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What are the best high-risk mutual funds for a 15-year investment with a monthly contribution of 50k?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 03, 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
Asked by Anonymous - Aug 25, 2024Hindi
Money

Hi Sir, For a long term perspective (15 years) which mutual funds would you recommend. I plan to invest 50k per month and ready to take high risk. Please advice.

Ans: For a 15-year investment horizon, you have a significant advantage. Long-term investments benefit from compounding, allowing wealth to grow steadily over time. Your readiness to take on high risk aligns well with growth-oriented investments, which can potentially deliver substantial returns.

Investment Objectives
Wealth Accumulation: With a 15-year timeline, the goal is to grow your wealth significantly.

High Growth Potential: Given your high-risk tolerance, investing in equity-oriented mutual funds makes sense.

Inflation-Beating Returns: Over a long period, your investments should outperform inflation, ensuring the value of your money grows.

Advantages of Active Management
Expertise: Actively managed funds benefit from the expertise of fund managers. They can adapt to market changes, aiming to outperform benchmarks.

Flexibility: Active funds are not tied to a particular index. Fund managers can choose the best-performing sectors and companies.

Potential for Higher Returns: Active management can potentially offer higher returns compared to passive strategies, especially over long periods.

Disadvantages of Index Funds
Lack of Flexibility: Index funds simply mirror a market index. This means they cannot adapt to changing market conditions.

No Outperformance: Index funds aim to match, not beat, the market. In times of market volatility, they might underperform compared to active funds.

Limited Downside Protection: In a declining market, index funds fall as much as the market. Active funds, on the other hand, may employ strategies to mitigate losses.

Disadvantages of Direct Funds
Absence of Professional Guidance: Direct funds do not provide access to a certified financial planner (CFP). This can lead to uninformed decisions.

Time-Consuming: Managing investments without professional help requires constant attention. This may not be ideal for everyone.

Possibility of Mistakes: Without expert advice, there’s a risk of choosing the wrong funds, which can negatively impact returns.

Benefits of Regular Funds
Professional Management: Regular funds come with the expertise of a CFP, ensuring your investments are well-managed.

Stress-Free Investing: With regular funds, you don’t have to constantly monitor your investments. The CFP takes care of it for you.

Better Fund Selection: A CFP can recommend funds that align with your financial goals and risk tolerance.

Portfolio Diversification
Equity Funds: Considering your high-risk tolerance, equity funds are a good choice. They offer high growth potential over the long term.

Mid-Cap and Small-Cap Funds: These funds invest in mid-sized and small companies, which can offer higher returns. However, they also come with higher risk.

Sectoral/Thematic Funds: These funds focus on specific sectors like technology or healthcare. They can provide high returns but require careful selection.

Balanced Approach: While equity should be the primary focus, consider adding a small percentage to debt funds for stability. This balances the risk, especially during market downturns.

Systematic Investment Plan (SIP)
Consistent Investment: A SIP allows you to invest Rs. 50,000 monthly, providing consistency and discipline in your investment strategy.

Rupee Cost Averaging: By investing regularly, you benefit from rupee cost averaging. This helps in buying more units when prices are low and fewer when prices are high, reducing the overall cost.

Mitigating Volatility: SIPs help in managing market volatility. Regular investments can smooth out market fluctuations over time.

Sectoral and Thematic Funds
Growth Potential: Sectoral funds, especially in sectors like technology and pharmaceuticals, have high growth potential. They are suited for investors willing to take risks.

Cyclical Nature: Be aware that sectoral funds are cyclical. They may perform exceptionally well during certain periods but could underperform during others. A balanced mix is essential.

International Exposure
Diversification Beyond India: Consider funds that invest in international markets. This offers exposure to global growth opportunities and reduces reliance on the Indian market alone.

Currency Advantage: Investing in international funds can provide currency diversification. If the rupee weakens, your international investments could gain in value.

Role of Debt Funds
Risk Mitigation: Even with a high-risk appetite, it’s wise to allocate a small portion to debt funds. They offer stability and act as a cushion during market downturns.

Regular Income: Debt funds can also provide a steady income, which can be reinvested to compound growth.

Regular Review and Rebalancing
Periodic Assessment: Regularly review your portfolio to ensure it aligns with your goals. Market conditions and personal circumstances may change, necessitating adjustments.

Rebalancing: Over time, your asset allocation may shift due to market movements. Rebalancing ensures that your portfolio remains aligned with your risk tolerance and goals.

Importance of a Certified Financial Planner
Tailored Advice: A CFP can provide personalized advice based on your financial goals, risk tolerance, and investment horizon.

Ongoing Support: Investing through a CFP ensures ongoing support and advice, helping you navigate market changes and adjust your strategy as needed.

Maximizing Returns: With the help of a CFP, you can maximize your returns while managing risk effectively. Their expertise in fund selection and portfolio management is invaluable.

Final Insights
Long-Term Commitment: With a 15-year horizon, stay committed to your investment plan. The market will have ups and downs, but long-term growth is likely.

Diversify Wisely: Diversify across equity, mid-cap, small-cap, sectoral, and a small percentage of debt funds. This balance will help manage risk while seeking growth.

Monitor and Adjust: Regular monitoring and adjusting of your portfolio are essential. This ensures your investments stay aligned with your goals.

Seek Expert Guidance: Investing with the help of a CFP ensures you get expert advice tailored to your needs. This enhances your chances of achieving your financial goals.

Investing Rs. 50,000 per month for 15 years can significantly grow your wealth. However, it’s important to choose the right mix of funds and manage them carefully to achieve the best results.

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 Apr 24, 2024

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kindly suggest some three mutual fund long term for the age for a person of 35 having income 1,25 lakh per month wants to invest 35000 per month as he is first time investor as early as possible
Ans: For a 35-year-old first-time investor with a monthly income of 1.25 lakh and a monthly investment capacity of 35,000, here are three mutual funds suitable for long-term investment:

Large Cap Fund:
Why: These funds invest in large, well-established companies that have a track record of stable growth. They are relatively less volatile and offer a good starting point for new investors.
Potential Choice: Large Cap Equity Funds that have a consistent performance history and a low expense ratio.
Multi-Cap Fund:
Why: These funds have the flexibility to invest across market caps, i.e., in large, mid, and small-cap stocks. This diversification can help in capital appreciation while managing risk.
Potential Choice: Multi-Cap Funds that have a proven track record of delivering consistent returns across market cycles.
Balanced Advantage Fund:
Why: These funds dynamically manage the equity-debt allocation based on market valuations. In bullish markets, they can increase equity exposure, while in bearish markets, they can shift towards debt, offering a balanced approach.
Potential Choice: Balanced Advantage Funds with a disciplined investment strategy and a focus on capital preservation along with growth.
Remember to consider the fund's past performance, fund manager's experience, expense ratio, and the fund house's reputation before investing. Additionally, reviewing and rebalancing the portfolio periodically can help in aligning it with your long-term financial goals. It's advisable to consult a Certified Financial Planner for personalized advice tailored to your financial situation and goals. Happy investing!

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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 02, 2024

Asked by Anonymous - Aug 24, 2024Hindi
Money
Hello, I want to know best growing mutual funds in debt, hybrid, index, equity for upcoming 15 years for investing long term. Please advise or suggest me..
Ans: Investing for the long term, especially for 15 years, requires a well-thought-out strategy. You want to ensure your investments grow steadily while managing risks effectively. Your interest in mutual funds—debt, hybrid, index, and equity—is a smart approach to diversify your portfolio.

For a 15-year horizon, it's essential to focus on a mix of funds that align with your financial goals and risk tolerance. Let's break down the key categories and their role in your portfolio.

Debt Mutual Funds: Stability with Moderate Growth
Debt mutual funds are a crucial part of a long-term portfolio. They provide stability, preserve capital, and generate moderate returns. Over a 15-year period, debt funds can help cushion your portfolio against market volatility.

Role of Debt Funds: These funds invest in fixed-income securities like bonds and government securities. They are less volatile than equity funds and provide steady returns.

Types of Debt Funds: There are various types of debt funds—short-term, medium-term, and long-term. For a 15-year investment horizon, you might consider long-term debt funds. These funds benefit from the interest rate cycles and offer higher returns than short-term debt funds.

Inflation Protection: Debt funds, particularly those with a longer duration, can offer some level of protection against inflation. However, they typically have lower returns compared to equity funds.

Balancing Risk: Including debt funds in your portfolio can balance the risk from equity investments. They are ideal for conservative investors who want to avoid high risk while still earning more than traditional savings accounts or fixed deposits.

Hybrid Mutual Funds: Balancing Growth and Stability
Hybrid mutual funds are a blend of equity and debt instruments. They provide a balanced approach to investing, offering both growth potential and risk management.

Role of Hybrid Funds: These funds are designed to achieve a balance between growth and stability. By investing in both equity and debt, they aim to provide higher returns than pure debt funds with less risk than pure equity funds.

Types of Hybrid Funds: There are different types of hybrid funds—conservative hybrid funds, aggressive hybrid funds, and balanced hybrid funds. Each has a varying degree of equity and debt exposure. For long-term growth, aggressive hybrid funds with higher equity exposure might be suitable.

Risk Management: Hybrid funds automatically rebalance the equity-debt mix according to market conditions. This dynamic allocation helps manage risk, making them suitable for investors looking for a mix of stability and growth.

Long-Term Growth: Over 15 years, hybrid funds can grow your wealth significantly while protecting you during market downturns. They offer a good compromise between safety and potential returns.

Index Funds: Market-Linked Growth with Lower Costs
Index funds are passive funds that replicate a specific market index. While these funds have gained popularity, it's important to understand their limitations, especially for long-term investments.

Role of Index Funds: Index funds aim to mirror the performance of a specific index like the Nifty 50 or Sensex. They are passive investments with low expense ratios.

Advantages: The main advantage of index funds is their low cost. Since they don't require active management, the fees are lower than actively managed funds.

Disadvantages: However, index funds only perform as well as the market. They lack the potential to outperform the market, which can limit your returns in the long run. Moreover, in bear markets, index funds can decline as much as the market.

Alternative: Actively Managed Funds: Actively managed funds, on the other hand, have the potential to outperform the market. Skilled fund managers can make decisions based on market conditions, aiming for higher returns. For a 15-year horizon, actively managed funds in the equity category might offer better growth prospects than index funds.

Equity Mutual Funds: Maximising Growth Potential
Equity mutual funds are essential for long-term wealth creation. They invest in stocks, which have historically provided higher returns than other asset classes over long periods.

Role of Equity Funds: These funds are designed for growth. They invest primarily in equities, which have the potential to deliver substantial returns over 15 years.

Types of Equity Funds: There are several types of equity funds—large-cap, mid-cap, small-cap, multi-cap, and sectoral funds. Each has a different risk-return profile. Large-cap funds offer stability with moderate growth, while mid-cap and small-cap funds are more volatile but have higher growth potential.

Risk and Reward: Equity funds come with higher risk compared to debt and hybrid funds. However, over a 15-year period, the risk is mitigated, and the potential for high returns makes them a vital part of your portfolio.

Diversification: Consider diversifying your equity investments across large-cap, mid-cap, and small-cap funds. This diversification can capture growth from various market segments while managing risk.

Long-Term Focus: Equity investments require patience. Market fluctuations are common, but staying invested over the long term can help you reap the benefits of compounding and market growth.

Importance of Regular Monitoring and Rebalancing
While selecting the right mutual funds is crucial, it's equally important to monitor and rebalance your portfolio periodically.

Regular Monitoring: Keep an eye on your investments and review their performance at least once a year. This ensures that your portfolio remains aligned with your financial goals and risk tolerance.

Rebalancing: Over time, market movements can cause your asset allocation to drift from your original plan. Rebalancing involves adjusting your portfolio back to your desired allocation. For instance, if your equity investments have grown significantly, you might want to shift some gains into debt funds to maintain balance.

Adjusting for Life Changes: Your financial goals and risk tolerance may change over time due to life events like marriage, children’s education, or nearing retirement. Adjust your investment strategy accordingly to stay on track.

Tax Efficiency in Long-Term Investments
Tax efficiency is an important aspect of long-term investing. Maximising returns by minimising tax outgo can significantly boost your overall wealth.

Equity Funds: Long-term capital gains (LTCG) from equity funds are taxed at 10% if the gains exceed Rs 1 lakh in a financial year. Although this is relatively low, consider tax-saving strategies to minimise your liability.

Debt Funds: LTCG from debt funds is taxed at 20% with indexation benefits. Indexation adjusts the purchase price for inflation, reducing your taxable gains.

Hybrid Funds: The tax treatment of hybrid funds depends on their equity exposure. If the fund has more than 65% equity, it is taxed like equity funds. Otherwise, it is taxed like debt funds.

Tax Planning: Consider investing in tax-saving mutual funds (ELSS) if you need to save on taxes under Section 80C. ELSS funds have a lock-in period of 3 years and offer equity-like returns with tax benefits.

The Role of a Certified Financial Planner
Investing for 15 years requires a sound strategy and discipline. A Certified Financial Planner (CFP) can help you create a customised investment plan that aligns with your financial goals and risk tolerance.

Personalised Advice: A CFP can assess your financial situation, risk appetite, and future goals to recommend the right mix of funds. They can help you navigate market uncertainties and keep you on track towards your long-term objectives.

Portfolio Management: Regular portfolio reviews and rebalancing are essential for long-term success. A CFP can guide you through these processes, ensuring your investments remain aligned with your goals.

Risk Management: Managing risk is crucial, especially in a long-term investment plan. A CFP can help you diversify your portfolio, select appropriate funds, and protect your wealth from market volatility.

Goal-Based Investing: Whether your goal is retirement, children’s education, or buying a home, a CFP can tailor your investment strategy to meet these specific needs.

Final Insights
Investing for the next 15 years can secure your financial future, but it requires a well-planned strategy. By focusing on debt funds for stability, hybrid funds for balanced growth, equity funds for high returns, and avoiding index funds, you can build a diversified and resilient portfolio.

Remember to monitor your investments regularly, rebalance your portfolio as needed, and consider tax-efficient strategies. Working with a Certified Financial Planner can further enhance your investment strategy, helping you achieve your long-term goals with confidence.

Your long-term financial journey is a marathon, not a sprint. Stay disciplined, stay informed, and your investments will reward you with the growth and security you seek.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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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.

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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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