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Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 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 - Apr 12, 2024Hindi
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Hi Sir, I'm 43+, Monthly take home is around 3.20 Lacs, Currently i have invested in Shares (Current Portfolio is around 1.55 Crs). EMI is around 1.1 lacs P/m, Recently i have started investing in SIP 1 lacs P/M, and balance 1.20 lacs goes in house, kids education expense. Have EPF balance of 40 lacs as on date. As mentioned above recently i have started investing in SIP (From Oct 2023 onwards), which is at the tune of 1 lacs per month. SIP are Franklin India Prima Fund regular Plan - Growth - 25K, ICICI Prudential Small cap fund retail plan G - 25K, Kotak Multicap fund regular plan growth - 15K, DSP Blackrock mid cap fund regular plan growth - 10 K, and Parag Parikh Flexi Cap fund - Regular plan growth - 25 K. Will increase the SIP investment by 10% every year going forward. Sir, My question is with current SIP investment will i be able to generate 8~10 Cr corpus fund by retirement (Assuming that i will be in Job and working for next 15 years). Current Share portfolio is for long term investment only (assuming i get 12~15% of return every year).

Ans: Analysis of Retirement Corpus Target

Considering your current financial situation and investment strategy, let's evaluate whether your SIP investments can help you achieve a corpus of 8-10 crores by retirement in the next 15 years.

Assessment of Current Investments

Shares Portfolio: With a current portfolio value of 1.55 crores and assuming an annual return of 12-15%, your shares portfolio has the potential to grow significantly over the long term.

EPF Balance: Your EPF balance of 40 lakhs provides a solid foundation for retirement savings and adds to your overall retirement corpus.

SIP Investments: Your SIP investments totaling 1 lakh per month are diversified across various mutual funds, including Franklin India Prima Fund, ICICI Prudential Small Cap Fund, Kotak Multicap Fund, DSP Blackrock Mid Cap Fund, and Parag Parikh Flexi Cap Fund. The plan to increase SIP investments by 10% annually demonstrates a commitment to long-term wealth accumulation.

Estimation of Future Corpus

To estimate the potential corpus accumulated through SIP investments, let's assume an average annual return of 12% over the next 15 years. With an initial SIP investment of 1 lakh per month and an annual increase of 10%, the future value of SIP investments can be calculated using a future value of annuity formula.

Considering the monthly SIP investments and their projected growth, you can accumulate a substantial corpus over the next 15 years. However, the final corpus will depend on various factors such as market performance, investment discipline, and economic conditions.

Assessment of Retirement Corpus Target

Achieving a corpus of 8-10 crores by retirement is ambitious but feasible with consistent savings, prudent investment decisions, and disciplined portfolio management. Your combined investments in shares, EPF, and SIPs demonstrate a proactive approach towards building wealth for retirement.

Recommendations

Regular Monitoring: Continuously monitor the performance of your SIP investments and shares portfolio. Periodically review your financial goals and adjust your investment strategy as needed to stay on track towards achieving your retirement corpus target.

Risk Management: Diversify your investment portfolio to manage risk effectively. Consider allocating assets across different asset classes such as equities, debt, and real estate to enhance portfolio resilience.

Professional Guidance: Consult with a Certified Financial Planner (CFP) to develop a comprehensive financial plan tailored to your specific needs, goals, and risk tolerance. A financial advisor can provide personalized recommendations and strategies to optimize your investment portfolio for long-term wealth accumulation.

With a disciplined approach to savings and investments, coupled with prudent financial planning, you can work towards achieving your retirement goals and securing a comfortable financial future for yourself and your family.

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  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 31, 2024

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Dear Sir I am 26 years old and started earning 1 year back. My take home salary is little more than 50,000 pm. An amount of Rs.5,600 pm is being deducted from salary by employer on account of EPF and I have also a PPF account having annual deposit of 25,000.00 I have already started investing Rs.5100.00 per month in three different Mutual Funds i.e. Kotak Small Cap Fund, Nippon Large Cap Fund and PP Flexi Cap Fund, each. Now, I am thinking to start investing Rs.5100.00 through SIP in HDFC Balance Dynamic Fund. All the above investments have been started with a very long term view of 25 years since I am planning to retire by the time I reached to 50 years age and my Goal is achieve corpus of atleast 10.00 crores. Kindly suggest, whether :- (1) My current investments (including proposed SIP) are sufficient to achieve the proposed Goal ? (2) Any modification is required in the present investment strategy ? Kindly note that at present I am a bachelor, planing for marriage in next two years and I do not have any requirement of construction/acquisition of permanent asset (residential house) since I am residing in parental home with my parents.
Ans: Your proactive approach to financial planning at the age of 26 is commendable. Building a strong investment portfolio early in life sets a solid foundation for achieving long-term goals. Let’s assess your current investments and proposed plans to ensure you are on the right track to reach your goal of accumulating Rs 10 crores by the age of 50.

Evaluating Your Current Investments
Your monthly income is slightly more than Rs 50,000, with Rs 5,600 deducted for EPF and an additional Rs 25,000 annually in PPF. You are also investing Rs 5,100 per month in three different mutual funds. Let’s break down the effectiveness of these investments.

Employee Provident Fund (EPF)
The EPF is a stable and secure form of savings. It offers tax benefits and a decent rate of return. Over the long term, it will contribute significantly to your retirement corpus.

Public Provident Fund (PPF)
The PPF is another excellent long-term investment with tax benefits. Your annual deposit of Rs 25,000 in the PPF will grow substantially over 25 years due to the power of compounding.

Mutual Funds
Your current investment of Rs 5,100 per month in each of three mutual funds (small cap, large cap, and flexi cap) is well diversified. Small cap funds offer high growth potential, while large cap funds provide stability. Flexi cap funds add flexibility to your portfolio by investing across market capitalizations.

Proposed Investment in HDFC Balanced Dynamic Fund
Adding a balanced dynamic fund to your portfolio is a strategic move. These funds balance equity and debt investments, reducing risk while providing growth. This aligns with your long-term goal and adds a layer of stability to your investments.

Assessing the Adequacy of Your Current Investments
Estimating Future Corpus
To achieve Rs 10 crores by the age of 50, consistent and strategic investments are crucial. Considering the power of compounding and historical market returns, your current investments appear promising. However, regular monitoring and adjustments are necessary to stay on track.

Diversification and Risk Management
Your portfolio is well-diversified across different asset classes and fund categories. This diversification reduces risk and enhances the potential for growth. However, ensure periodic review and rebalancing to maintain the desired asset allocation.

Recommendations for Your Investment Strategy
Continue with Regular SIPs
SIP investments are effective for long-term wealth creation. They mitigate market volatility and inculcate financial discipline. Continue your existing SIPs and proposed investment in the balanced dynamic fund.

Increase Investment Gradually
As your income grows, consider increasing your SIP amounts. Incremental increases in investments will significantly impact your corpus over the long term. Aim to increase your SIPs by at least 10% annually.

Emergency Fund and Insurance
Ensure you have an adequate emergency fund, ideally covering 6-12 months of expenses. Also, consider health and term insurance to protect against unforeseen events. This will safeguard your financial plan and provide peace of mind.

Regular Reviews and Adjustments
Financial planning is not a one-time activity. Regularly review your investments and make necessary adjustments based on market conditions and life changes. Consulting with a Certified Financial Planner can provide professional guidance.

Conclusion
Your current and proposed investments are on a good path towards achieving your goal of Rs 10 crores by age 50. Continue with disciplined investing, regular reviews, and necessary adjustments. Your proactive approach and long-term vision are commendable and will serve you well in your financial journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Asked by Anonymous - May 08, 2024Hindi
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Sir I am 42 years old. my current portfolio is INR 48 lakhs. I invest through sip in mutual funds for INR 50k. HDFC mid cap opportunities fund - 10k PPFAS flexi Cap - 15k Mirae asset multi cap - 5k Edelweiss small cap - 5k Tata Digital fund - 5k ICICI India opportunities fund - 5k PPFAS tax saver - 5k I will invest till my retirement. I have been investing in some of the above scheme since 7 to 8 years. Kindly suggest whether I can accumulate good amount of Corpus at the time of retirement. Kindly advise
Ans: Assessing Retirement Accumulation Potential
Current Portfolio Analysis
Your disciplined approach towards investing through SIPs in various mutual funds reflects a proactive stance towards wealth accumulation.

Evaluating Retirement Goals
To assess the adequacy of your retirement corpus, we must align your investment strategy with your retirement goals and financial aspirations.

Analyzing Investment Performance
Review the historical performance of your existing mutual fund investments to gauge their growth potential over the long term.

Assessing Retirement Corpus
Considering your current age, investment horizon, and monthly SIP contributions, we'll estimate the potential corpus you can accumulate by the time of retirement.

Identifying Retirement Income Needs
Determine your expected retirement expenses, including living costs, healthcare, travel, and any other financial obligations, to ascertain the required corpus.

Conducting Retirement Gap Analysis
Evaluate whether your current investment strategy and contribution levels are sufficient to meet your projected retirement corpus needs.

Recommendations for Retirement Planning
Optimize Asset Allocation: Consider rebalancing your investment portfolio to maintain an optimal mix of equity, debt, and hybrid funds aligned with your risk tolerance and retirement timeline.

Review Fund Selection: Regularly assess the performance of your mutual fund holdings and consider reallocating investments to funds with consistent track records and growth potential.

Increase SIP Contributions: If feasible, explore the option of gradually increasing your SIP contributions to accelerate wealth accumulation and bridge any potential retirement gap.

Explore Supplementary Investments: Explore additional avenues for wealth creation, such as tax-efficient investment options like ELSS funds or retirement-focused investment products to enhance your retirement corpus.

Monitor Progress Regularly: Periodically review your investment portfolio's performance and adjust your strategy as needed to stay on track towards achieving your retirement goals.

Conclusion
While your current investment approach demonstrates a proactive stance towards retirement planning, it's essential to periodically reassess your strategy and make adjustments as needed to ensure that you're on course to achieve your financial objectives. By implementing the recommended measures and staying committed to your long-term financial goals, you can enhance the likelihood of accumulating a substantial retirement corpus.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

Asked by Anonymous - Jul 08, 2024Hindi
Money
Hi Sir, I'm 43+, Monthly take home is around 3.20 Lacs, Currently i have invested in Shares (Current Portfolio is around 1.75 Crs). EMI is around 1.1 lacs P/m (Home loan 1 - 50K per month till 2037, 30K car loan till 2027 (Planning to close this year by paying 12 lacs, please suggest if this option of preclosure is good or EMI is good), 30k per month of home 2 till 2040., Recently i have started investing in SIP 1 lacs P/M, and balance 1.20 lacs goes in house, kids education expense. Have EPF balance of 40 lacs as on date. As mentioned above recently i have started investing in SIP (From Oct 2023 onwards), which is at the tune of 1 lacs per month. SIP are Franklin India Prima Fund regular Plan - Growth - 25K, ICICI Prudential Small cap fund retail plan G - 25K, Kotak Multicap fund regular plan growth - 15K, DSP Blackrock mid cap fund regular plan growth - 10 K, and Parag Parikh Flexi Cap fund - Regular plan growth - 25 K. Will increase the SIP investment by 10% every year going forward. Sir, My question is with current SIP investment will i be able to generate 8~10 Cr corpus fund by retirement (Assuming that i will be in Job and working for next 15 years). Current Share portfolio is for long term investment only (assuming i get 12~15% of return every year). Please note : will be spending around 80 lacs for my Son education in engineering from 2027 to 2031, 50% will be spend from savings and balance 50% from education loan.
Ans: It is commendable that you have a structured approach to your finances and investments. Let us delve into an in-depth analysis of your current financial situation and provide a detailed assessment of your future financial objectives, especially focusing on building a corpus of Rs 8-10 crores by retirement.

Current Financial Overview
Income and Expenses
Your current monthly take-home income is around Rs 3.20 lakhs. This is a healthy income, providing you with a good foundation to build your investments. With an EMI burden of Rs 1.1 lakhs per month, you have a significant portion of your income allocated towards debt repayment. It is essential to manage this debt efficiently to maximize your savings and investments.

Investment Portfolio
Your current investment portfolio is diversified across shares, SIPs, and EPF. Here is a quick breakdown:

Shares: Your long-term share portfolio is valued at Rs 1.75 crores.

SIPs: You have recently started SIPs of Rs 1 lakh per month across various funds. This is a positive step towards systematic investment.

EPF: Your EPF balance is Rs 40 lakhs as of now.

EMI Obligations
You have three major EMIs:

Home loan 1: Rs 50,000 per month till 2037
Car loan: Rs 30,000 per month till 2027 (with a plan to prepay Rs 12 lakhs)
Home loan 2: Rs 30,000 per month till 2040
Other Expenses
You have also accounted for household and educational expenses, which is Rs 1.20 lakhs per month. This ensures your family’s needs are met while you invest for the future.

Investment Strategy
SIP Investments
Your SIP investments are well diversified across different types of funds. This diversification helps in managing risks and achieving steady growth. Increasing SIP investments by 10% annually is a prudent strategy, ensuring that your investments grow with your income.

Long-term Share Investments
Assuming a 12-15% return per annum from your share investments, you are on a good path. Shares, being long-term investments, have the potential to provide significant returns, especially if chosen wisely.

EPF
Your EPF provides a secure and stable return, acting as a safety net for your retirement corpus. It is crucial to continue contributing to this fund as it offers tax benefits and compounded growth.

Debt Management
Prepaying Car Loan
Prepaying the car loan of Rs 12 lakhs can be a good decision. It will reduce your EMI burden by Rs 30,000 per month. With the car loan closed, you can redirect this amount towards your investments, accelerating your wealth creation.

Home Loans
Your home loans have a longer tenure, and given their current interest rates, it is advisable to continue with the EMIs. Home loans also provide tax benefits which should be considered.

Future Financial Goals
Retirement Corpus
To achieve a corpus of Rs 8-10 crores by the time you retire, it is crucial to stay disciplined with your investments. Assuming you continue working for the next 15 years, here are some key points to consider:

SIP Growth: Increasing your SIPs by 10% annually will significantly boost your corpus. Starting with Rs 1 lakh per month, your SIPs will grow to Rs 4.18 lakhs per month by the 15th year, assuming a 10% annual increment.

Compounded Growth: With an assumed annual return of 12%, your SIPs alone could potentially grow to Rs 5-6 crores in 15 years. Combined with your share portfolio and EPF, achieving an Rs 8-10 crores corpus is feasible.

Regular Review: Periodically review and rebalance your portfolio. This ensures that your investments are aligned with your goals and market conditions.

Child’s Education
You have planned Rs 80 lakhs for your son’s education, with 50% from savings and 50% from an education loan. This is a balanced approach, ensuring that you do not deplete your savings entirely. Education loans also come with tax benefits on the interest paid.

Risk Management and Insurance
Adequate Insurance
Ensure you have adequate life and health insurance. This protects your family and finances in case of unforeseen events. Evaluate your existing policies and consider additional coverage if necessary.

Emergency Fund
Maintain an emergency fund to cover at least 6-12 months of your expenses. This provides a buffer against unexpected financial shocks.

Tax Planning
Optimize Deductions
Maximize your tax-saving investments under sections 80C, 80D, and other relevant sections. This reduces your tax liability and increases your investable surplus.

Long-term Capital Gains
Plan your withdrawals and investments to optimize long-term capital gains. This involves holding investments for the required duration to benefit from lower tax rates.

Final Insights
Your current financial strategy is robust and well-planned. With disciplined investment and regular reviews, you are on track to achieve your retirement corpus of Rs 8-10 crores. Here are some final suggestions to ensure continued success:

Stay Informed: Keep yourself updated with financial markets and investment opportunities.

Seek Professional Advice: Periodically consult with a Certified Financial Planner to review your strategy and make necessary adjustments.

Focus on Goals: Stay focused on your long-term goals, avoiding impulsive financial decisions.

Your dedication and planning are commendable. With continued discipline and smart financial management, you are well on your way to a secure and prosperous retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

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

Asked by Anonymous - Jul 17, 2024Hindi
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Hi Mam, I'm 43+, Monthly take home is around 3.20 Lacs, Currently i have invested in Shares (Current Portfolio is around 1.75 Crs). EMI is around 1.1 lacs P/m (Home loan 1 - 50K per month till 2037, 30K car loan till 2027 (Planning to close this year by paying 13 lacs, please suggest if this option of preclosure is good or EMI is good, will be paying this amount by selling some shares), 30k per month of home 2 till 2040., Recently i have started investing in SIP 1 lacs P/M, and balance 1.20 lacs goes in house, kids education expense. Have EPF balance of 40 lacs as on date. As mentioned above recently i have started investing in SIP (From Oct 2023 onwards), which is at the tune of 1 lacs per month. SIP are Franklin India Prima Fund regular Plan - Growth - 25K, ICICI Prudential Small cap fund retail plan G - 25K, Kotak Multicap fund regular plan growth - 15K, DSP Blackrock mid cap fund regular plan growth - 10 K, and Parag Parikh Flexi Cap fund - Regular plan growth - 25 K. Will increase the SIP investment by 10% every year going forward. Sir, My question is with current SIP investment will i be able to generate 10~12 Cr corpus fund by retirement (Assuming that i will be in Job and working for next 15 years). Current Share portfolio is for long term investment only (assuming i get 12~15% of return every year). Please note : will be spending around 1~1.5 cr for my Son education in engineering from 2027 to 2031, 50% will be spend from savings and balance 50% from education loan.
Ans: Financial Snapshot
Age: 43+
Monthly Take Home Salary: Rs 3.20 lakhs
Current Investment in Shares: Rs 1.75 crores
EMI Payments: Rs 1.1 lakhs per month
Home Loan 1: Rs 50,000 till 2037
Car Loan: Rs 30,000 till 2027 (planning to close this year)
Home Loan 2: Rs 30,000 till 2040
Monthly SIP Investment: Rs 1 lakh (started Oct 2023)
Monthly Household and Education Expenses: Rs 1.20 lakhs
EPF Balance: Rs 40 lakhs
Expected Expenses for Son's Education: Rs 1-1.5 crores (2027-2031)
Assessing Current Investments
Share Portfolio:

Value: Rs 1.75 crores
Assumed Annual Return: 12-15%
Long-term growth potential is strong. Continue holding for compounding benefits.
SIP Investments:

Started in Oct 2023
Current SIP of Rs 1 lakh per month in a diversified mix of funds
Analyzing Loan Preclosure Option
Car Loan Preclosure:

Current EMI: Rs 30,000 per month till 2027
Preclosure Amount: Rs 13 lakhs (consider selling some shares)
Pros of Preclosure:

Reduces monthly EMI burden
Saves interest costs
Cons of Preclosure:

Selling shares might impact portfolio growth
Evaluate if share sale aligns with long-term goals
Recommendation:

If interest rate on car loan is high, preclosure can be beneficial.
Ensure share sale does not significantly affect long-term portfolio growth.
Evaluating SIP Investments
Current SIP Allocation:

Franklin India Prima Fund: Rs 25,000
ICICI Prudential Small Cap Fund: Rs 25,000
Kotak Multicap Fund: Rs 15,000
DSP Blackrock Mid Cap Fund: Rs 10,000
Parag Parikh Flexi Cap Fund: Rs 25,000
Plan to Increase SIP by 10% Annually:

This is a good strategy. It helps to combat inflation and increase your corpus over time.
Active vs. Index Funds:

Advantages of Actively Managed Funds:
Potential to outperform market
Professional management
Disadvantages of Index Funds:
Passive tracking of the market
No chance to outperform during market rallies
Projected Retirement Corpus
Assumptions:

Monthly SIP: Rs 1 lakh (increasing by 10% annually)
Investment Horizon: 15 years
Average Annual Return: 12-15%
Projection:

Estimated Corpus at Retirement:
With a 12% annual return: Approximately Rs 10-12 crores
With a 15% annual return: Potentially higher than Rs 12 crores
Financial Planning for Son's Education
Expected Expenses:

Rs 1-1.5 crores over 4 years (2027-2031)
Plan to use 50% savings and 50% education loan
Recommendation:

Start a dedicated education fund
Consider balanced or hybrid funds for stability and growth
Ensure this fund aligns with the investment horizon and risk tolerance
Final Insights
Your current investment strategy is strong.
Increasing SIP contributions annually is a prudent move.
Evaluate the car loan preclosure option based on interest rates and long-term goals.
Maintain a diversified portfolio to balance risk and growth.
Regularly review your investments with a Certified Financial Planner to stay on track.
By following these steps, you should be well-positioned to achieve a corpus of Rs 10-12 crores by retirement. Additionally, planning for your son's education expenses with a dedicated fund will ensure financial stability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Milind

Milind Vadjikar  |161 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 19, 2024

Asked by Anonymous - Sep 17, 2024Hindi
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Dear Sir, I have another question: I have been investing in the Bajaj Allianz Life Goal Assurance Plan for the past five years, which is a combination of insurance and investment. The total premium payment duration is 10 years, with a SIP of ?10,000 per month, followed by a lock-in period of an additional 5 years So far, my monthly contributions of ?10,000 have grown to ?9.40 lakhs, with an approximate CAGR of 16%, although the insurance coverage remains at ?12 lakhs. Initially, I did not have much knowledge but continued investing due to the plan’s market-linked structure. For the first five years, my funds were allocated to Pure Stock II and Equity Growth funds basically large-cap. Recently, mid-cap and small-cap index funds were also added to their portfolio. Now that I’ve completed 5 years of investing in large-cap components, I am considering allocating the remaining 5 years to mid-cap and small-cap funds, without increasing the SIP. This would be done through a fund switch from large-cap to mid-cap and small-cap or by dividing the allocation equally—25% each across pure-stock, equity growth, mid-cap, and small-cap funds. Would you recommend this strategy while allowing the large-cap corpurs from the first 5 years to grow at their own pace and remaining 5 years switched into mid-cap/small-cap. Since the policy will mature in 2034, this gives me ample time for the investment to grow, allowing the corpus to build significantly over the remaining years
Ans: Since you are looking for 10 year time horizon, I recommend you divide the allocation equally(25%) across pure stock, equity growth, midcap index and small cap quality index funds.

Happy Investing!!

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Radheshyam Zanwar  |892 Answers  |Ask -

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I am bsc cbz(chemistry botany zoology) 2nd semester student in bikaner rajasthan and my age is 22 and general category and want to pursue research msc than phd but confused about the scope in india in research field i am from middle class family . I dont want to become a school/ coaching teacher but can look for assistant professor and i am not interested in doing msc in chemistry or physics want to do in biotechnology microbiology etc. please help me ????????
Ans: Hello APRK.
You can pursue an M.Sc. and aim to go for P.Hd. There is a lot of scope for research field in India. To become an assistant professor, you must have a minimum qualification of M.Sc. If you are not interested in M.Sc. Chemistry / Physics, then you can go with Biotechnology Microbiology. This is also a good option for you.
In my opinion, there is no point in diversifying yourself without any reason. The correct path is B.Sc. then M.Sc. and then P.Hd. Join as an assistant professor in any college and even though you don't want to join any school/college, you can join any big coaching center or start your coaching. Without any confusion at this stage, just focus on your B.Sc. and try to excel In it with a high %tile for a better future in PG and P.Hd. While pursuing a B.Sc., if possible join some computer courses related to AI, Website development, Mastering Excel, Business Automation, etc. to have an added advantage from a job placement point of view.

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If satisfied, please like and follow me.
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Radheshyam

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Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 2024

Asked by Anonymous - Sep 19, 2024Hindi
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Hello sir. I am 46 looking for advice . I want to increase my 50 L to 1 crore mf portfolio in next one year and my end goal is to achieve 5 to 7 crore by 10 years . I will invest Sip 12 lakh per year for next 5 years . I am getting 32 lakhs cash in next 6 to 9 manths. I am thinking to invest 8 laksh every quarter additional lumpsum by distributing to different mf. I have mf portfolio as large cap 3 including 1 index fund 23% . Midcap 3 23% and small cap 3 23% and flexicap 2 8% and sectorial 2 10% hybrid 2 13%. Based on overlapping fund I see large cap as potential to balance as it's 54% overlapping stocks ,other funds are 0verlapping is 8 to 14%. For each areas . I would like to know is my strategy right to distributing lumpsum quarterly wise right ? . I will be mostly distributing same % ? . Please let me know any other method to achieve the goal. Also all mfs iam keeping are 5 or 4 rated funds with consistent return of 15 to 20% with alpha more than 1 . I am reducing investment on 3 rated funds below alpha 1 funds. Please confirm the approach and Your guidance will be really appreciated
Ans: At 46, you are in a strong financial position with Rs. 50 lakh in mutual funds. Your goal is to grow this to Rs. 1 crore within a year and Rs. 5 to 7 crore in the next 10 years. You plan to invest Rs. 12 lakh per year through SIPs for the next five years, and you will also receive Rs. 32 lakh in cash in the next 6 to 9 months, which you plan to invest in a staggered manner. Your current mutual fund portfolio includes a mix of large-cap, mid-cap, small-cap, flexi-cap, sectoral, and hybrid funds.

Now, let's evaluate and assess your strategy from all angles to ensure it is aligned with your financial goals.

Evaluating Your Portfolio Composition
Current Allocation: Your portfolio includes a diverse range of mutual funds. You have 23% in large-cap, mid-cap, and small-cap funds, 8% in flexi-cap, 10% in sectoral, and 13% in hybrid funds.

Large-Cap Overlap: You mentioned that 54% of your large-cap funds overlap, which indicates some redundancy. Reducing overlap will streamline your portfolio and improve diversification.

Mid-Cap and Small-Cap Allocation: With 23% allocated to mid-cap and small-cap funds, you are well-positioned to benefit from higher growth potential. However, this also comes with higher volatility, which we will discuss in a later section.

Sectoral Funds: Sectoral funds make up 10% of your portfolio. These funds can be risky as they are dependent on the performance of specific sectors. Limiting exposure here is wise.

Hybrid Funds: Hybrid funds, at 13%, provide a mix of equity and debt, which adds a layer of stability. This is a balanced approach and complements your aggressive equity investments.

Lumpsum Strategy: Quarterly Distribution
Your Plan: You plan to distribute Rs. 8 lakh every quarter from your Rs. 32 lakh cash inflow, over the next year. Distributing lumpsum investments quarterly is a prudent way to mitigate market timing risks.

Staggered Approach: By staggering your lumpsum investment, you can take advantage of rupee cost averaging. This reduces the impact of market volatility, which is particularly important given the uncertain nature of markets.

Potential Risks: One concern with lump sum investments is the temptation to invest during market highs. Timing the market is difficult, and a disciplined staggered approach, as you’ve chosen, helps mitigate this risk.

SIPs for Consistent Growth
Annual SIP Commitment: You are investing Rs. 12 lakh annually in SIPs over the next five years. This is an excellent strategy, as SIPs benefit from market volatility. You are disciplined, which is crucial for long-term growth.

Rebalancing Strategy: You are reviewing funds based on their ratings and alpha. Reducing investments in 3-rated funds with lower alpha and focusing on 4- and 5-rated funds is smart. It is essential to continuously monitor fund performance, but avoid making impulsive changes based on short-term fluctuations.

Overlap in Large-Cap Funds
Issue of Overlap: You observed a 54% overlap in your large-cap funds, which is quite high. This can limit your exposure to new opportunities and reduce diversification. It is worth considering consolidation of your large-cap holdings to reduce this overlap.

Action Plan: You can replace some of the overlapping large-cap funds with high-quality actively managed funds. Actively managed funds can provide better opportunities for returns compared to index funds, as fund managers can take advantage of market inefficiencies.

Avoid Index Funds: While index funds can provide low-cost exposure, they often mirror market indices and cannot outperform them. Since you are aiming for a higher growth rate, actively managed funds are likely to be more beneficial. Index funds also lack flexibility in adjusting to changing market conditions, which is essential for achieving higher returns.

Flexi-Cap Funds: Adaptive and Flexible
Flexi-Cap Allocation: Your allocation of 8% to flexi-cap funds is solid. Flexi-cap funds offer the advantage of flexibility in investing across large-cap, mid-cap, and small-cap segments based on market opportunities.

Balancing Act: These funds can adapt to market conditions, providing a more balanced risk-return profile. Increasing your allocation to flexi-cap funds could further enhance the flexibility of your portfolio. These funds can help reduce the impact of volatility while still capitalizing on growth opportunities.

Mid-Cap and Small-Cap Funds: Growth with Volatility
Growth Potential: Mid-cap and small-cap funds provide significant growth potential. However, they are also more volatile compared to large-cap funds.

Current Allocation: Your allocation of 23% each to mid-cap and small-cap funds indicates a high-risk appetite. While these funds can deliver high returns, they can also experience sharp declines in the short term.

Risk Management: Since you are aiming for long-term growth, holding these funds makes sense. However, it’s essential to ensure that your portfolio is not overly concentrated in these high-risk categories. You may want to consider reducing your exposure slightly to mitigate risk, particularly as you approach retirement.

Sectoral Funds: Strategic but Risky
Sectoral Allocation: Sectoral funds can deliver outsized returns, but they are also highly risky as they depend on the performance of specific sectors.

Limiting Exposure: Keeping sectoral funds at 10% of your portfolio is reasonable. However, be cautious about increasing this allocation further, as these funds are more vulnerable to sector-specific downturns.

Hybrid Funds: Stability and Safety
Hybrid Allocation: Your 13% allocation to hybrid funds is a good way to balance your portfolio. Hybrid funds combine equity and debt, providing a safety net during market downturns.

Importance of Stability: These funds offer lower returns compared to pure equity funds, but they also provide stability, especially during market corrections. It’s a good idea to retain this allocation to hybrid funds as part of your overall strategy.

Monitoring Fund Ratings and Alpha
Fund Selection: You are making fund selections based on ratings and alpha. This approach is effective as it helps filter out underperforming funds.

Consistent Review: Continuously monitoring the performance of your funds is crucial. However, avoid making frequent changes based on short-term performance. Focus on long-term consistency and the overall trajectory of the funds.

Reducing 3-Rated Funds: You are reducing your investment in 3-rated funds with an alpha below 1. This is a sound decision as these funds are underperforming. Focus on high-quality funds that have consistently delivered strong returns.

Achieving Your 5 to 7 Crore Goal
Targeting 5 to 7 Crore: Your target of achieving Rs. 5 to 7 crore in 10 years is ambitious but achievable. With disciplined SIPs, a staggered lumpsum approach, and strategic fund selection, you are well on track.

Strategic Rebalancing: It’s important to regularly rebalance your portfolio to ensure it remains aligned with your goals. Focus on actively managed funds, reduce overlap, and avoid index funds to maximize your growth potential.

Consistency: The key to achieving your goal will be consistency. Stick to your SIP schedule, invest your lumpsum funds wisely, and avoid chasing short-term gains.

Final Insights
Your Strategy Is Strong: Overall, your strategy is solid. You have diversified your portfolio across different types of funds, and your disciplined approach to SIPs and lumpsum investments is commendable.

Focus on Large-Cap Overlap: Reducing the overlap in your large-cap funds will improve diversification and provide new growth opportunities.

Continue Monitoring Performance: Keep reviewing your fund performance, but avoid making hasty changes based on short-term trends. Focus on long-term growth.

Stay Disciplined: The key to success is discipline. Stick to your investment plan, and you will be well on your way to achieving your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6340 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 2024

Money
Mr Vivek Lala, Good Morning. Can you please tell me , 1) where all the places we can invest in SWPs. 2) Is there any age limit for SWP. 3) Is there SWP facility in NPS also?.4) Any upper ceiling limit to invest in SWP?. Thank you.
Ans: A Systematic Withdrawal Plan (SWP) is a facility offered by many mutual funds. It allows investors to withdraw a fixed sum from their investments at regular intervals. Let’s dive into each part of your query to provide detailed insights.

1. Investment Options for SWPs

SWPs are primarily associated with mutual funds. Here are the various options where you can invest through SWPs:

Debt Mutual Funds: These are one of the most popular options for SWPs. They provide stability, with low-risk returns.

Equity Mutual Funds: SWPs can also be done in equity mutual funds. This option is riskier, but it can offer better returns in the long term.

Hybrid Mutual Funds: These funds combine equity and debt, offering balanced risk and returns. SWPs in hybrid funds can help diversify risk.

Balanced Advantage Funds: These are dynamic funds that shift between equity and debt based on market conditions. SWPs in these funds could provide more stability.

Notably, SWPs are not available in direct equity, bonds, or other such traditional investments. They are mainly associated with mutual funds. It’s a simple and flexible option for generating regular income.

2. Age Limit for SWPs

There is no age limit for investing in an SWP. Whether you are young and looking to generate additional income, or you are in retirement, anyone can opt for SWPs. You can start an SWP at any stage in your life, as long as you have a mutual fund investment.

For young investors, it can be used to fund specific needs like education, travel, or other personal expenses. For retirees, it acts as a regular source of income to meet living expenses.

3. SWP in National Pension System (NPS)

Unfortunately, there is no SWP facility available in the NPS. The NPS is structured differently from mutual funds. It is a pension scheme meant for long-term retirement savings. The withdrawals from NPS are governed by specific rules, and it doesn’t offer the flexibility that SWPs do.

NPS provides partial withdrawal options, but these are limited. Upon maturity, you can withdraw 60% of your corpus, but the remaining 40% must be used to purchase an annuity. So, NPS does not have the same withdrawal flexibility as SWPs in mutual funds.

4. Upper Ceiling Limit for SWPs

There is no upper ceiling limit for investing in SWPs. You can invest as much as you want in mutual funds and set up an SWP accordingly. Your SWP amount depends on the size of your corpus and the returns it generates.

However, it’s crucial to be cautious. Withdrawing more than the returns can eat into your capital. Therefore, it is advisable to carefully calculate how much you wish to withdraw through SWP to ensure that your capital lasts for the desired period.

Advantages of SWPs

Here are the key advantages of opting for SWPs:

Regular Income: SWPs provide a steady and regular stream of income.

Tax Efficiency: SWPs in equity and hybrid funds are more tax-efficient compared to traditional income sources like Fixed Deposits.

Customisation: SWPs allow you to customize the withdrawal amount and frequency.

Flexibility: You can start or stop an SWP anytime. You can also increase or decrease the amount as needed.

Capital Protection: SWPs allow you to withdraw just the returns, protecting your capital.

Disadvantages of SWPs

Despite the advantages, there are a few downsides to SWPs:

Capital Erosion: If your withdrawals exceed the returns, your capital could reduce over time.

Market Risks: In equity-based SWPs, market fluctuations can impact returns, especially if you’re withdrawing regularly.

Lower Returns in Debt Funds: Debt funds provide stability but generally have lower returns compared to equity funds.

Comparison: SWPs vs Direct Investments

Some investors prefer direct mutual fund investments. However, direct plans, while having lower expense ratios, lack professional advice. Certified Financial Planners (CFPs) have extensive market experience and can tailor investments according to your goals and risk appetite.

Direct funds are usually opted by those who understand markets well. However, many investors lose potential returns by making emotional or uninformed decisions. That’s where regular funds managed by an MFD with CFP credentials can provide significant benefits. The guidance of a professional can ensure that your investments stay aligned with your goals and market conditions.

Why Actively Managed Funds are Better than Index Funds

If you’re considering mutual funds for SWPs, actively managed funds are a better option compared to index funds. Here’s why:

Market-Beating Potential: Actively managed funds have the potential to outperform the market, while index funds can only mirror the market returns.

Professional Management: Actively managed funds are run by experienced fund managers who actively adjust portfolios to seize opportunities and mitigate risks.

Customisation and Flexibility: Active funds allow fund managers to customize portfolios according to changing market conditions, unlike index funds which are rigid.

While index funds offer low-cost investments, they don’t offer the flexibility and potential growth that actively managed funds do.

No Ceiling on SWP Investments

As mentioned earlier, there is no ceiling on the amount you can invest in SWPs. However, you must consider how much you are withdrawing monthly. Over-withdrawing can erode your capital.

A Certified Financial Planner can help you plan an optimal withdrawal amount. They will ensure that your corpus is not depleted quickly while generating consistent returns.

Final Insights

SWPs are an excellent way to generate regular income, especially for retirees or those looking for a steady cash flow. The flexibility and tax benefits make it an attractive option for many investors.

You should remember, though, that SWPs in equity funds carry market risks, while debt funds offer stability with lower returns. A balance between the two, or opting for hybrid funds, may offer a safer bet for long-term withdrawal plans.

Lastly, avoid direct and index funds if you prefer peace of mind and professional management. By investing through a Certified Financial Planner, you can make sure your investments are aligned with your long-term financial goals, especially if you are considering SWPs.

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

...Read more

Dr Dipankar

Dr Dipankar Dutta  |612 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Sep 19, 2024

Asked by Anonymous - Sep 18, 2024Hindi
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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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