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New investor with ₹5,000 monthly: Stocks, Mutual Funds or ETFs?

Samraat

Samraat Jadhav  |2277 Answers  |Ask -

Stock Market Expert - Answered on Apr 22, 2025

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more
Asked by Anonymous - Apr 22, 2025Hindi
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I am new to investing and I am willing to spare about Rs 5,000 monthly. I want to build long-term wealth but I don't know where to begin. Should I pick stocks, go with mutual funds, or try ETFs? What is the safest and smartest path for a beginner like me?

Ans: mutual funds are good as a beginner.
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  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 2024

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Hello sir I am Adwaith M , i have completed my 12th grade and i really want to kniw how to start investing for long term , for my retirement and all. I would like to invest in mutual funds . So sir can u pls help me to find out and tell which mutual funds would be better for great return and would be best to invest in .
Ans: Adwaith, you are at a great stage to start investing. Planning early for retirement and long-term goals can set you up for a secure future.

Why Mutual Funds?
Mutual funds are a great way to start investing. They provide diversification, professional management, and potential for higher returns compared to traditional savings.

Choosing the Right Mutual Funds
1. Large-Cap Funds

Invest in stable, large companies.
Suitable for beginners due to lower risk.
2. Mid-Cap Funds

Invest in medium-sized companies.
Offer a balance between risk and return.
3. Small-Cap Funds

Invest in smaller companies.
Higher risk but higher potential returns.
4. Balanced or Hybrid Funds

Invest in both equity and debt.
Provide stability and growth.
5. Equity-Linked Savings Schemes (ELSS)

Offer tax benefits under Section 80C.
Have a lock-in period of 3 years.
Starting with SIPs
Systematic Investment Plans (SIPs)

Invest a fixed amount monthly.
Reduce risk through rupee cost averaging.
Start with as low as Rs. 500-1000 per month.
Diversifying Your Portfolio
Equity Funds

Large-cap, mid-cap, and small-cap funds.
Debt Funds

For stability and lower risk.
Hybrid Funds

Combine equity and debt.
Steps to Start Investing
Know Your Risk Tolerance

Understand your risk capacity.
Higher risk can yield higher returns.
Set Clear Goals

Define your investment goals.
Short-term (3-5 years) and long-term (15-20 years).
Research and Select Funds

Choose funds based on past performance.
Consult a certified financial planner for personalized advice.
Start with SIPs

Begin with a manageable amount.
Increase as your income grows.
Monitoring and Adjusting
Regular Reviews

Check your investments annually.
Rebalance your portfolio as needed.
Stay Updated

Keep up with market trends.
Adjust your investments accordingly.
Final Insights
Starting early gives you an advantage. With regular investments, you can build a substantial corpus over time. Mutual funds offer a good mix of risk and return, especially for young investors.

Remember to diversify your investments to spread risk. Regular monitoring and adjustments will ensure you stay on track to meet your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

Asked by Anonymous - Jul 16, 2024Hindi
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Hi there, I am 34 yr old, new in market. Never invested in any mutual funds or anything. Can you guide me whats best option for me right now in terms of mutual funds, stocks, bonds, Etfs etc. Looking for ling term investment. Thanks in advance!!
Ans: As a 34-year-old new investor, you have the advantage of a long investment horizon, which allows you to benefit from compounding. Here's a guide to help you get started.

Investment Options

1. Mutual Funds

Equity Mutual Funds: Suitable for long-term growth. Invests in stocks and provides diversification. Ideal for those looking to build wealth over time.

Debt Mutual Funds: Safer option, invests in bonds and government securities. Provides regular income and stability.

Hybrid Mutual Funds: Combines equity and debt. Balanced approach to growth and stability.

2. Stocks

Direct Stock Investment: Invest in individual companies. Requires research and monitoring. Potential for high returns but comes with higher risk.
3. Bonds

Government Bonds: Safe and secure. Provides fixed returns over time. Suitable for conservative investors.

Corporate Bonds: Higher returns than government bonds but come with higher risk.

4. Exchange-Traded Funds (ETFs)

ETFs: Trades like a stock but holds a diversified portfolio. Offers exposure to a wide range of assets with lower fees.
Investment Strategy

1. Define Your Goals

Long-Term Goals: Retirement, children's education, buying a house. Helps in choosing the right mix of assets.
2. Assess Your Risk Appetite

High Risk Tolerance: Can invest more in equity mutual funds and stocks.
Moderate Risk Tolerance: Balance between equity and debt funds.
Low Risk Tolerance: Focus more on debt funds and bonds.
3. Diversify Your Portfolio

Diversification: Spread investments across different asset classes. Reduces risk and enhances returns.
4. Start with Systematic Investment Plans (SIPs)

SIPs: Invest a fixed amount regularly in mutual funds. Disciplined approach and benefits from rupee cost averaging.
5. Review and Rebalance

Regular Reviews: Monitor your investments periodically.
Rebalancing: Adjust your portfolio based on performance and changing goals.
Recommended Approach

For a Balanced Portfolio:

Equity Mutual Funds: 60% of your portfolio. Choose a mix of large-cap, mid-cap, and small-cap funds.
Debt Mutual Funds: 20% of your portfolio. Provides stability and income.
Bonds: 10% of your portfolio. Safe and secure returns.
ETFs: 10% of your portfolio. Diversified and low-cost option.
Final Insights

Starting your investment journey with a mix of mutual funds, bonds, and ETFs can provide a balanced approach to growth and stability. Regularly review your investments and adjust as needed to stay aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

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

Asked by Anonymous - Jul 16, 2024Hindi
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Hi there, I am 34 yr old, new in market. Never invested in any mutual funds or anything. Can you guide me whats best option for me right now in terms of mutual funds, stocks, bonds, Etfs etc. Looking for long term investment. Thanks in advance!!
Ans: Welcome to the world of investing! At 34, you have a great opportunity to grow your wealth over the long term. Let's explore the best options for you in mutual funds, stocks, bonds, and ETFs.

Understanding Your Financial Goals

Define your financial goals. These could be retirement, buying a home, or children’s education. Knowing your goals helps in choosing the right investments.

Assessing Your Risk Tolerance

Understand your risk tolerance. This depends on your comfort with market fluctuations. Higher risk can lead to higher returns but also potential losses.

Starting with Mutual Funds

Mutual funds are great for beginners. They provide diversification and professional management. Here are some types to consider:

Equity Mutual Funds

Equity funds invest in stocks. They offer higher returns but come with higher risk. Ideal for long-term growth.

Debt Mutual Funds

Debt funds invest in bonds and fixed income securities. They offer stable returns with lower risk. Suitable for medium-term goals.

Balanced or Hybrid Funds

These funds invest in both equity and debt. They provide a balance of risk and return. Good for moderate risk tolerance.

Systematic Investment Plan (SIP)

Start with SIPs. They allow you to invest a fixed amount regularly. This approach averages out the purchase cost and mitigates market volatility.

Investing in Stocks

Stocks can offer high returns but require market knowledge. Diversify your investments across different sectors. Invest in well-established companies with a good track record.

Exploring Bonds

Bonds are fixed-income investments. They are safer but offer lower returns. Ideal for capital preservation and stable income. Government bonds and corporate bonds are good options.

Considering ETFs

ETFs are similar to mutual funds but trade like stocks. They offer diversification at a lower cost. Good for passive investment strategies.

Creating a Diversified Portfolio

Diversification reduces risk. Combine different asset classes like equities, bonds, and ETFs. This balances potential returns and risks.

Consult a Certified Financial Planner

A Certified Financial Planner (CFP) can provide personalized advice. They can help you create a tailored investment plan based on your goals and risk tolerance.

Regular Review and Adjustment

Regularly review your investments. Adjust based on market conditions and personal circumstances. Stay informed about market trends and new investment opportunities.

Emergency Fund

Maintain an emergency fund. This should cover 6-12 months of expenses. It provides financial security in case of unexpected events.

Tax Planning

Consider the tax implications of your investments. Long-term investments often have tax benefits. Plan accordingly to optimize your returns.

Final Insights

Starting early gives you a significant advantage. Focus on long-term goals and stay disciplined. Diversify your investments to balance risk and return. Consult a Certified Financial Planner for personalized guidance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2025

Asked by Anonymous - May 13, 2025
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Greetings!!!! I am 43 years Old, I had started 10k per month TATA AIA SIP in previous year for total 7years Plan. I want to education plan for my 1 kid who is 6 years old now. Please advice and guide me about more investments plan, as i am still confused about future growth and any plan for my wife age 38years.
Ans: You're at a critical financial stage. Planning for your child’s education and securing your family’s future are both top priorities. You've already started a ULIP, which is a start. But let’s take a deeper 360-degree view of your situation.

Below is a detailed plan, broken into simple sections for better clarity.



Assessment of Your Current ULIP Investment

You're investing Rs. 10,000 per month in a 7-year ULIP.



ULIPs mix insurance with investment. That reduces the growth power of your money.



Charges like premium allocation, fund management, and mortality charges reduce returns.



Your actual invested amount is much lower in the first few years.



ULIPs have limited flexibility in fund switching and partial withdrawal rules.



Maturity benefits are taxed if the annual premium exceeds Rs. 2.5 lakh. Be cautious of this.



A ULIP is not ideal for education goals or long-term wealth building.



As a Certified Financial Planner, I suggest surrendering this policy and moving funds to mutual funds.



You can continue till 5 years to avoid surrender charges if already started.



But do not renew after the 7-year term. Don't increase contributions in this ULIP.



Planning for Your Child’s Higher Education

Your child is 6 years old. You have around 11-12 years.



College education in India or abroad can cost Rs. 30–60 lakhs or more.



Instead of ULIPs, invest in diversified mutual funds. This will give better inflation-adjusted returns.



Use a mix of large cap, flexi cap and small cap mutual funds.



Start SIPs in these funds with a long-term horizon of 10-12 years.



You may also consider goal-based child education funds that are actively managed.



Don't invest in direct funds. They look cheaper, but don’t offer guidance.



Always invest through a Certified Financial Planner via a regular plan.



Your investment will stay aligned with your goal as the planner will guide with rebalancing.



Use a dedicated SIP only for child’s education goal. Don’t merge it with retirement planning.



Suggested Action Plan for Child’s Education

Shift future contributions from ULIP to SIPs in active funds.



Start with Rs. 20,000 per month SIP only for education.



Review this SIP every year and increase it by 10%-15% annually.



Add lump sums like bonuses or yearly increments into the same goal fund.



In the last 2 years before the education goal, shift to debt funds slowly.



This will protect your accumulated amount from equity volatility.



Investment Plan for Your Wife (Age 38)

She has a long horizon. She can invest for both retirement and her independent needs.



Open a separate mutual fund folio in her name.



Start SIPs in flexi cap, large & midcap, and hybrid funds in regular plans.



You can start with Rs. 10,000 per month and increase gradually.



You may also use her PPF account for additional tax-free corpus.



Avoid investing in gold, insurance policies, or real estate for her.



Ensure she has her own health insurance and a term insurance if she’s working.



If she’s not working, then create an emergency fund in her name.



That gives her independence and safety if she needs cash.



Family Protection with Insurance

You did not mention your term cover. You must have it if not already.



Ideal cover should be 15–20 times your yearly income.



ULIPs or LIC endowment policies should not be considered for protection.



Avoid investment-linked insurance plans. Keep insurance and investment separate.



Review your existing insurance covers. Add riders like critical illness and accident if needed.



Tax Efficient Planning

Use Section 80C wisely. Don’t just rely on ULIP or LIC plans.



Max out PPF, ELSS mutual funds, and children tuition for tax saving.



Invest in actively managed ELSS funds for better returns than ULIPs.



Avoid index funds for tax planning. They may underperform in volatile markets.



Debt funds are taxed as per slab now. Use carefully if short horizon.



Track capital gains if you sell mutual funds. Use new tax rules for equity funds:



  - LTCG above Rs. 1.25 lakh taxed at 12.5%

  

  - STCG taxed at 20%



Plan redemptions well in advance to manage taxes efficiently.



Retirement Planning (For You and Wife)

Start a separate SIP for your retirement corpus. Do not merge with other goals.



You have 17 years for retirement. That’s good for wealth accumulation.



Invest in a mix of actively managed flexi-cap and large-cap funds.



Add hybrid funds to reduce volatility as you near retirement.



Continue EPF, and increase VPF if possible. It is tax-free and safe.



Don't consider NPS if liquidity is important. Maturity rules are rigid.



Use mutual funds with regular advice to stay on track till age 60.



Exit ULIPs and Poor Insurance Products

You mentioned TATA AIA ULIP. Continue for 5 years to avoid penalty.



After that, exit and move funds to SIP in mutual funds.



If you or wife have LIC endowment, Jeevan Saral, or ULIPs, surrender them.



Reinvest maturity amount into SIPs in regular mutual fund plans.



Do not fall for insurance agents who pitch plans as tax saving or guaranteed.



Emergency Fund and Liquidity

Keep at least 6 months of family expenses in a liquid mutual fund.



Don’t use your SIP or education fund as emergency source.



You may open a separate savings bank linked sweep account for this.



This fund will help if there is any job loss, health issue, or urgent need.



What Not to Do

Don’t invest in new ULIPs or insurance-linked plans.



Avoid direct mutual fund investments. You won’t get guided rebalancing.



Do not use your child’s education fund for house down payment.



Don’t pick index funds. They underperform in sideways or bear markets.



Don’t buy land or gold as an investment for your goals.



Final Insights

You are at a very strategic life stage. You have time and income strength.



ULIPs will not help you grow wealth. Shift to goal-based mutual fund SIPs.



Separate goals: child education, your retirement, wife’s security, and emergencies.



Invest only through a Certified Financial Planner for customised long-term support.



Review all goals every year. Increase SIPs with income.



Protect family with pure term insurance and health insurance.



Focus on building wealth in regular mutual funds, not through insurance products.



Real financial freedom comes when goals are funded without stress.



You have a clear head start. Use it with discipline and right guidance.



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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