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Ramalingam Kalirajan |7122 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 25, 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

Question by Ajay on May 24, 2024Hindi

Hi money guru, im investing 30k sip in below funds can you please look into these and suggest if any changes need for better growth, my target is for retirement in 10 years with high returns i can take risk as im 33 years old now, and i would like to invest for mi kids in one fund as well with another 5ksip, please suggest My funds Nippon small cap 6k Quant mid cap 6k Hdfc mid cap 6k Axis small cap 6k Paragh parik flexi cap 6k Please help me if any changes required for high returns Thanks

Ans: It’s commendable that you are investing Rs 30,000 per month in SIPs for your retirement. At age 33, you have a significant investment horizon, which allows for a higher risk appetite and potential for high returns. Let’s evaluate your current investments and suggest any necessary changes for better growth.

Current Investments
Your portfolio currently includes:

Nippon Small Cap: Rs 6,000
Quant Mid Cap: Rs 6,000
HDFC Mid Cap: Rs 6,000
Axis Small Cap: Rs 6,000
Parag Parikh Flexi Cap: Rs 6,000
Evaluation of Current Funds
Small Cap Funds: You have significant exposure to small-cap funds (Nippon and Axis Small Cap). These funds have high growth potential but also come with higher volatility and risk.

Mid Cap Funds: The allocation to mid-cap funds (Quant and HDFC Mid Cap) provides a balance between risk and return, with potential for substantial growth.

Flexi Cap Fund: Parag Parikh Flexi Cap offers diversification across market capitalizations, providing stability and growth potential.

Suggested Changes for Better Growth
Diversify Further: Your portfolio is heavily weighted towards small and mid-cap funds. Consider adding a large-cap fund to reduce volatility and provide stability.

Balanced Allocation: Aim for a mix of large-cap, mid-cap, and small-cap funds. This strategy balances risk and return effectively.

Reduce Overlap: Ensure that your funds do not have significant overlap in stock holdings. Diversified holdings reduce risk.

Recommended Portfolio Structure
Large Cap Fund: Allocate a portion to a large-cap fund for stability. Large-cap funds invest in established companies, offering steady returns.

Mid Cap Fund: Retain one or two mid-cap funds. They provide a good balance between growth and risk.

Small Cap Fund: Maintain a small portion in small-cap funds for high growth potential. However, avoid over-exposure to reduce risk.

Flexi Cap Fund: Keep the Parag Parikh Flexi Cap for its diversified approach.

Suggested Allocation
Large Cap Fund: Rs 6,000
Mid Cap Fund: Rs 6,000 (retain one existing fund)
Small Cap Fund: Rs 6,000 (retain one existing fund)
Flexi Cap Fund: Rs 6,000 (retain existing)
Balanced Fund or Multi-Cap Fund: Rs 6,000 (new addition)
Investing for Your Child
For your child’s future, consider a dedicated investment fund. A balanced or child-specific mutual fund can be ideal. These funds offer a mix of equity and debt, ensuring growth with reduced volatility.

Recommended Fund for Child
Child-Specific Fund or Balanced Fund: Rs 5,000 per month. These funds are designed to grow steadily while ensuring capital protection.
Importance of Regular Reviews
Periodic Review: Regularly review your investments to ensure they align with your financial goals and risk tolerance. Market conditions change, and periodic reviews help in making necessary adjustments.

Rebalancing Portfolio: Rebalance your portfolio periodically to maintain the desired asset allocation. This helps in managing risk and optimizing returns.

Benefits of Actively Managed Funds
Actively managed funds offer the potential for higher returns as fund managers make strategic decisions to outperform the market. While index funds provide average market returns, actively managed funds aim to exceed them.

Disadvantages of Direct Funds
Direct funds have lower costs but lack professional guidance. Investing through a Mutual Fund Distributor (MFD) with a CFP credential ensures expert advice and tailored investment strategies.

Conclusion
Your current portfolio has a strong foundation, but it can benefit from further diversification and balanced allocation. Adding a large-cap fund and a balanced fund will reduce volatility and provide steady growth. For your child’s investment, a dedicated child-specific or balanced fund is recommended. Regular reviews and rebalancing will ensure your portfolio remains aligned with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Asked on - May 27, 2024 | Answered on May 27, 2024

Thank you so much for your valuable suggestione. I will try to add a large car fund in my portfolio. I have one more question could you please help me with this as well? As im 33 years old, recently took a 2cr term insurance for family protection. As im a corporate employee current company provides a health insurance for me and spouse. Im paying extra amount for parents health insurance in the same company beacuse it will be applicable from day 1. Should i take separate health insurance for me and spouse and parents as well. Note: parents are dependent on me Thanks

Ans: You are welcome!

It's great that you've taken a term insurance policy for family protection. As a corporate employee, your company-provided health insurance for you and your spouse is a good benefit. However, relying solely on employer-provided health insurance may not be sufficient for several reasons.

First, employer-provided health insurance is contingent on your employment. If you switch jobs or face job loss, you may lose coverage, which can be risky. It's wise to have a separate health insurance policy for yourself and your spouse to ensure continuous coverage, regardless of employment status.

Second, company health insurance policies often have coverage limits that may not be adequate for severe or prolonged illnesses. A separate health insurance policy can provide higher coverage and more comprehensive benefits, ensuring better financial protection during medical emergencies.

Moreover, it's advantageous to take separate health insurance while you are still healthy. Securing a policy now means you'll likely get better coverage and lower premiums, which will benefit you significantly during retirement when health issues are more common.

Regarding your parents, since they are dependent on you, it's prudent to have a dedicated health insurance policy for them. Employer-provided health insurance might have limitations on the coverage for dependents, especially for senior citizens, and could be insufficient for their healthcare needs.

In summary, having separate health insurance for yourself, your spouse, and your parents ensures continuous, comprehensive coverage and financial protection against medical expenses, both now and in retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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