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Moneywize   |124 Answers  |Ask -

Financial Planner - Answered on Mar 10, 2024

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Asked by Anonymous - Mar 09, 2024Hindi
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I have been investing in mid-cap MFs. Shall I close them and move to index funds as market looks overheated? Same startegy for small and mirco-cap MFs?

Ans: Deciding whether to switch from mid-cap mutual funds (MFs) to index funds depends on several factors, and the current market condition (overheated or not) is just one piece of the puzzle. Here's a breakdown to help you decide:

Mid-Cap vs Index Funds:

• Risk: Mid-cap funds generally involve higher risk than index funds. Mid-cap companies are more volatile, so the fund's value can fluctuate more significantly. Index funds, by nature, tend to mirror the market, offering a more stable ride.
• Return Potential: Historically, mid-cap funds have offered the potential for higher returns than index funds. However, this is not guaranteed, and past performance doesn't necessarily predict future results.
• Management: Mid-cap funds are actively managed, meaning a fund manager tries to pick stocks that will outperform the market. Index funds are passively managed, simply tracking a specific market index.

Current Market Conditions:

Overheated Market: If you believe the market is overheated, there could be some logic in moving to a less volatile option like an index fund. However, trying to time the market can be difficult, and you risk missing out on potential gains if the market continues to rise.

Other Factors to Consider:

• Investment Timeframe: If you have a long-term investment horizon (over 5 years), you may be able to stomach the volatility of mid-cap funds. However, if you need your money in the short term, index funds might be a safer option.
• Risk Tolerance: How comfortable are you with potential losses? If you can't handle large swings in your portfolio value, index funds might be a better fit.
• Your Investment Goals: What are you hoping to achieve with your investments?

Small and Micro-Cap MFs:

The same logic applies to small and micro-cap MFs. They generally involve even higher risk than mid-cap funds but also have the potential for even higher returns. Carefully consider your risk tolerance and investment goals before investing in them.

Here are some recommendations:

• Do your research: Learn more about mid-cap vs index funds and understand the risks involved in each.
• Consult a financial advisor: A professional advisor can help you assess your individual situation and make informed investment decisions.
• Consider a diversified portfolio: You don't have to choose between all mid-cap or all index funds. You can have a mix of both in your portfolio to balance risk and reward.

Ultimately, the decision of whether to switch from mid-cap MFs to index funds is up to you. By considering all the factors involved, you can make an informed choice that aligns with your investment goals and risk tolerance.
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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You may like to see similar questions and answers below

Nikunj

Nikunj Saraf  |308 Answers  |Ask -

Mutual Funds Expert - Answered on Sep 27, 2022

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Planning to start investment in following MFs from next month. Time Horizon is 8-10 years. Goal: To get 20% (or 33% more than Nifty 50) return overall in 8-10 years. Will pull out as soon as I see 20% (or 33%+ on nifty 50) in total at 8-10 years, otherwise will pull out individual MFs from 10-12years with best CAGRs achievable. Planning to buy a house next year with a loan of 70 lakh, will clear the home loan with that money. All are direct. 1. Quant Active: 10K 2. Nippon India Small Cap Nifty Index: 5k 3. Nippon India Mid cap Nifty Index: 5k 4. Quant Infrastructure Fund: 5k 5. Quant Tax Fund: 3k 6. SBI Consumption opportunities: 2.5k 7. ICICI prudential Bharat Consumption Fund :-2.5k Will double as soon as I see a 13% drop in Nifty for the time horizon mentioned and keep on doing that till the time it reaches within 3% from the top. Let me know if I need to change the funds or the funds are okay. Would replacing small or mid cap index funds with smallcap funds like SBI Smallcap Fund or Canara Robeco Small Cap fund be a better thing?
Ans: Hi Amrit, In accordance with your goals and current MF selection. I could see you have selected multiple sectoral funds which are aggressive risk & allocated proportion is more than advisable. Therefore, I suggest you concise the schemes with the amount in sectoral funds.

Furthermore, you can replace the small-cap and mid-cap index funds with small-cap funds such as SBI Small Cap Fund or Canara Robeco Small Cap Fund in order to improve your portfolio.

Additionally, you can introduce Flexi cap & mid cap categories to your selection. Diversify your portfolio with different categories and AMCs.

..Read more

Ramalingam

Ramalingam Kalirajan  |5298 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

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Sir, i have been investing in Large cap direct MF , shall i close them and move to largege cap index fund ? Same startegy for mid , small and mirco cap ?
Ans: Transitioning from actively managed mutual funds to index funds requires careful consideration of your investment objectives, risk tolerance, and market dynamics.

While index funds offer lower expense ratios and passive management, they may not always outperform actively managed funds, especially during market fluctuations or when specific sectors outperform the broader market.

Here's a breakdown of factors to consider:

Large Cap Funds: If your large-cap direct mutual funds have consistently underperformed their benchmark indices, or if you prefer a more passive approach with lower costs, transitioning to large-cap index funds could be an option. However, ensure you understand the implications of switching, including potential tax consequences and performance variations.
Mid, Small, and Micro Cap Funds: These segments of the market often require active management to identify promising opportunities and manage risks effectively. While index funds may provide broad exposure, actively managed funds can capitalize on market inefficiencies and deliver potentially higher returns. Evaluate the track record of your existing funds and consider consulting a Certified Financial Planner to determine the best approach based on your investment goals and risk profile.
When transitioning between funds, consider the following:

Tax Implications: Exiting existing investments may trigger capital gains tax liabilities. Assess the tax implications of switching funds and evaluate whether the potential benefits outweigh the costs.
Performance Comparison: Compare the historical performance of your current funds with relevant index benchmarks. Evaluate factors such as consistency, risk-adjusted returns, and fund manager expertise before making a decision.
Cost Analysis: Consider the impact of expense ratios and transaction costs on your investment returns. While index funds typically have lower costs, ensure that the benefits justify any potential performance trade-offs.
Diversification: Review your overall portfolio diversification and ensure that any changes align with your asset allocation strategy and long-term financial goals.
Ultimately, the decision to switch from actively managed funds to index funds should be based on a thorough assessment of your individual circumstances and investment objectives. Consulting with a Certified Financial Planner can provide valuable insights and personalized guidance tailored to your specific needs.

there are some advantages to consider direct funds, and the cost savings can be significant in the long run. However, there are some potential benefits to using a regular MFD:

Advantages of Investing Through a Mutual Fund Distributor (MFD):

Personalized Advice: MFDs can be helpful for beginners or those who lack investment knowledge. They can assess your risk tolerance, financial goals, and investment horizon to recommend suitable mutual funds. This personalized guidance can be valuable, especially if you're new to investing.
Convenience: MFDs handle all the paperwork and transactions on your behalf, saving you time and effort. They can help with account setup, SIP registrations, and managing your portfolio across different funds.
Investor Support: MFDs can be a point of contact for any questions or concerns you may have about your investments. They can provide ongoing support and guidance throughout your investment journey.


Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Samkit

Samkit Maniar  |145 Answers  |Ask -

Tax Expert - Answered on Jul 25, 2024

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Hi Samkit, I'm a retired person, 66 years old. Before retirement, I had invested Rs.93.5 lakhs in a commercial real estate in Navi Mumbi in Feb.2017 and registered the property jointly with my wife on 50/50 basis. The value of the property as determined by stamp duty registrar at that time was Rs.73.41 lakhs. The expenses on stamp duty, registration and brokerage was Rs.7.53 lakhs and improvement expenditure of Rs.4 lakhs. So total cost of purchase worked out to Rs.1.09 crores. I sold this property in Feb.2024, exactly after 7 years, for Rs.1.1 crore. Market value (for stamp duty purpose) on this date was Rs.89.89 lakhs. While filing my ITR2 in AY 2024-25, I had split all the above values by 2 and 50% was shown in my ITR2 and the remaining 50% was shown in my wife's ITR2 under CG for showing the capital gain. The system has calculated and shown the capital gain as minus Rs.31.24, i.e. Rs.-15.62 in each of our ITR2. The system has also automatically adjusted my LTCG arising out of other share transactions during the FY. The system allows the remaining loss to be carried forward to next year under CFL. My questions are: (1) Can we both go ahead and finalise & submit the ITR2 as shown above? (2) Can we use the losses carried forward during the next AY to set off our incomes arising out of share market transactions? Thank you so much in advance for your valuable time and advice.
Ans: Yes, seems correct treatment done. You can go ahead with submitting your returns respectively.

Please note that Long term losses can only be set off against long term gains, if that's the case then you can.

Please consult your CA before moving ahead.

...Read more

Ramalingam

Ramalingam Kalirajan  |5298 Answers  |Ask -

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

Asked by Anonymous - Jul 15, 2024Hindi
Money
Dear Sir We had booked a flat in one of the projects in Karnataka ( 15 + years back) but when the project is about to complete the land owner of that apartment filed the case against the builder because the builder had constructed few flats illegally in that project.. The land owner had demanded few crores from the builder for illegally constructing the flat...During that time we were in abroad and 3 flats werent registered in this project one is ours and 2 more flat owners were in abroad too..Thats out of 35 flats... Hence the builder had registered three flats in their name for the safety..But till now we havent got registered of that flat in our name becos there is case in the court. Hence there is no completion certificate issued for that project..etc.... and no flat owner can sell their flat due to the court case. However the builder had given us a power of attorney for the flat for rent it out or stay... And we have rented the flat and are getting the rent... we have been regularly followed up with the builder, he everytime promises today tomorrow....like this 15+ years passed...last year we asked for a replacement flat in one of their new project and he agreed to give us a replacement flat provided we pay some extra bucks as per the rate...We agreed for that and got the agreement signed and also got the sale deed of the land etc.. we have paid the payment in cheques.Its a huge project and completion of the project is bit slow and got delayed.... Recently, the builder had sent an email to all flat owners to register their flats but when we consulted for registration the builder said he had to transfer the payment done by us from the previous project to this new project...hence it would take time (by the way thats their internal issue) everytime we consulted for registration he says it would take one months time and his legal team is working on it...Sometime he says the court case should get over of the other project and then only he can help to register the the present flat..(though the previous flat is in their name itself) we have nothing to do with case (as the Case is between land owner and builder) also the previous flat registration al in their name..we have only agreement and receipts.of payment done...hence so far the flat is not registered...most of the flats got registered in the new project...The project is not completed yet it would take one more year... My question is why the builder is delaying the registration process of our flat and why is he not doing the internal issues solved and help us to register our flat in our name... Should we register the flat ourselves provided we get required documents from the builder? Or consult a lawyer in this regard...Pls guide...
Ans: You booked a flat 15+ years ago in Karnataka. The project faced legal issues due to illegal construction. You haven’t been able to register the flat in your name.

Builder’s Delay
The builder registered three flats, including yours, in their name. You have a power of attorney to rent it out. The builder promised a replacement flat in a new project, but the registration is still delayed.

Key Questions
Why is the builder delaying registration?
Should you register the flat yourself?
Should you consult a lawyer?
Builder's Delay Analysis
Internal Issues
Fund Transfer: The builder needs to transfer payments from the previous project to the new one. This seems to be causing delays.

Legal Complications: The builder indicates that the ongoing court case may affect the registration process. However, you have no involvement in this case.

Project Completion
Project Delay: The new project is not yet complete. This might also contribute to the registration delay.
Recommendations
Consult a Lawyer
Legal Advice: Consult a lawyer to understand your legal standing and options.

Documentation: Ensure all your documents are in order. The lawyer can help review and prepare necessary paperwork.

Registration Process
Self-Registration: With the required documents from the builder, you might register the flat yourself. This requires legal guidance.

Follow-Up: Continue to follow up with the builder regularly. Ensure all communication is documented.

Legal Action
Notice to Builder: Your lawyer may suggest sending a legal notice to the builder for delaying registration.

Court Case: If the builder doesn’t cooperate, consider filing a case against them. This might expedite the process.

Insightful Evaluation
Assessing Risks
Builder's Reliability: Evaluate the builder’s past projects and their completion rates. This helps in assessing the likelihood of further delays.

Legal Risks: Understand the legal risks associated with the ongoing court case. Your lawyer can provide a detailed assessment.

Future Steps
Replacement Flat: If the builder provides a replacement flat, ensure all legal aspects are clear before agreeing.

Backup Plan: Have a backup plan in case the registration process faces more delays. This might include exploring other housing options.

Communication
Transparent Dialogue: Maintain open and transparent communication with the builder. Document all discussions and agreements.

Legal Assistance: Have your lawyer involved in all major communications with the builder. This ensures legal backing.

Final Insights
Proactive Steps
Consulting a lawyer is crucial. They can guide you through the legal complexities and help expedite the registration process.

Keep all your documents organized. This will be helpful during any legal procedures.

Regularly follow up with the builder. Ensure you have written records of all communications.

Evaluate the reliability of the builder and the legal implications of the ongoing court case. This helps in making informed decisions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |5298 Answers  |Ask -

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

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Dear Sir/Madam, I hope this message finds you well. As the sole earning member of my family, I am 41 years old and responsible for supporting my family of five. Here are the details of my financial situation: Income and Expenses: Monthly salary income: ?1.10 lakhs. Monthly expenses: Rent (?35,000) and household expenses (?50,000). Insurance and Loans: ICICI Lombard term insurance: Coverage of ?50 lakhs with an annual premium of ?9,700. Mediclaim for my mother: Coverage of ?1 lakh with an annual premium of ?13,000. Family mediclaim: Coverage of ?2 lakhs with an annual premium of ?6,700. Loan from LIC: ?2 lakhs. Savings and Investments: PPF savings: ?80,000. Endowment policies with an annual premium of ?24,000. SIP investments in the following mutual funds: Aditya Birla Sun Life Pure Value Fund (G): ?1,000/month. Bandhan Sterling Value Fund - Regular Plan (G): ?1,000/month. DSP Flexi Cap Fund - Regular Plan (G): ?1,000/month. HDFC Mid-Cap Opportunities Fund (G): ?1,500/month. Considering this details do help me to design my portfolio for corpus of around 10crores in next 20 years.
Ans: Age: 41 years
Family: Five members
Monthly Salary: Rs 1.10 lakhs
Monthly Expenses: Rs 85,000 (Rent: Rs 35,000; Household expenses: Rs 50,000)
Insurance and Loans:
ICICI Lombard term insurance: Rs 50 lakhs (annual premium: Rs 9,700)
Mediclaim for mother: Rs 1 lakh (annual premium: Rs 13,000)
Family mediclaim: Rs 2 lakhs (annual premium: Rs 6,700)
Loan from LIC: Rs 2 lakhs
Savings and Investments:
PPF savings: Rs 80,000
Endowment policies: Annual premium Rs 24,000
SIP investments: Rs 4,500/month
Financial Planning Goals
Retirement Corpus: Rs 10 crores in 20 years
Insurance Coverage: Adequate protection for family
Debt Management: Efficiently manage and repay loans
Wealth Creation: Strategic investment for growth
Step-by-Step Financial Plan
1. Review and Enhance Insurance Coverage

Term Insurance: Ensure coverage is at least 10-15 times your annual income
Health Insurance: Increase coverage for family to Rs 5 lakhs
Mediclaim for Mother: Increase coverage to Rs 5 lakhs
2. Create an Emergency Fund

Amount: 6-12 months of expenses
Investment: High-interest savings account or short-term FDs
3. Debt Management

LIC Loan: Prioritize repaying the Rs 2 lakhs loan
Avoid New Loans: Focus on managing current debts
4. Increase SIP Investments

Existing SIPs

Aditya Birla Sun Life Pure Value Fund
Bandhan Sterling Value Fund
DSP Flexi Cap Fund
HDFC Mid-Cap Opportunities Fund
Strategy

Increase Contributions: Gradually increase SIP amount by 10% annually
Diversify: Add more funds for balanced growth and risk management
5. Public Provident Fund (PPF)

Contribution: Continue investing in PPF for tax benefits
Increase Investment: Aim to contribute the maximum limit of Rs 1.5 lakhs per year
6. Endowment Policies

Evaluate Performance: Assess the returns and benefits
Consider Alternatives: If underperforming, consult a Certified Financial Planner for better options
7. Additional Investment Options

Mutual Funds

Equity Funds: For long-term growth
Debt Funds: For stability and regular income
National Pension System (NPS)

Contribution: Invest in NPS for additional retirement corpus
Benefit: Tax benefits under Section 80C and 80CCD
8. Regular Monitoring and Review

Review Portfolio: Regularly review and adjust your investments
Rebalance: Ensure your portfolio aligns with your risk tolerance and goals
Disadvantages of Index Funds
Limited Flexibility

Tracking: Index funds strictly follow market indices
Drawback: Lack of active management to adapt to market changes
Lower Returns

Potential: Actively managed funds can outperform index funds
Disadvantages of Direct Funds
Lack of Guidance

Direct Funds: No professional advice
Benefit of Regular Funds: Access to Certified Financial Planner for personalized advice
Convenience

Ease: Investing through Certified Financial Planner offers better management and oversight
Final Insights
Start Early: The sooner you start, the better
Diversify: Spread investments across different asset classes
Consult a CFP: Professional advice ensures a comprehensive plan
Review Regularly: Adjust your plan as needed to stay on track
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |5298 Answers  |Ask -

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

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Sir, I have invested Rs. 200000/-in Nippon India Nifty I T Index fund in the month of Feb, 2024. Is it worth stay invested or switch over?
Ans: You invested Rs 2,00,000 in the Nippon India Nifty IT Index Fund in February 2024. Here’s a detailed evaluation.

Understanding Index Funds
1. Passive Investment:

Index funds replicate market indices.
They offer average market returns.
2. Low Management:

Lower expense ratios due to passive management.
Limited scope for beating the market.
3. Market Volatility:

Performance tied to the market index.
Susceptible to market downturns.
IT Sector Performance
1. Growth Potential:

IT sector shows strong growth.
High potential for long-term gains.
2. Volatility:

IT stocks can be volatile.
Sector-specific risks can impact returns.
Advantages of Actively Managed Funds
1. Higher Returns:

Actively managed funds aim to outperform indices.
Fund managers adjust based on market conditions.
2. Professional Management:

Expert fund managers make strategic decisions.
Better adaptability to market changes.
3. Diversification:

Actively managed funds can diversify across sectors.
Reduce risk by spreading investments.
Disadvantages of Index Funds
1. No Market Outperformance:

Index funds cannot beat the market.
Returns are limited to index performance.
2. Lack of Flexibility:

Fixed to the index composition.
Cannot adjust to market opportunities.
3. Sector Concentration:

Heavy exposure to one sector increases risk.
IT sector concentration may not be ideal for all investors.
Evaluation of Your Investment
1. Investment Horizon:

Your investment horizon is crucial.
Longer horizons can mitigate short-term volatility.
2. Risk Tolerance:

Assess your risk tolerance.
Higher risk tolerance suits IT sector investments.
3. Diversification Needs:

Diversify your portfolio to reduce risk.
Consider adding actively managed funds.
Recommendations
1. Stay or Switch:

If you have high risk tolerance and long horizon, stay invested.
For diversification and potential higher returns, switch to actively managed funds.
2. Regular Review:

Monitor your investment regularly.
Adjust based on market performance and personal goals.
3. Seek Professional Advice:

Consult a Certified Financial Planner (CFP).
Get personalized recommendations.
Final Insights
Your investment in Nippon India Nifty IT Index Fund has potential but consider diversifying. Actively managed funds can offer higher returns and better risk management. Regularly review and seek professional advice for optimal results.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Nayagam P

Nayagam P P  |2471 Answers  |Ask -

Career Counsellor - Answered on Jul 25, 2024

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Career
Presently Im a class 12 commerce student and i want to join BCA for my degree next year but i dont know what are the careers after BCA.
Ans: Adella, first of all, shortlist top 5-10 colleges to get admission for your BCA.

Know the Eligibility Criteria / Admission Process / Entrance Exams (such as CUET & other Private Colleges' its own Entrance Exams) you will have to appear in.

There are multiple career options after BCA, but depends upon which specialization you will choose, which specilizations are available in the college you will join & which all skills you will upgrade. Some of the examples of specializations available for BCA are:

1) Software Development
2) Cyber Security
3) Data Analytics
4) Web Development
5) Mobile Application Development
6) Networking & System Administration
7) Cloud Computing
8) Digital Marketing
9) Multimedia & Animation
10) AI & ML
11) Full Stack Development & More.

After you get admission into BCA in any college:

1) Try to maintain a good academic performance.
2) Involve in co/extra-curricular activities.
3) Keep upgrading your skills, as recommended by your college faculties.
4) Start researching about the Recruiters/Companies visited your college for Campus Recruitment.
5) Have a Professional LinkedIn Profile.
6) Put Job Alerts related to your domain in LinkedIn.
7) Get notifications of job vacancies and go through the JD (Job Description) of each.
8) Know the Job Market Trends & keep analyzing how it changes till your 3rd year.
9) Connect with Professionals of your domain, get their advice/views/opinions for your Career Growth
10) At the end of your 3rd year, start applying for jobs through LinkedIn, matching your Profile and also prepare for your Campus Interview.

All the BEST for Your Bright Future.

To know more on ‘ Careers | Education | Jobs’, ask / Follow Us here in RediffGURUS.

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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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