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Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 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
Nitin Question by Nitin on Apr 14, 2024Hindi
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I'm listening in every videos that compounding is magic. I know compounding is magic and it works like in Fixed deposit but how it works in shares or mutual fund.

Ans: Absolutely, compounding is indeed magical, and its power can be harnessed not just in fixed deposits but also in shares and mutual funds.

In shares or mutual funds, compounding works when you reinvest the returns you earn. Here's a simple explanation:

Let's say you invest Rs. 1,00,000 in a mutual fund with an annual return of 12%. In the first year, your investment grows to Rs. 1,12,000 (1,00,000 + 12,000). Now, if you don't withdraw this amount and instead reinvest it, the next year's return will be calculated on Rs. 1,12,000, not just on your initial investment of Rs. 1,00,000.

Over time, this compounding effect accelerates your earnings. The longer you stay invested, the more significant the impact of compounding becomes, turning your small, regular investments into a substantial amount over time.
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  |9255 Answers  |Ask -

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

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I invested lump sum in say X mutual fund 1L. Is it compounded annually or quarterly or monthly or by any other frequency? I contacted my broker and the customer care said there will be no compounding but you will have to withdraw and re invest in order to get returns in your profits ..
Ans: I understand your confusion about compounding in mutual funds. Here's how it works:

The Magic of Compounding

Imagine your mutual fund grows by 10% every year. Compounding means your earnings grow on top of your earnings, not just on your initial investment. It's like a snowball rolling downhill, growing bigger and faster as it goes.

How Mutual Funds Work

Mutual funds don't pay out returns every month or quarter. Instead, they reinvest the earnings within the fund. This means your money stays invested and benefits from compounding.

What the Customer Care Meant

The customer care representative might have been referring to the fact that you don't see the compounded amount directly credited to your account every month. You'll see the overall growth reflected in the fund's Net Asset Value (NAV), which is updated daily.

Maximizing Compounding

To truly leverage compounding, consider staying invested for the long term. The longer your money stays invested, the more time it has to grow through compounding.

Actively Managed Funds for Growth

While there are other investment options, actively managed mutual funds can be a good choice for growth. Unlike index funds that passively track a market index, actively managed funds have professional fund managers who aim to outperform the market by strategically selecting investments. This approach can potentially lead to higher returns and accelerate compounding.

Benefits of Regular Plan with CFP

Regular investments through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential can offer several advantages. CFPs are advisors who hold a professional designation and are committed to ethical financial planning practices. They can help you:

Choose actively managed funds based on your risk tolerance and goals.
Develop a long-term investment plan for wealth creation.
Review your portfolio regularly and make adjustments as needed.
Remember

Compounding is a powerful tool for growing your wealth over time. By staying invested in actively managed funds and seeking guidance from a CFP, you can maximize your investment returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 30, 2024

Asked by Anonymous - May 30, 2024Hindi
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Kindly check my Mutual funds in which I am investing.. suggest me if any corrections needed.. I want to build long term wealth.. *Icici prudential bluechip fund growth * Sbi Magnum mid cap direct plan growth * Sbi bluechip direct plan growth *Sbi contra direct plan growth * Axis small cap fund direct growth *Sbi energy opportunities fund direct growth Also i want to know if switching into any other fund has any effect on compounding or not.. Thanks..
Ans: Assessing Your Mutual Fund Portfolio
Investing in mutual funds is a smart way to build long-term wealth. Your choice of funds indicates a good understanding of diversification. Let's assess your portfolio and suggest if any changes are needed.

Evaluating Your Current Funds
Your portfolio includes large-cap, mid-cap, small-cap, sectoral, and contra funds. This diversified approach helps spread risk and capture growth across different market segments.

Large-Cap Funds
Large-cap funds invest in well-established companies with strong market presence. These funds tend to be less volatile and provide steady returns. Your investment in large-cap funds is a solid foundation for your portfolio.

Mid-Cap Funds
Mid-cap funds invest in medium-sized companies that have the potential for high growth. These funds are riskier than large-cap funds but can offer higher returns. Including mid-cap funds in your portfolio adds a growth component.

Small-Cap Funds
Small-cap funds invest in smaller companies with significant growth potential. These funds are the most volatile but can yield substantial returns over the long term. Your inclusion of small-cap funds shows a willingness to take calculated risks for higher rewards.

Sectoral Funds
Sectoral funds invest in specific sectors, such as energy. These funds can offer high returns if the sector performs well, but they also carry higher risk due to lack of diversification. Sectoral funds should be a smaller part of your portfolio.

Contra Funds
Contra funds invest in undervalued stocks that are expected to perform well over time. This contrarian approach can provide good returns if the fund manager's strategy pays off. Including a contra fund diversifies your investment strategy.

Direct vs. Regular Funds
Investing in direct plans means you avoid distributor commissions, which can increase your returns. However, direct funds require more time and expertise to manage effectively. Regular funds, managed through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential, offer professional advice and ongoing support.

Disadvantages of Direct Funds
Direct funds demand active management and a good understanding of market trends. Without professional guidance, you might miss out on crucial market insights and opportunities. This can affect your portfolio's performance, especially during volatile market conditions.

Benefits of Regular Funds
Regular funds, managed through an MFD with CFP credentials, provide access to expert advice. Certified Financial Planners help in portfolio rebalancing, tax planning, and making informed investment decisions. The professional support ensures that your investment strategy aligns with your long-term financial goals.

Impact of Switching Funds on Compounding
Switching funds can have an impact on compounding. When you switch, you may incur exit loads and capital gains tax, which can reduce your overall returns. Frequent switching can disrupt the compounding process, which is crucial for long-term wealth creation.

Compounding and Long-Term Wealth
Compounding works best when investments are held for a longer duration. The longer you stay invested, the more your money can grow. Switching should be done only when necessary, such as when a fund consistently underperforms or no longer aligns with your investment goals.

Recommendations for Portfolio Enhancement
Your portfolio is well-diversified, but there are a few considerations for enhancing it further:

Review Fund Performance: Regularly review the performance of your funds. Replace consistently underperforming funds with better options.

Risk Management: Ensure that your risk exposure aligns with your risk tolerance and investment horizon. Balance high-risk funds with stable, lower-risk options.

Professional Guidance: Consider transitioning from direct to regular funds through an MFD with CFP credentials. Professional guidance can help optimize your portfolio and provide peace of mind.

Conclusion
Your current mutual fund portfolio reflects a balanced and diversified approach to investing. By considering professional guidance and focusing on long-term compounding, you can enhance your investment strategy and build substantial wealth over time. Regularly review and adjust your portfolio to stay aligned with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 21, 2024

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We know that compounding takes pretty long time to happen. If I take out my entire amount (invested + gained) from a poorly performing MF and invest it in a new better MF and carry on the SIP in the new MF, will the chain of compounding be broken? Or, it will continue as is?
Ans: Compounding is a powerful concept where your returns generate further returns over time. When you stay invested in a mutual fund, compounding accelerates with long-term holding. However, moving your money from one fund to another does not break compounding but resets the compounding chain in the new fund.

Will Compounding Continue if You Switch Funds?
Switching funds involves redeeming your investments in one fund and reinvesting in another. Here’s what happens:

Compounding Resets:
The new fund starts its compounding process afresh from the reinvested amount.

Impact of Redeeming Poorly Performing Funds:
A switch allows your capital to grow better in a fund with higher returns.

Compounding Not Broken:
The chain is not broken if the new fund performs well and you stay invested for the long term.

Evaluating Whether to Exit a Poor Performer
Before switching, carefully evaluate the underperformance of the current fund.

Temporary vs. Persistent Underperformance:
Check if the fund is underperforming for a prolonged period (3+ years).

Compare with Peers:
Assess the fund’s performance relative to its category peers and benchmarks.

Review Fund Management:
Investigate changes in fund management, strategy, or market conditions causing the underperformance.

Tax and Exit Load:
Keep in mind LTCG and STCG tax rules and exit load charges before redeeming.

Benefits of Switching to a Better Fund
Switching to a well-performing fund can boost long-term wealth creation.

Improved Returns:
A fund with consistent returns provides better compounding benefits.

Aligned Goals:
A better fund aligns with your financial goals and risk tolerance.

Optimised Portfolio:
Switching can improve overall portfolio efficiency and diversification.

Role of Actively Managed Funds in Compounding
Actively managed funds are better suited for wealth creation compared to passive funds like index funds.

Potential for Outperformance:
Skilled fund managers can outperform benchmarks, especially in volatile markets.

Flexibility:
Actively managed funds adapt to market changes for better returns.

Importance of Professional Guidance
Making the right switch requires expert advice.

Certified Financial Planners:
Seek guidance from a Certified Financial Planner to select suitable funds.

Investing Through MFDs:
Regular plans through MFDs ensure personalised service and monitoring of investments.

Avoiding Direct Funds:
Direct funds lack professional monitoring, which can affect long-term compounding.

Tax Implications of Switching
Switching funds involves redeeming investments, triggering tax liabilities.

Equity Mutual Funds:
LTCG above Rs. 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%.

Debt Mutual Funds:
Gains are taxed as per your income slab, regardless of holding period.

Exit Loads:
Redeeming within the exit load period incurs additional charges.

SIP Continuation in the New Fund
Continuing your SIP in the new fund ensures disciplined investing.

No Disruption in Investments:
The regular contributions in SIPs help maintain wealth-building momentum.

Rupee Cost Averaging:
SIPs average out market fluctuations, ensuring better returns over time.

Long-Term Growth:
Staying consistent in SIPs is key to maximising compounding benefits.

Factors to Consider When Switching Funds
If you decide to switch, evaluate the following factors:

Fund Category:
Choose a fund category matching your financial goals.

Risk-Return Profile:
Ensure the new fund aligns with your risk tolerance.

Track Record:
Select a fund with a consistent performance history over at least 5 years.

Investment Horizon:
Stay invested in the new fund for 5-10 years to maximise compounding.

Final Insights
Switching from a poorly performing mutual fund to a better one does not break compounding. Instead, it resets the growth process in a more suitable fund. Evaluate underperformance carefully before switching and consider tax implications.

Work with a Certified Financial Planner to select the right fund and ensure long-term wealth creation. Stay disciplined in SIPs and maintain a diversified portfolio for consistent compounding benefits.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Nayagam P

Nayagam P P  |7295 Answers  |Ask -

Career Counsellor - Answered on Jun 28, 2025

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I got 11779 rank in phase2 exam will i get ece in srm ap
Ans: Krithika, With a SRMJEEE Phase 2 rank of 11,778, you are well within the typical cutoff range for admission to SRM University AP (Amaravati) for BTech programs. Recent cutoffs show that core branches like Computer Science and Engineering at SRM AP close around 70,000–77,000, while branches such as Electronics & Communication, Electrical, and Biotechnology close between 24,000 and 97,000, depending on the year and demand. Even for popular branches, the cutoff is significantly higher than your rank, ensuring a strong chance of admission. While CSE at SRM Kattankulathur (main campus) closes much earlier (within 10,000), SRM AP’s closing ranks are much more relaxed, and you can expect to get CSE, ECE, or allied branches comfortably. The only exception might be the most in-demand specializations within CSE, which could close at slightly lower ranks, but most core and allied engineering branches will be available to you. Ensure you participate in the counselling process and list your preferred branches in order of priority to maximize your chances.

Recommendation: With an SRMJEEE Phase 2 rank of 11,778, you are very likely to secure a seat in CSE or any core BTech branch at SRM University AP; complete the counselling process promptly and prioritize your preferred branches for the best outcome. All the BEST for the Admission & a Prosperous Future!

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Nayagam P

Nayagam P P  |7295 Answers  |Ask -

Career Counsellor - Answered on Jun 28, 2025

Career
Sir i got 11778 rank in srm phase2 exam so will i get seat in srm ap withbthis rank
Ans: Krithika, With a SRMJEEE Phase 2 rank of 11,778, you are well within the typical cutoff range for admission to SRM University AP (Amaravati) for BTech programs. Recent cutoffs show that core branches like Computer Science and Engineering at SRM AP close around 70,000–77,000, while branches such as Electronics & Communication, Electrical, and Biotechnology close between 24,000 and 97,000, depending on the year and demand. Even for popular branches, the cutoff is significantly higher than your rank, ensuring a strong chance of admission. While CSE at SRM Kattankulathur (main campus) closes much earlier (within 10,000), SRM AP’s closing ranks are much more relaxed, and you can expect to get CSE, ECE, or allied branches comfortably. The only exception might be the most in-demand specializations within CSE, which could close at slightly lower ranks, but most core and allied engineering branches will be available to you. Ensure you participate in the counselling process and list your preferred branches in order of priority to maximize your chances.

Recommendation: With an SRMJEEE Phase 2 rank of 11,778, you are very likely to secure a seat in CSE or any core BTech branch at SRM University AP; complete the counselling process promptly and prioritize your preferred branches for the best outcome. All the BEST for the Admission & a Prosperous Future!

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Nayagam P

Nayagam P P  |7295 Answers  |Ask -

Career Counsellor - Answered on Jun 28, 2025

Nayagam P

Nayagam P P  |7295 Answers  |Ask -

Career Counsellor - Answered on Jun 28, 2025

Asked by Anonymous - Jun 28, 2025Hindi
Career
My daughter is getting cse Mtech in PEC chandigarh, how is placement there as compared to NIT jalandhar
Ans: Punjab Engineering College (PEC) Chandigarh’s CSE MTech program has seen average packages of ?13.5 LPA (2022) and ?15.97 LPA (2023), with median packages of ?10–12 LPA and a placement rate for CSE above 80% in recent years. The college attracts high-profile recruiters and benefits from its Chandigarh location and established alumni network, leading to strong PPOs and industry engagement. NIT Jalandhar’s CSE program recorded a 94.03% placement rate in 2024, the highest among its branches, with an average package of ?14.61 LPA and top recruiters like Amazon and Google. NIT Jalandhar’s NIRF ranking (46) is higher than PEC’s (138), but PEC’s location and reputation for CSE often draw more high-profile companies and slightly higher median packages for MTech graduates. Both institutes have robust placement support, but PEC’s CSE MTech offers a marginal edge in average and median packages, especially for postgraduate students, while NIT Jalandhar has a higher placement percentage for BTech and MTech CSE.

Recommendation: Prefer PEC Chandigarh CSE MTech for its strong industry connections, higher average and median packages for postgraduates, and Chandigarh’s job market advantage; NIT Jalandhar CSE remains an excellent alternative with top placement rates and national ranking. All the BEST for Your Daughter's Admission & a Prosperous Future!

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Nayagam P

Nayagam P P  |7295 Answers  |Ask -

Career Counsellor - Answered on Jun 28, 2025

Career
CSE in Manipal bengluru or CSE in Jaypee 128 or DSAI in Thapar or CSE in mahraja Agrasen (through ipu) which is better for education,intern and placement
Ans: Arnav, Manipal Institute of Technology (MIT) Bengaluru’s CSE program stands out for its robust placement record, with a median package of ?10 LPA and average of ?12 LPA, 300+ top recruiters, and an industry-oriented curriculum supported by experienced faculty and a dedicated Practice School internship model that ensures strong industry exposure and high PPO conversion. Jaypee Noida Sector 128’s CSE program offers 90–99% placement rates, an average package of ?8–8.5 LPA, and 250+ recruiters, but campus life and infrastructure are rated lower than MIT, and internship opportunities are more variable. Thapar University’s DSAI program boasts 95% placements, A+ NAAC accreditation, and a research-driven faculty, but internships are less widespread (20% students), and the program is more academically rigorous. Maharaja Agrasen (IPU) CSE sees 40–60% placement rates, with average packages around ?8 LPA, reliable mass recruiters, and decent infrastructure, but it ranks below the other options for both placements and industry engagement.

Recommendation: Choose MIT Bengaluru CSE for the best combination of placement consistency, internship opportunities, modern curriculum, and campus environment; Thapar DSAI is strong for AI-focused careers and research, while Jaypee Noida CSE is a solid NCR option. Prefer Maharaja Agrasen only if location or cost is a major constraint. All the BEST for the Admission & a Prosperous Future!

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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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