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New to Investing? Seeking Advice on Choosing Mutual Funds

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 29, 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
mustafa Question by mustafa on Jul 24, 2024Hindi
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dear sir, i am new to investing, can u suggest few best mutual funds?

Ans: Investing in mutual funds can be a smart choice. As a beginner, selecting the right funds is crucial.

Understanding Mutual Fund Categories
Large Cap Funds
Stability and Reliability
These funds invest in big companies.
They are less risky and provide steady growth.
Flexi Cap Funds
Versatility and Balance
They invest across large, mid, and small caps.
This offers a balanced and flexible approach.
Mid Cap Funds
Growth Potential
These funds invest in medium-sized companies.
They have higher growth potential but also higher risk.
Small Cap Funds
High Risk, High Reward
These invest in small companies.
They can deliver high returns but are very volatile.
Benefits of Actively Managed Funds
Professional Management
Expertise at Work
Active funds are managed by experts.
They pick stocks with high potential.
Potential for Higher Returns
Beating the Market
Active funds aim to outperform the market.
This can lead to better returns than index funds.
Disadvantages of Index Funds
Lack of Flexibility
Index funds follow a set index.
They cannot adjust to market changes.
Benefits of Regular Funds
Guidance and Support
Investing through an MFD with CFP credentials provides guidance.
Regular funds offer support and advice, unlike direct funds.
Suggested Mutual Fund Types
Balanced Approach
Large Cap and Flexi Cap Mix
A mix of these funds provides stability and growth.
This is ideal for beginners.
Growth-Oriented Approach
Adding Mid Cap Funds
Include mid caps for higher growth potential.
This suits those willing to take some risk.
Aggressive Approach
Including Small Cap Funds
Add small caps for high returns.
This is for those comfortable with high risk.
Portfolio Allocation Tips
Diversify Wisely
Mix Different Types
Don’t put all your money in one type of fund.
Diversification reduces risk.
Regular Monitoring
Stay Informed
Keep track of your investments.
Adjust your portfolio as needed.
Avoid Over-Diversification
Focused Investments
Too many funds can dilute your returns.
Focus on a few high-performing funds.
Final Insights
Starting your investment journey with mutual funds is a wise decision. Understand the types of funds and their benefits. Opt for actively managed funds for better returns. Diversify wisely and monitor your investments regularly. This will help you achieve your financial goals.

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  |7101 Answers  |Ask -

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

Asked by Anonymous - May 06, 2024Hindi
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Hi could you please tell me in which mutual funds should i invest in and would give me good returns
Ans: Mutual fund selection depends on various factors such as your financial goals, risk tolerance, investment horizon, and asset allocation preferences. Here are some popular mutual fund categories you may consider for potentially good returns:

Large Cap Funds:
Large-cap funds invest in well-established companies with stable earnings and strong market presence.
These funds offer relatively lower risk compared to mid and small-cap funds and are suitable for investors with a conservative risk appetite.
Mid Cap and Small Cap Funds:
Mid and small-cap funds invest in companies with high growth potential but higher volatility.
These funds can generate higher returns over the long term but come with increased risk. They are suitable for investors with a higher risk tolerance and longer investment horizon.
Multi Cap or Flexi Cap Funds:
Multi-cap or flexi cap funds have the flexibility to invest across large, mid, and small-cap stocks based on market conditions.
These funds offer diversification benefits and can adapt to changing market dynamics, making them suitable for investors seeking balanced growth opportunities.
Sector Funds:
Sector funds focus on specific sectors or industries such as technology, healthcare, or banking.
These funds can provide opportunities for higher returns if the selected sector outperforms the broader market. However, they also carry higher sector-specific risks.
Index Funds and Exchange-Traded Funds (ETFs):
Index funds and ETFs replicate the performance of a specific market index such as the Nifty or Sensex.
These funds offer low expense ratios and are ideal for investors seeking passive investment options with diversified exposure to the equity market.
Debt Funds:
Debt funds invest in fixed-income securities such as government bonds, corporate bonds, and money market instruments.
These funds provide stability and regular income, making them suitable for conservative investors or those with short-term investment goals.
Before investing, assess your financial goals, risk tolerance, and investment horizon. Consider consulting with a Certified Financial Planner or mutual fund advisor to create a personalized investment plan tailored to your needs and objectives. Regularly review your portfolio and make adjustments as needed to stay on track towards achieving your financial goals.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 10, 2024

Asked by Anonymous - Jun 10, 2024Hindi
Money
I want to invest in mutual funds. Can u suggest which one is the best
Ans: Understanding Mutual Funds
Mutual funds pool money from various investors to invest in diversified assets, managed by professional fund managers. They offer diversification, professional management, and potential for good returns.

Types of Mutual Funds
Mutual funds come in various types, each serving different financial goals and risk appetites.

Equity Mutual Funds
Equity funds primarily invest in stocks. They offer high return potential but come with higher risk. Suitable for long-term goals like retirement or children's education.

Debt Mutual Funds
Debt funds invest in fixed-income instruments like bonds and government securities. They are less risky and suitable for short to medium-term goals like buying a car or planning a vacation.

Hybrid Mutual Funds
Hybrid funds invest in a mix of equity and debt, offering balanced risk and returns. They suit investors seeking moderate risk with a balanced approach.

Sectoral/Thematic Funds
Sectoral funds invest in specific sectors like technology or healthcare. Thematic funds focus on themes like infrastructure or emerging markets. High-risk, high-reward category.

Active vs. Passive Funds
Active funds are managed by fund managers who make decisions to outperform the market. Passive funds track a specific index.

Disadvantages of Index Funds
While index funds have lower fees, they often underperform compared to actively managed funds during market downturns. Active fund managers can make strategic decisions to protect investments.

Benefits of Actively Managed Funds
Active funds leverage fund managers' expertise to navigate market complexities. They can adjust portfolios based on market conditions, offering potential for higher returns and better risk management.

Choosing the Right Mutual Fund
Choosing the right mutual fund requires understanding your financial goals, risk tolerance, and investment horizon.

Assessing Financial Goals
Identify your financial goals: buying a home, children's education, retirement planning, or wealth creation. Align mutual fund selection with these goals.

Understanding Risk Tolerance
Risk tolerance varies among investors. Assess your comfort with market volatility. High-risk tolerance suits equity funds; low-risk tolerance fits debt funds.

Evaluating Investment Horizon
Investment horizon influences fund selection. Short-term goals (1-3 years) align with debt funds; long-term goals (5+ years) align with equity funds.

Regular vs. Direct Funds
Regular funds involve mutual fund distributors (MFDs) and offer advisory services. Direct funds eliminate intermediaries, reducing fees but requiring self-management.

Disadvantages of Direct Funds
Direct funds save on commissions but demand significant time and knowledge. Investors may miss out on expert guidance, impacting returns and risk management.

Benefits of Regular Funds
Regular funds provide access to Certified Financial Planners (CFPs) who offer personalized advice, portfolio management, and regular monitoring. This support can optimize returns and align investments with goals.

Evaluating Fund Performance
Evaluate mutual fund performance by analyzing historical returns, consistency, and comparison with benchmarks and peer funds.

Historical Returns
Review past performance to gauge potential returns. However, past performance doesn't guarantee future results.

Consistency of Returns
Consistency is crucial. A fund with stable returns over various market cycles indicates good management.

Benchmark Comparison
Compare fund performance with relevant benchmarks. Consistent outperformance indicates strong management.

Peer Comparison
Evaluate a fund against its peers. Consistently outperforming peers signals a robust fund.

Importance of Expense Ratio
Expense ratio impacts net returns. Lower ratios are preferable, but consider the services and performance offered by the fund.

Fund Manager's Track Record
The fund manager's experience and track record are vital. A skilled manager can significantly impact fund performance.

Understanding SIP and Lump Sum Investments
Systematic Investment Plan (SIP) and lump sum investments are common ways to invest in mutual funds.

Systematic Investment Plan (SIP)
SIP allows regular, small investments. It offers rupee cost averaging and disciplined investing, reducing market timing risks.

Lump Sum Investment
Lump sum investment involves investing a large amount at once. Suitable for investors with idle cash and knowledge to time the market.

Tax Implications
Understanding tax implications is crucial for maximizing returns and planning withdrawals.

Equity Funds
Equity funds held for over a year attract long-term capital gains tax at 10% on gains exceeding Rs 1 lakh annually. Short-term gains (within a year) are taxed at 15%.

Debt Funds
Debt funds held for over three years attract long-term capital gains tax at 20% with indexation benefits. Short-term gains are taxed as per the investor's income tax slab.

Asset Allocation and Diversification
Effective asset allocation and diversification reduce risk and enhance returns.

Asset Allocation
Divide investments across asset classes based on risk tolerance and goals. A balanced mix of equity, debt, and hybrid funds can optimize returns.

Diversification
Diversify within each asset class to spread risk. Invest in different sectors, themes, and geographies to mitigate specific risks.

Monitoring and Rebalancing
Regularly monitor your investments and rebalance your portfolio to maintain desired asset allocation and align with goals.

Monitoring
Review fund performance, portfolio alignment with goals, and market conditions periodically.

Rebalancing
Adjust investments to maintain target asset allocation. Rebalancing involves selling overperforming assets and buying underperforming ones.

Importance of a Certified Financial Planner
Engaging a Certified Financial Planner (CFP) offers expert guidance, personalized advice, and ongoing support.

Expert Guidance
CFPs provide professional expertise in financial planning, investment strategies, and market analysis.

Personalized Advice
CFPs tailor investment recommendations to individual goals, risk tolerance, and financial situation.

Ongoing Support
CFPs offer continuous support, portfolio reviews, and adjustments to align with changing financial goals and market conditions.

Avoiding Common Mistakes
Avoid common investment mistakes to safeguard your wealth and optimize returns.

Chasing Past Performance
Don't rely solely on past performance. Market conditions change, and top-performing funds may not always sustain returns.

Ignoring Risk
Understand and accept the inherent risks in mutual fund investments. Choose funds aligning with your risk tolerance.

Lack of Diversification
Avoid concentrating investments in a single fund or asset class. Diversify to spread risk.

Emotional Investing
Don't let emotions drive investment decisions. Stick to your financial plan and avoid impulsive actions.

Considering Your Financial Situation
Evaluate your current financial situation, including income, expenses, liabilities, and existing investments. This helps determine how much you can invest and in which types of funds.

Evaluating Existing Investments
If you hold LIC, ULIP, or investment-cum-insurance policies, consider surrendering them and reinvesting in mutual funds. These products often have high charges and lower returns compared to mutual funds.

Importance of Financial Education
Continuous financial education empowers you to make informed investment decisions.

Staying Updated
Keep abreast of market trends, economic changes, and new investment opportunities. Knowledge enhances decision-making.

Attending Workshops
Participate in financial workshops and seminars. They provide valuable insights and updates on investment strategies and market outlooks.

Final Insights
Investing in mutual funds is a strategic way to grow wealth and achieve financial goals. Understanding different types of funds, assessing your financial situation, and aligning investments with your goals and risk tolerance are crucial steps. Engaging a Certified Financial Planner offers professional guidance, personalized advice, and ongoing support, optimizing your investment journey. Avoid common mistakes, stay educated, and regularly monitor and rebalance your portfolio to ensure it remains aligned with your objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
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.

...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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