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Omkeshwar

Omkeshwar Singh  | Answer  |Ask -

Head, Rank MF - Answered on May 26, 2021

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HrushikeshPatnaik Question by HrushikeshPatnaik on May 26, 2021Hindi
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I have been investing in MF since last 5 years with a diversified portfolio.

For faster growth, I am interested in topping-up SIPs in good performing funds, but understood that I can't top-up SIPs in already running funds. This has to be by cancelling current SIPs and starting a fresh with top-up instruction. I am not comfortable with this idea as I want to create a long term portfolio and starting afresh will impact growth.

Alternate way is to invest lump sums every month through Additional purchase request which I am OK with. 

Wondering if this is ok if I keep adding additional sum every month through Lump sums along with SIPs in the same funds and in the same folio? Please advice.

Ans: There are options available for top up with AMCs, and it happens automatically without any need to cancel existing schemes and start afresh.

However most of the digital platforms don’t have this option, therefore, if you are comfortable, you may do additional purchases per month in the SIP schemes as lumpsum.

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  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 25, 2024

Asked by Anonymous - Sep 24, 2024Hindi
Money
Hello, Greetings of the day!. My MF Portfolio include the following funds for monthly SIP. Axis Midcap Fund Rs 2500, HDFC Flexi cap Fund Rs 2500, Kotak Emerging Equity Fund Rs 3500, Mirae Asset Large and Midcap Fund Rs 2500, Nippon India Small Cap Fund Rs 4000, Parag Parikh Flexi Cap Fund Rs 3500. I would like to add another Rs 4000 to my monthly SIP. Should I consider adding another Small Cap Fund or increase my SIP in existing funds. I started SIPs 4 years ago and I plan to continue investing for another 5-6 years. Please advise as my goal is to have a corpus target of 50 lacs.
Ans: You have a well-diversified portfolio with exposure across various market segments – large-cap, mid-cap, flexi-cap, and small-cap funds. It's great that you started 4 years ago and are continuing your SIPs with a clear investment horizon of 5-6 more years.

Your current portfolio includes:

Axis Midcap Fund: Rs 2500 (mid-cap exposure)

HDFC Flexi Cap Fund: Rs 2500 (flexible across market capitalisations)

Kotak Emerging Equity Fund: Rs 3500 (mid-cap exposure)

Mirae Asset Large and Midcap Fund: Rs 2500 (blend of large and mid-cap stocks)

Nippon India Small Cap Fund: Rs 4000 (small-cap exposure)

Parag Parikh Flexi Cap Fund: Rs 3500 (flexi-cap exposure, some international exposure)

With your goal of accumulating Rs 50 lakhs in the next 5-6 years, it's important to optimise your investment strategy to balance both risk and return.

Evaluating Your Portfolio and Future Steps

Let’s break down your portfolio and assess whether you need to add another small-cap fund or increase your SIPs in existing funds.

1. Exposure to Small Cap and Mid Cap Funds
You already have a good chunk of your portfolio allocated to small and mid-cap funds:

Nippon India Small Cap Fund: Rs 4000
Axis Midcap Fund: Rs 2500
Kotak Emerging Equity Fund: Rs 3500
Small-cap and mid-cap funds offer the potential for higher growth, but they also come with greater volatility. Adding another small-cap fund might increase your risk level. Since you are already contributing Rs 4000 per month to a small-cap fund, it's better to avoid overloading this category.

Instead of adding another small-cap fund, you can consolidate and strengthen your position by increasing the SIP in existing funds that have a proven track record.

2. Increase SIP in Existing Funds
Your portfolio already has a diversified mix, and rather than complicating your investments with more funds, consider increasing your SIP in the existing funds. Since you have a mix of mid-cap, large-cap, and flexi-cap funds, this could balance your risk and returns more effectively.

Here's how you could increase your SIP amounts:

HDFC Flexi Cap Fund: Rs 2500 → You can consider increasing this. Flexi-cap funds offer flexibility to the fund manager to switch between large, mid, and small caps based on market conditions, which helps in reducing risk while ensuring growth.

Mirae Asset Large and Midcap Fund: Rs 2500 → This fund gives you exposure to both large-cap stability and mid-cap growth. Increasing your SIP here can give you a balanced mix of returns and reduce volatility.

Parag Parikh Flexi Cap Fund: Rs 3500 → Known for its value-based investing approach, this fund also includes some international exposure. You can increase your SIP in this fund for geographical diversification.

3. Risk Management and Portfolio Stability
With a time horizon of 5-6 years, it’s crucial to strike the right balance between risk and return. Mid-cap and small-cap funds can be volatile, especially over shorter periods. Flexi-cap and large-cap funds tend to be more stable, especially during market downturns.

Given the allocation you already have towards small-cap and mid-cap funds, adding another small-cap fund could increase the overall volatility of your portfolio. Since your goal is to build a Rs 50 lakh corpus, it's important to focus on stability as you approach the latter part of your investment horizon.

4. Consider the Option of Hybrid Funds or Balanced Advantage Funds
If you are open to adding a new category, you might want to consider hybrid or balanced advantage funds instead of another small-cap fund. These funds offer a balance of equity and debt, which can provide stability, especially when markets become volatile.

Hybrid funds automatically adjust the equity and debt exposure based on market conditions. This could act as a buffer and reduce the risk of sharp losses, particularly if market corrections happen during your investment tenure.

5. Setting Realistic Expectations for Corpus Target
Accumulating Rs 50 lakhs in 5-6 years is a good target, but keep in mind that the returns from equity-based funds are market-dependent. Based on your investment horizon and risk appetite, your current SIPs and potential increases should bring you closer to your goal.

However, market performance can fluctuate, and there is no guaranteed return. It's advisable to regularly review your portfolio, at least once a year, and make adjustments if needed.

6. Review Asset Allocation as You Approach Retirement
Since you have 5-6 more years of investment, consider gradually shifting a portion of your portfolio to lower-risk instruments as you get closer to your target date. This will protect your corpus from sudden market crashes or corrections as you approach your withdrawal phase.

Final Insights

Here’s a recommended strategy:

Avoid adding another small-cap fund as you already have enough exposure to this category.

Increase your SIPs in the HDFC Flexi Cap Fund, Mirae Asset Large and Midcap Fund, and Parag Parikh Flexi Cap Fund. These funds provide balanced growth opportunities with moderate risk.

If you want to add a new fund, consider hybrid or balanced advantage funds to introduce some stability and reduce portfolio risk.

Review your portfolio annually and adjust the allocation to ensure you stay on track towards your Rs 50 lakh goal.

Closer to the end of your investment horizon, consider shifting some funds to debt or safer options to lock in the gains and avoid any market downturn risks.

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

..Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 15, 2024

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Dear Sir, Thank you for your detailed analysis on the mutual fund portfolio and your support is highly appreciated. As per your suggestion I have attempted to move for a SIP top up plan but most of the mutual fund companies do not permit the top up for the existing mutual funds. Usually the SIP top up plan is available while registering a new SIP. Either you need to invest in lumpsum or start a new SIP in the same mutual fund folio. Can you please suggest on how to move forward in such a scenario for SIP top up plan for the existing mutual funds? Additionally, please let me know if I intent to invest in lumpsum or start a new SIP in the same mutual fund folio (say after 3 years with the planning of having a top up plan) would it have any impact on the existing NAV units?
Ans: Thank you for your kind words.

In your case, you're right that many mutual fund companies only allow the SIP top-up option during the initial registration. To move forward, you can:

Start a new SIP: You can begin a fresh SIP in the same fund with the top-up option for future investments. This will not impact your existing investments.

Invest lumpsum: You can always invest lumpsum in the same folio. It won’t affect the NAV of your existing units, as the new units will be purchased at the current NAV.

I recommend reaching out to your Mutual Fund Distributor (MFD) for personalized guidance. They can help set this up seamlessly and advise on any future changes.

Best Regards,

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Asked by Anonymous - May 12, 2025
Money
I am 38 years old and self-employed, earning an average of 1.8 to 2 lakhs per month. I have a home loan of 44 lakhs (EMI is 46,000, tenure 15 years). There is no other liabilities. My investments include 11 lakhs in mutual funds, 3 lakhs in fixed deposits, and 1.5 lakh in gold. Should I focus on prepaying the home loan given my irregular income, or keep my investments intact and continue with EMIs?
Ans: You are doing quite well, especially with your investments and controlled liabilities. Your financial discipline is truly appreciable.

You are 38, self-employed, with Rs.1.8 to 2 lakhs monthly income.
Your current home loan is Rs.44 lakhs with EMI of Rs.46,000 for 15 years.
You have Rs.11 lakhs in mutual funds, Rs.3 lakhs in FDs, and Rs.1.5 lakhs in gold.
Your income is irregular, but you have no other liabilities.

Let us now do a 360-degree evaluation of whether to prepay the loan or stay invested.

 

Step-by-Step Financial Assessment
1. Evaluate the Stability of Your Income First
You earn between Rs.1.8 to Rs.2 lakhs per month.

 

But income is irregular. That needs caution.

 

Loan EMI is Rs.46,000 — about 25% of your average income.

 

If income drops in any month, EMI pressure will increase.

 

So we must first ensure EMI is always affordable, without stress.

 

Hence, liquidity is more important for you right now than aggressive loan prepayment.

 

2. Evaluate Your Emergency Reserve
You have Rs.3 lakhs in FD and Rs.1.5 lakhs in gold.

 

That makes it Rs.4.5 lakhs total liquid safety.

 

Your EMI is Rs.46,000, and personal expenses will also be there.

 

Ideal emergency fund for you = 6 to 9 months of expenses + EMI.

 

That is around Rs.6 to Rs.8 lakhs minimum.

 

So current emergency fund is slightly lower than ideal.

 

Please don’t use this for loan prepayment now.

 

3. Assess the Role of Mutual Funds
You have Rs.11 lakhs in mutual funds. That’s a solid step.

Now let’s assess whether to redeem this and prepay loan.

 

Should You Redeem Mutual Funds to Prepay?
Mutual funds, over long term, give better post-tax return than loan savings.

 

Loan interest is 8% to 9%, whereas mutual funds can give 11–13% in long term.

 

Especially if funds are equity-oriented and held for 5+ years.

 

You will also get capital gains tax exemption on Rs.1.25 lakhs LTCG annually.

 

If you redeem funds, you lose growth potential and compounding.

 

That hurts long-term wealth building.

 

So, do not redeem the entire Rs.11 lakhs in mutual funds.

 

4. Disadvantage of Early Loan Prepayment in Your Case
Prepaying early will reduce interest over time, yes.

 

But you may run into cash flow stress in slow months.

 

Once money is used to prepay, it cannot be taken back easily.

 

Liquidity once lost = flexibility lost.

 

Also, income tax benefit under Section 24(b) gets reduced if loan balance drops.

 

So it’s better to maintain balance between repayment and investment.

 

5. Best Strategy for You – A Balanced Approach
Let’s now craft the best plan for you.

 

Maintain Strong Liquidity First
Keep FD and gold untouched.

 

Increase emergency fund to at least Rs.6–Rs.7 lakhs.

 

For that, set aside extra Rs.2.5–Rs.3 lakhs from savings over time.

 

This makes your EMI safe even in low-income months.

 

Continue Your Mutual Fund SIPs Without Stopping
SIPs give long-term growth and beat loan interest in most cases.

 

Don’t stop mutual fund investments to prepay loan.

 

Stay invested. Let wealth compound.

 

Start Small and Periodic Prepayments
Don’t do bulk prepayment now. Do systematic small prepayments.

 

For example, Rs.25,000 to Rs.50,000 extra every 3–4 months.

 

When income is higher, use that surplus to prepay in parts.

 

Target 1–2 bulk part-payments per year.

 

This reduces tenure and interest slowly, without affecting liquidity.

 

Track Your Loan Amortisation Every 6 Months
Use netbanking or get a fresh loan statement every 6 months.

 

Check how each prepayment is reducing principal.

 

Adjust your strategy accordingly.

 

Avoid One-Time Full Prepayment
That would kill your long-term investment compounding.

 

Also removes your income tax benefit under Section 24(b).

 

Stay flexible. You are self-employed.

 

You need cash buffers more than salaried people.

 

Final Insights
Do not do bulk home loan prepayment from mutual funds now.

 

Keep SIPs going and maintain your compounding.

 

Grow your emergency fund to Rs.6–7 lakhs minimum.

 

Use surplus months to make small part-payments towards home loan.

 

This protects your peace and builds wealth at the same time.

 

Reassess in 2–3 years. You may be able to prepay more later.

 

You are already in a good financial position. Your thoughtful approach is praiseworthy.

 

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Money
i wish to purchase new car i10, should i purchase the same through own money or should i take a vehicle loan from bank and the money own by my to be kept as FDR or liquid mutual fund
Ans: It’s a good sign that you’re thinking before buying a car. You’re not rushing into it. That shows maturity and smart thinking.

We will now evaluate own money vs vehicle loan — from every angle.

 

Understanding the Nature of a Car Purchase
A car is not an investment.

 

It is a consumption asset, not a growth asset.

 

It depreciates every year. Its value goes down, not up.

 

So the cheaper the total cost, the better for your wealth.

 

Option 1: Use Own Money Fully
Pros

No interest cost. You save on total expenses.

 

You are free from monthly EMI pressure.

 

Car becomes fully yours from day one.

 

No need to deal with bank, forms, hypothecation etc.

 

Cons

Your liquid money reduces.

 

You may not have enough cash for emergencies.

 

Opportunity loss if you had invested that money.

 

Option 2: Take Vehicle Loan & Keep Own Money in FDR or Liquid Mutual Fund
Let’s evaluate this with care.

Vehicle Loan Pros

You can preserve your savings for emergencies.

 

EMI can be budgeted monthly, if income is stable.

 

Some banks offer competitive interest rates.

 

Vehicle Loan Cons

You will pay interest on a depreciating item.

 

Loan adds to your monthly obligations.

 

You must pay insurance, EMI, fuel, and service together.

 

FDR and Liquid Mutual Funds give lower returns than loan cost.

 

So you will likely lose more in interest than you gain.

 

Let's Compare: Interest Rate vs Investment Return
Vehicle loan interest is usually 9% to 11% per year.

 

FDR gives around 6% to 7% before tax.

 

Liquid mutual funds give 6% to 7.5% on average.

 

So you pay more to the bank than you earn from investment.

 

Tax on interest or gains reduces actual return further.

 

This means taking a car loan and investing your own money leads to net loss.

 

Best Option for You: Smart Compromise Approach
Let me share a wise solution.

 

Don’t use full own money. Don’t take full loan either.

 

Instead, pay 70–80% from own funds.

 

Take a small car loan for the remaining 20–30% only.

 

This keeps EMI low and retains some liquidity.

 

You reduce interest cost and also keep Rs.50,000–Rs.1 lakh aside.

 

Park that in liquid fund for any urgent need.

 

Repay this small loan fast in 1–2 years.

 

Only Take a Car Loan If:
Your job income is stable.

 

You already have 3–6 months emergency fund ready.

 

You don’t have big loans running now.

 

You can pay EMI without affecting savings.

 

You commit to close the loan early.

 

Avoid This Mistake:
Never buy a more expensive car because loan makes it “feel affordable.”

 

Loan should not expand your car budget.

 

Whether you buy with loan or cash, pick a simple car within limits.

 

i10 is a wise, middle-ground choice. Good thought.

 

Tax Angle (If Business Use)
If you are using the car for business, vehicle loan interest may be tax-deductible.

 

But for personal use, there is no tax benefit.

 

So do not take loan just for imagined tax saving.

 

Final Insights
A car is a need, not an investment.

 

Using your own money fully keeps things simple and cheap.

 

Taking a full car loan and investing the money gives net negative return.

 

Best option is a split approach — pay major part from own funds.

 

Take small loan only if needed and close it early.

 

Always keep emergency money aside before buying.

 

Avoid emotional buying or overbudget cars.

 

Your financially balanced approach is very appreciable.

 

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

...Read more

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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