversifying your portfolio across different asset classes to manage risk.

2. Long-Term Perspective
Maintain a long-term perspective to ride out market volatility and achieve higher returns.

Conclusion
Your commitment to investing for your and your children’s future is commendable. With a balanced approach, regular reviews, and adjustments, you can achieve your financial goals. Building a Rs 1 crore corpus and a Rs 15 lakh emergency fund in 7 years is ambitious but achievable with disciplined investing and strategic planning.

Final Thoughts
Stay focused on your goals, maintain regular investments, and seek professional advice when needed. Your proactive approach sets a strong foundation for a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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