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Ramalingam

Ramalingam Kalirajan  |6268 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 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
SAGAR Question by SAGAR on Jul 31, 2024Hindi
Money

Hi Sir, I am investing in Parag Parikh Flexi cap 2k, Nippon India Small Cap 2k, PGIM India Midcap Opportunities 2k, Bank of India ELSS Tax Saver 2K and Kotak Flexicap Fund 2k. Are the above funds good to invest, invest for last 3 years and would like to continue for next 15 Years. I am 35 years old. I am also investing in PPF 5K per month for last 4 years. Please suggest if I need any change/add to this list?

Ans: Assessment of Current Investments
Your current investment portfolio shows a thoughtful approach to diversification. You’ve chosen funds across various categories: flexi cap, small cap, mid cap, and ELSS. This is a strong foundation for long-term growth. Let's break down the elements and assess if any adjustments are needed.

Flexi Cap Funds
Strength in Flexibility: Flexi cap funds offer flexibility across market capitalizations. This flexibility can help navigate different market cycles effectively.

Balanced Risk and Return: Your investments in flexi cap funds are well-positioned to balance growth with stability. This makes them a solid choice for your long-term goals.

Small Cap and Mid Cap Funds
High Growth Potential: Small cap and mid cap funds provide exposure to companies with high growth potential. Over a 15-year period, these can deliver substantial returns.

Increased Volatility: However, these funds can be more volatile in the short term. The long-term horizon you have planned helps mitigate this risk.

ELSS Funds
Tax Efficiency: Your investment in an ELSS fund not only offers growth potential but also provides tax benefits under Section 80C. This dual benefit is an excellent strategy.

Long-Term Commitment: ELSS funds come with a lock-in period of three years. This aligns well with your long-term investment horizon, ensuring discipline in your investments.

Public Provident Fund (PPF)
Safe and Secure: Your monthly investment in PPF adds a layer of security to your portfolio. PPF offers assured returns, making it a good tool for risk management.

Tax-Free Returns: The returns from PPF are tax-free, which adds to the overall growth of your corpus. This is a sound strategy for long-term wealth accumulation.

Evaluating the Need for Changes
Given your diversified approach, your portfolio is well-structured for long-term growth. However, let’s consider a few additional points to ensure it remains robust over the next 15 years.

Consideration of Additional Investments
Large Cap Fund: While flexi cap funds provide exposure to large caps, you might consider a dedicated large cap fund. This can further balance your portfolio by adding stability through investments in established companies.

Sectoral/Thematic Fund: If you are willing to take on a bit more risk for potentially higher returns, a small allocation to a sectoral or thematic fund could be considered. This is optional but could add another layer of diversification.

Revisiting PPF Contribution
Balance with Equity Exposure: Your current Rs. 5,000 monthly investment in PPF is a safe choice. However, ensure that it doesn’t overshadow your equity investments. Equity has the potential to outpace fixed income returns over the long term.

Review Periodically: Keep reviewing your PPF contributions in relation to your overall portfolio. Adjustments may be needed based on changing market conditions or life goals.

Long-Term Investment Strategy
Consistency is Key: You’ve been investing for the last three years, which is commendable. Continue with this disciplined approach to build wealth over time.

Periodic Review: It’s essential to review your portfolio periodically. This ensures your investments remain aligned with your financial goals and market dynamics.

Rebalancing: As your investment progresses, consider rebalancing your portfolio. This helps in maintaining the desired asset allocation and managing risk effectively.

Direct vs. Regular Funds
Disadvantages of Direct Funds:

No Professional Guidance: Direct funds lack the guidance of a Certified Financial Planner. This could lead to missed opportunities or higher risks.

Time and Effort: Managing direct funds requires significant time and effort. Without expertise, this could result in suboptimal investment decisions.

Advantages of Investing Through a CFP:

Tailored Advice: A CFP provides personalized advice, ensuring your investments align with your financial goals.

Ongoing Monitoring: Investing through a CFP means your portfolio is regularly monitored and adjusted to market conditions, optimizing your returns.

Final Insights
Your investment strategy is on the right track with a diversified portfolio across flexi cap, small cap, mid cap, and ELSS funds. Your monthly PPF contributions also add a layer of security to your financial plan. However, consider adding a large cap fund for further stability and possibly a sectoral fund for additional diversification.

Stay consistent with your investments, periodically review your portfolio, and consider the guidance of a Certified Financial Planner for optimal results. This will ensure that your investments continue to grow and meet your financial goals over the next 15 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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  |6268 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 06, 2024

Asked by Anonymous - Apr 12, 2024Hindi
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Hello sir, I am investing in the following funds. 1) SBI mid and large cap 10000rs 2) SBI Contra Fund 5000 rs 3) Paragh Parik Flexicap 5000 rs I am planning to invest 15000 rs in HDFC Midcap opportunities and 20000 rs in SBI bluechip fund. Please guide me if these funds are good or shall I look for some other funds.
Ans: It's wonderful to see your commitment to financial planning. Let's dive into shaping your investment strategy:

• Firstly, I commend you for taking the initiative to invest and secure your financial future.
• It's a wise decision to seek guidance from a Certified Financial Planner like myself to navigate the complexities of investing.

• As we embark on this journey together, let's prioritize understanding your financial goals, risk tolerance, and investment horizon.
• Your unique circumstances and aspirations will guide us in crafting a tailored investment plan that aligns with your needs.

• Remember, investing is not just about chasing returns; it's about achieving your financial objectives while managing risk effectively.
• We'll focus on building a diversified portfolio that balances growth potential with stability to withstand market fluctuations.

• Mutual funds can be a powerful tool in your investment arsenal, offering access to a wide range of asset classes and investment strategies.
• By spreading your investments across different mutual funds, we can mitigate risk and optimize returns over the long term.

• It's essential to review your investment portfolio regularly and make adjustments as needed based on changing market conditions and your evolving financial goals.
• Consult a Certified Financial Planner, to provide ongoing support and guidance to keep you on track towards financial success.

• Lastly, remember that investing is a journey, not a destination.
• Stay disciplined, stay informed, and stay focused on your long-term objectives.

• With dedication and prudent decision-making, you can build a robust investment portfolio that paves the way for a secure and prosperous future.
• Together, let's turn your financial aspirations into reality. You're on the path to financial freedom, and I'm here to help you every step of the way.

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Ramalingam

Ramalingam Kalirajan  |6268 Answers  |Ask -

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

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Hello Sir I m investing 9000 in SBI small cap & 9000 in Quant small cap in Feb'2024. Also 6000 in Parag Parikh Flexi Cap and 6000 in Quant Flexi Cap for the period for 20+ years. Please review my funds. Is these are good to continue.
Ans: It's commendable that you're investing with a long-term horizon in mind. Let's review your fund choices:

SBI Small Cap: Small-cap funds typically carry higher risk but also the potential for higher returns over the long term. Given your investment horizon of 20+ years, investing in small-cap funds can be a sound strategy, as they have the potential to outperform over extended periods.

Quant Small Cap: Similar to SBI Small Cap, Quant Small Cap also falls into the small-cap category. It's essential to understand that small-cap funds can be volatile in the short term but may offer significant growth opportunities over the long run.

Parag Parikh Flexi Cap: Flexi-cap funds provide flexibility to invest across market capitalizations based on market conditions. Parag Parikh Flexi Cap is known for its diversified approach and focus on quality stocks. It's a suitable choice for long-term investors seeking exposure to a mix of large, mid, and small-cap stocks.

Quant Flexi Cap: Flexi-cap funds like Quant Flexi Cap offer flexibility in asset allocation, allowing the fund manager to adapt to changing market conditions. While Quant Flexi Cap may provide growth opportunities, it's essential to monitor its performance and ensure it aligns with your investment objectives.

Overall, your fund selection reflects a diversified approach across small-cap and flexi-cap categories, which can potentially provide robust growth prospects over the long term. However, it's essential to regularly review your investments to ensure they remain aligned with your financial goals and risk tolerance.

Consider consulting with a Certified Financial Planner periodically to reassess your investment strategy and make any necessary adjustments based on changing market dynamics and personal circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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MF, PF Guru - Answered on Sep 11, 2024

Asked by Anonymous - Sep 10, 2024Hindi
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I have 10 lakh rupees which I want invest in MF. Please suggest some fund for lump sum amount to invest for 1 and half years.
Ans: Dear Friend,
Thank you for your query. 1.5 Years is a very short time for getting high returns. Investing Rs 10 lakhs in mutual funds for a short-term horizon of 1.5 years requires a cautious approach. For such small period, you should look for low to moderate-risk funds that offer stability with reasonable returns, as investing in high-risk equity funds might be too volatile for a short time frame. Since your investment horizon is just 1.5 years, avoid high-risk equity mutual funds as they can be volatile in the short term. Check for exit loads and tax implications before investing. Most short-term capital gains (if you withdraw before 3 years) from debt funds are taxed according to your income tax slab.
You have to evaluate your risk Appetite , Short-Term Debt Funds are invested in government securities, corporate bonds, and other debt instruments with short maturities, offering stability and moderate returns. For a 1.5-year investment, these are ideal as they are less volatile. you can expect 5-7% per annum Returns. You can think of
• ICICI Prudential Short Term Fund
• HDFC Short Term Debt Fund
• Axis Short Term Fund
• ICICI Prudential Corporate Bond Fund
• HDFC Corporate Bond Fund
• Aditya Birla Sun Life Corporate Bond Fund.
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Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

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Ramalingam

Ramalingam Kalirajan  |6268 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 11, 2024

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Hello Sir, I am Naveen Raja from Chennai. I am investing from Sep 2021 in ELSS SIP. Now I have been stopped due to monthly expenses. Question 1: I want to start again on a daily sip basis to achieve 5 cr in next 10 years suggest me a fund which will give this target amount over 10 years on an average of 20% interest Y-o-Y compunding to the investment amount? Question 2: Also, which I stopped in ELSS SIP - Axis Long term - Growth should I need to continue for a longer period or should take that money and invest in any different hybrid funds ?
Ans: Naveen, thank you for reaching out. Investing in ELSS funds is a good choice, especially considering tax-saving benefits. Stopping your SIPs due to monthly expenses is understandable, but restarting is crucial to achieving your financial goals.

Let’s address your two concerns one by one.

Question 1: Achieving Rs. 5 Crores in 10 Years
You aim to accumulate Rs. 5 crores in the next 10 years, with an expected 20% annual growth. While this is a high target, it’s not impossible. But I must highlight that 20% returns over 10 years are aggressive, and the market may not guarantee such consistent growth. Equity mutual funds, however, can potentially give you strong returns if you stay disciplined.

Steps to Achieve Rs. 5 Crores in 10 Years
Daily SIP Approach:
Daily SIP is a good way to spread out your investments. It allows for better averaging as the market fluctuates daily.

Focus on Equity Mutual Funds:
For such high returns, equity mutual funds are ideal. These funds have a strong track record of delivering long-term growth. However, keep in mind that they come with market risk.

Avoid Setting Unrealistic Return Expectations:
A 20% return every year is optimistic. A more realistic return from equity funds would be around 12% to 15%. Anything beyond that would require consistent high-performing market conditions.

Recommended Strategy
Diversified Equity Funds:
Instead of chasing returns with a single fund, diversify your investments across various equity funds. This reduces risk and ensures balanced growth.

Mid and Small Cap Funds:
These funds offer higher returns but come with more volatility. You can allocate a portion of your investments to these funds for higher growth potential.

Large Cap Funds:
They offer stability. Having some exposure to large-cap funds can help you maintain balance in your portfolio.

Avoid Index Funds:
Index funds might not meet your target as they only track the market. Actively managed funds can provide better returns through stock selection.

Calculating SIP Contribution
Achieving 5 Crores in 10 Years:
If you want to achieve Rs. 5 crores in 10 years, based on a more realistic 12% to 15% annual return, you would need to invest a significant amount every month. A Certified Financial Planner can help you calculate the exact monthly SIP amount based on your goal and risk tolerance.
Question 2: Should You Continue ELSS SIP or Shift to Hybrid Funds?
Your current ELSS investment in Axis Long Term Equity Fund is a tax-saving fund with a 3-year lock-in period. Since you’ve already completed the minimum holding period, you may wonder if it’s wise to continue or switch to a different type of fund.

Assessing ELSS Funds
Tax Benefit:
ELSS funds provide tax benefits under Section 80C. This is a significant advantage if you still need to save tax. Continuing with your ELSS investment can help you keep your tax-saving advantage.

Equity Exposure:
ELSS funds are equity-oriented, which means they have good long-term growth potential. If your goal is to build wealth over time, equity exposure is necessary.

Disadvantages of Switching to Hybrid Funds
Lower Returns:
Hybrid funds invest in a mix of equity and debt, which may offer lower returns compared to pure equity funds. While they are less volatile, their growth potential may not meet your goal of Rs. 5 crores in 10 years.

Not Ideal for High Growth:
If you want aggressive wealth creation, hybrid funds may not be the best fit. Their balanced approach is better suited for those with low to moderate risk tolerance.

What You Should Do
Continue with ELSS:
Since you’ve already started with Axis Long Term Equity Fund, consider continuing for a longer period. ELSS funds provide both tax benefits and growth. You’ve already endured the initial market volatility, and over time, equity funds tend to deliver better returns.

Avoid Hybrid Funds for Now:
If your goal is aggressive wealth creation, hybrid funds might not align with this. Instead, stick to equity funds with a high growth potential.

Final Insights
Set Realistic Expectations:
While you aim for 20% annual returns, the market is unpredictable. A more realistic expectation of 12% to 15% will help you stay grounded and focused.

Daily SIPs Can Be Helpful:
A daily SIP strategy can help you achieve better averaging. However, for high returns, focus on equity funds with a long-term horizon.

Continue Your ELSS Investments:
Since you’ve already invested in Axis Long Term Equity Fund, consider continuing with it. It offers both tax benefits and long-term growth.

Consult with a Certified Financial Planner:
To determine the exact amount you should invest monthly, it’s essential to work with a professional. They can help you build a diversified portfolio aligned with your goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

...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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