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Nikunj

Nikunj Saraf  | Answer  |Ask -

Mutual Funds Expert - Answered on Mar 29, 2023

Nikunj Saraf has more than five years of experience in financial markets and offers advice about mutual funds. He is vice president at Choice Wealth, a financial institution that offers broking, insurance, loans and government advisory services. Saraf, who is a member of the Institute Of Chartered Accountants of India, has a strong base in financial markets and wealth management.... more
Bhagat Question by Bhagat on Mar 26, 2023Hindi
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HI Nikunj, I am 43 Years Old and I am investing 95K per month in Mutual funds. Idea is to build a corpus fund for retirement and children education and marriage assuming the amount needed is 2.5 Crore. PLease suggest on my portfolio. Below are the funds I am investing : HDFC Index Fund - S&P BSE Sensex Plan : 20K Mirae Asset Large Cap Fund -Growth : 15K Parag Parikh Flexi Cap Fund Regular Plan Growth : 20K ICICI Prudential Equity & Debt Fund Growth : 10K Mirae Asset Emerging Bluechip Fund Growth : 5K Axis Midcap Fund-Growth : 25K

Ans: Hello Bhagat. Your portfolio assessment appears to be in good condition. The portfolio selection looks to be carefully calibrated to and matched with the market.  Assuming that your time horizon is at least 10 years, 95k SIP seems appropriate for achieving a corpus of 2.5 crore for multiple investment objectives.
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  |7628 Answers  |Ask -

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

Asked by Anonymous - Jul 14, 2024Hindi
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Hello Sir, My age is 28 year and Salary around 1.2 lakh. I have a 1 month old baby and my wife is dependent on me. From last two year, I am doing PPF of 50k , LIC 43K , NPS 50 K Mutual fund monthly: Nifty index 50 - 5k Axis small cap -5k Canara robbeco small cap -5 k Quant mid cap- 5k ( started last month only) I am looking for suggestions to invest more in mutual fund. My monthly expenditure is 30k . I dont have any liability on me. Please suggest how to make good corpus for retirement. Considering I want to buy a house, car in upcoming years.
Ans: Assessing Your Current Financial Situation
You are 28 years old with a salary of Rs 1.2 lakh per month. You have a one-month-old baby and a dependent wife. Your current investments are:

PPF: Rs 50,000 annually
LIC: Rs 43,000 annually
NPS: Rs 50,000 annually
Mutual Funds: Rs 20,000 monthly
Nifty Index Fund: Rs 5,000
Axis Small Cap: Rs 5,000
Canara Robeco Small Cap: Rs 5,000
Quant Mid Cap: Rs 5,000
Your monthly expenditure is Rs 30,000, leaving you with Rs 90,000 for savings and investments.

Goal Setting
Retirement Corpus
You want to build a substantial corpus for retirement.

House Purchase
You plan to buy a house in the near future.

Car Purchase
You also intend to buy a car soon.

Current Investments Analysis
PPF: Provides tax-free returns and is a good long-term investment.
LIC: Traditional policies offer low returns. Consider evaluating its performance.
NPS: Offers tax benefits and helps build a retirement corpus.
Mutual Funds: Good mix of small-cap and mid-cap funds, but consider diversifying further.
Suggestions for Mutual Fund Investments
Diversification

Your current portfolio is heavy on small and mid-cap funds. Diversify by adding large-cap and multi-cap funds for stability.

Systematic Investment Plan (SIP)

Increase your SIP amount to make the most of compounding. Consider allocating Rs 40,000 per month to mutual funds.

Recommended Mutual Fund Portfolio
Large-Cap Fund

Monthly SIP: Rs 10,000
Reason: Provides stability and steady growth.
Multi-Cap Fund

Monthly SIP: Rs 10,000
Reason: Diversified exposure to large, mid, and small-cap stocks.
Balanced Advantage Fund

Monthly SIP: Rs 10,000
Reason: Balances between equity and debt based on market conditions.
Existing Funds

Continue with your current investments in small-cap and mid-cap funds.
Investment Strategy for House and Car
Short-Term Goals

For buying a house and car, focus on low-risk investments.

Recurring Deposits (RD)
Set up RDs for disciplined savings.

Debt Mutual Funds
Invest in short-term debt funds for better returns than savings accounts and FDs.

Fixed Deposits (FD)
Use FDs for guaranteed returns and safety.

Monthly Budget Allocation
Emergency Fund

Maintain an emergency fund covering 6 months of expenses.
Amount: Rs 1.8 lakh
Keep it in a high-interest savings account or a liquid mutual fund.
Investment Allocation

Mutual Funds: Rs 40,000 per month
NPS: Continue with Rs 50,000 annually
PPF: Continue with Rs 50,000 annually
LIC: Re-evaluate the policy and consider switching if returns are low.
Savings for House and Car

RD/FD/Debt Funds: Rs 20,000 per month
This will help you accumulate funds for a house and car.
Tax Planning
Section 80C

Maximize the Rs 1.5 lakh limit under Section 80C.
PPF, NPS, and ELSS investments are tax-efficient.
Health Insurance

Consider taking health insurance.
Premiums are tax-deductible under Section 80D.
Final Insights
Start Early: Investing early maximizes the benefits of compounding.
Diversify: A well-diversified portfolio balances risk and returns.
Review Regularly: Regularly review and adjust your investments.
Stay Disciplined: Consistent investments will help you achieve your financial goals.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7628 Answers  |Ask -

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

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Sir I have been investing in mutual funds for the last 5 years. Now the corpus is around 5.5 lakhs . I have the following funds in my portfolio. Please asses my portfolio or need switch. 1. Nippon india large cap fund 2000 2. Mirae asset large cap 3000 3.Axis elss tax saver 1000 4. Kotak elss tax saver 1000 5. Axis Blue chip fund 6. Jm flexi cap fund 2200 7. Motilal oswal mid cap 2000 8. Axis mid cap 1000 9. Icici prudential passive multi asset for regular growth one time amount 5000 . 10.Sbi contra fund 2000 Sir i need to build a corpus of 1.5 crore in next 12 years. My age is now 38. Please review .
Ans: You have built a diversified portfolio with a combination of large-cap, mid-cap, ELSS, and flexi-cap funds. Each fund serves a specific purpose, but a review will help optimize your investments to meet your goal of Rs. 1.5 crore in 12 years. Let’s assess each category.

Large-Cap Funds
Nippon India Large Cap Fund – Rs. 2,000 per month

Mirae Asset Large Cap Fund – Rs. 3,000 per month

Axis Bluechip Fund

These funds focus on large-cap companies, offering stable growth but with relatively lower risk. While having multiple large-cap funds ensures stability, it may lead to overlap in the portfolio. You can consider consolidating them into 1 or 2 funds to reduce redundancy. Mirae Asset and Axis Bluechip are solid options for continued long-term investments.

ELSS Funds
Axis ELSS Tax Saver – Rs. 1,000 per month

Kotak ELSS Tax Saver – Rs. 1,000 per month

ELSS funds offer tax benefits under Section 80C. However, having two ELSS funds for Rs. 2,000 might not be necessary. You can choose the one with consistent performance and focus your ELSS investment there. Axis ELSS has performed well historically, but assess both before making a decision.

Mid-Cap Funds
Motilal Oswal Mid Cap – Rs. 2,000 per month

Axis Mid Cap – Rs. 1,000 per month

Mid-cap funds offer higher growth potential than large-cap funds, but with more risk. Holding two mid-cap funds is a balanced strategy, but since the Axis Mid Cap has been consistently strong, you can consider increasing your SIP here. Motilal Oswal Mid Cap is a good performer but may need to be watched for volatility.

Flexi-Cap Funds
JM Flexi Cap Fund – Rs. 2,200 per month
Flexi-cap funds give fund managers the flexibility to invest across market capitalizations, reducing concentration risk. This fund provides good diversification. Review its performance regularly, as flexi-cap funds can vary in returns based on market conditions.

Passive Multi-Asset Fund
ICICI Prudential Passive Multi-Asset Fund (One-time investment of Rs. 5,000)
This fund combines equity, debt, and gold to balance risk. While passive funds reduce the need for active monitoring, they may not provide the same growth potential as actively managed funds. Actively managed funds tend to perform better in dynamic markets, which could better align with your long-term goal of wealth creation.

Contra Fund
SBI Contra Fund – Rs. 2,000 per month
Contra funds follow a contrarian investment strategy, buying when others are selling. While this can provide significant gains during market recovery, contra funds may experience long periods of underperformance during market booms. It's a high-risk option that may not suit every portfolio. Regularly review its performance to ensure it fits with your investment goals.

Suggestions for Improvement
Consolidate Funds: You have multiple large-cap and ELSS funds. Streamline to 1 or 2 per category to reduce overlap and improve focus. A well-performing large-cap fund and one ELSS should suffice.

Increase SIP in High-Growth Funds: Focus more on mid-cap and flexi-cap funds, as they have higher growth potential. Increase your SIP in Axis Mid Cap and JM Flexi Cap, as they can boost your returns over the long term.

Review Contra and Passive Fund: SBI Contra and ICICI Passive Multi-Asset may not align with your goal of aggressive wealth creation. Consider switching to funds with more aggressive growth profiles, like a focused equity fund or a small-cap fund, to maximize potential returns.

Building a Rs. 1.5 Crore Corpus
To achieve your goal of Rs. 1.5 crore in 12 years, you'll need to invest aggressively. Based on your current portfolio, the estimated return would range between 10-12% annually, depending on market conditions and fund performance. To reach Rs. 1.5 crore in 12 years, you may need to increase your monthly SIP amount to around Rs. 20,000-25,000, depending on the returns.

Steps to Build the Corpus:
Increase SIP Contributions: To reach your goal, gradually increase your SIP amount over time. Aim to raise your SIP to Rs. 20,000-25,000 per month.

Rebalance Annually: Revisit your portfolio at least once a year. Make sure your portfolio remains aligned with your long-term goal.

Stick to Long-Term Investment: Avoid switching funds frequently. Stay committed to your investment horizon, and let the power of compounding work for you.

Emergency Fund: Ensure that you have an emergency fund in place, covering at least 6 months of expenses. This will prevent you from withdrawing your investments during unforeseen events.

Tax Planning with ELSS
You are already investing Rs. 2,000 in ELSS funds, which qualifies for tax deductions under Section 80C. Continue this as part of your tax-saving strategy, but make sure it fits into your overall portfolio without over-diversifying.

Final Insights
Your portfolio is well-diversified but can be simplified by reducing overlapping funds.

Focus on high-growth funds like mid-cap and flexi-cap to achieve your long-term goals.

Regularly review and rebalance your portfolio based on performance and market conditions.

Increase your SIP contributions gradually to ensure you are on track for your Rs. 1.5 crore goal in the next 12 years.

Avoid frequent switching; give your investments time to grow.

Tax planning with ELSS funds is good, but one fund is enough for your tax-saving needs.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7628 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 24, 2025

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Hello, I want a monthly withdrawal of 2lakh through SWP. Give me the amounts and expect ROI for various instruments that I should use. Also what factor to consider as I would be able to invest those amount lets say after a year.
Ans: To achieve a sustainable monthly withdrawal of Rs. 2 lakh (Rs. 24 lakh annually), we need to identify the right mix of investments and expected returns. Let us create a detailed framework.

1. Factors to Consider Before Investing
Time Horizon: You plan to start investing after a year. This delay impacts your compounding benefit, but planning ahead mitigates it.

Expected Rate of Return (ROI): Different instruments offer varied returns. Diversification ensures both growth and stability.

Withdrawal Feasibility: Sustainable withdrawals depend on balancing withdrawals with corpus growth.

Inflation Impact: Investments must generate returns above inflation to preserve corpus value.

Risk Appetite: Choose instruments aligning with your comfort towards volatility.

Tax Efficiency: Optimise your withdrawals and investments for better post-tax returns.

2. Expected ROI for Investment Options
Here is the expected ROI and rationale for different asset classes:

Actively Managed Equity Mutual Funds

Allocation: 50% of the corpus
Expected ROI: 12% annually
Rationale: These funds provide high returns and help beat inflation over the long term.
Debt Mutual Funds

Allocation: 30% of the corpus
Expected ROI: 7% annually
Rationale: These offer stability with moderate returns and are suitable for regular withdrawals.
Fixed-Income Instruments (e.g., FDs, SGBs)

Allocation: 15% of the corpus
Expected ROI: 6-7.5% annually
Rationale: Secure returns with no market risk. Ideal for stability.
Liquid Mutual Funds

Allocation: 5% of the corpus
Expected ROI: 4-5% annually
Rationale: Quick access for emergencies or interim cash flow needs.
3. Corpus Required for Rs. 2 Lakh Monthly Withdrawal
Corpus Based on ROI
At 8% ROI: A corpus of Rs. 3 crore is required.
At 9% ROI: A corpus of Rs. 2.66 crore is required.
At 10% ROI: A corpus of Rs. 2.4 crore is required.
The corpus requirement reduces with higher returns but increases risk exposure.

Building the Corpus Over One Year
If the funds are idle for a year, invest them in liquid mutual funds temporarily. These yield 4-5% with low risk.
Use Systematic Transfer Plans (STPs) to gradually move funds into equity and debt over 12-18 months.
4. Investment Plan for SWP
Equity Mutual Funds (50% Allocation)
Allocate Rs. 1.5 crore to equity funds.
Delay SWP for at least three years to allow growth.
Equity funds ensure high long-term returns, reducing inflation's impact.
Debt Mutual Funds (30% Allocation)
Allocate Rs. 90 lakh to debt funds.
Start SWP immediately from this portion.
These funds provide stable returns and low volatility.
Fixed-Income Instruments (15% Allocation)
Allocate Rs. 45 lakh to secure instruments like FDs or Sovereign Gold Bonds.
Use these funds for stability and emergencies.
Liquid Mutual Funds (5% Allocation)
Allocate Rs. 15 lakh to liquid funds.
Use these funds for interim liquidity needs and to manage cash flow gaps.
5. Steps for Efficient Withdrawal
Start withdrawals from debt and liquid funds first. Let equity funds grow for 3-5 years.
Monitor returns annually to adjust the withdrawal rate or asset allocation.
Keep a buffer of 1-2 years' expenses in liquid funds for emergencies.
Review the tax efficiency of your withdrawals and rebalance your portfolio every year.
Final Insights
A well-diversified portfolio ensures stable withdrawals of Rs. 2 lakh monthly. Focus on equity for growth, debt for stability, and liquid funds for emergencies. Starting the plan early and monitoring it regularly will ensure financial independence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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