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Will my ETF and Mutual Fund investment strategy generate enough returns for my daughter's education and marriage in 25 years?

Ramalingam

Ramalingam Kalirajan  |8103 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 07, 2025

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 - Feb 07, 2025Hindi
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I am planning to invest monthly 10,000 in nifty ETF, 10,000Motilal Oswal NASDAQ 100 ETF, 8000 in Axis Midcap fund, 6,000 in Tata small cap Fund, 3,000 in SBI innovation Fund, 3000 in Tata consumer fund, 3,000 in Tata nifty 200 alpha 30 fund and 2,000 in Motilal oswal nifty 500 momentum 50 fund. I am planning to invest for next 25 years for my daughter's education and marriage. My risk appetite is high. Is above strategy or funds are good for maximum return? I am planning to deploy more whenever market corrects and hold investment for 25 years, will it work for maximize portfolio return?

Ans: Your long-term investment plan is well-structured and shows a strong commitment. Since your goal is to maximize returns for your daughter’s education and marriage, let’s evaluate your approach from multiple angles.

Investment Horizon and Discipline
A 25-year investment horizon is a strong advantage.
Staying invested through market cycles can help compound your wealth.
Adding more funds during market corrections is a smart approach.
Avoid panic selling during market downturns.
Disadvantages of Index ETFs
Index ETFs do not aim to beat the market.
They follow a fixed set of stocks, limiting growth potential.
Active funds adjust portfolios to maximize returns.
ETFs do not benefit from expert fund management.
Some ETFs struggle with liquidity and tracking errors.
Advantages of Actively Managed Funds
Fund managers select high-growth stocks.
They adjust portfolios based on market conditions.
Active funds can outperform indices over long periods.
Well-managed funds can deliver higher alpha.
Diversification within active funds helps reduce risk.
Portfolio Diversification
Your investments cover large-cap, mid-cap, and small-cap segments.
Exposure to international markets adds diversification.
Including thematic and sectoral funds increases risk but can yield high returns.
A balanced mix of growth and stability is important.
Potential Portfolio Improvements
Reducing ETF allocation can improve long-term returns.
A mix of flexi-cap and focused funds can enhance growth.
Too many funds can dilute portfolio performance.
Reducing overlapping funds may improve efficiency.
Mid and small-cap allocation should align with your risk profile.
Investment Through a Certified Financial Planner
Direct plans lack expert guidance.
A Certified Financial Planner (CFP) helps in fund selection.
Portfolio rebalancing is crucial for maximizing returns.
Regular funds through a CFP provide structured wealth management.
Risk Management and Market Corrections
Market downturns are opportunities, not threats.
Investing extra during dips can boost returns.
Avoid over-concentration in a single asset type.
Ensure an emergency fund before deploying surplus.
Taxation Impact on Mutual Fund Returns
Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.
International fund taxation differs from domestic equity funds.
Reviewing tax implications can optimize post-tax returns.
Inflation and Future Planning
Education costs will rise significantly over 25 years.
Inflation-adjusted returns matter more than absolute returns.
Staying invested in high-growth funds helps beat inflation.
Regular portfolio reviews ensure alignment with goals.
Final Insights
Your plan is strong but needs fine-tuning.
Reducing ETF exposure can improve long-term gains.
Active fund management provides better growth potential.
Investing through a Certified Financial Planner ensures structured wealth building.
Market corrections should be used strategically for additional investments.
Periodic review and rebalancing will keep your portfolio on track.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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  |8103 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

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Hi Experts! I am 36 years old, married 1 year ago. I have Rs.223000 invested in Mutual Fund. Per Month 10k in Parag Parikh Flexi Cap Fund, Rs.1250 in DSP ELSS Tax Saver Fund Direct Growth, Rs.1000 in Kotak ELSS Tax Saver Fund Direct Growth, PGIM India Tax Saver Fund Direct Growth, Rs.2000 in Nippon India Small Cap Fund Direct Growth, Rs.2000 in Quant Multi Asset Fund Direct Growth and Rs.2000 in ICICI Prudential BHARAT 22 FDF Direct Growth. Apart from this I pay Rs.10k/month in PPF and 1.5 lac/year in SBI Life Insurance. Please let me know if this is a good portfolio or should I modify anything in this. What kind of Future return I will be expecting here with this portfolio.
Ans: Congratulations on your recent marriage and your proactive approach towards financial planning. It's evident that you're committed to securing your financial future.

Your investment portfolio reflects a diversified approach, which is a positive sign. Diversification helps spread risk and can enhance long-term returns. Let's delve into your portfolio to assess its effectiveness and potential for future returns.

Investing in Parag Parikh Flexi Cap Fund offers exposure to a diversified portfolio across various sectors and market capitalizations. This fund's flexible investment strategy allows it to capitalize on emerging opportunities, potentially leading to attractive returns over time.

ELSS Tax Saver Funds like DSP and Kotak offer tax benefits under Section 80C of the Income Tax Act while providing exposure to equities. These funds have a lock-in period of three years, aligning with your long-term investment horizon.

Nippon India Small Cap Fund and Quant Multi Asset Fund offer exposure to smaller companies and multiple asset classes, respectively. Small-cap funds have the potential for higher growth but come with increased volatility. Ensure they align with your risk tolerance.

ICICI Prudential BHARAT 22 FDF provides exposure to a diversified basket of public sector enterprises and select private sector companies. This fund can add stability to your portfolio while offering growth potential.

Your investments in PPF and SBI Life Insurance contribute to your overall financial security and tax planning. PPF offers stable returns with tax benefits, while life insurance provides protection for your family's future financial needs.

Considering your age and investment horizon, this portfolio has the potential to generate attractive returns over the long term. However, periodically review and rebalance your portfolio to ensure alignment with your financial goals and risk tolerance.

For a more comprehensive analysis and personalized advice, consider consulting a Certified Financial Planner who can tailor recommendations to your specific needs and objectives.

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

..Read more

Ramalingam

Ramalingam Kalirajan  |8103 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 12, 2025

Asked by Anonymous - Feb 07, 2025Hindi
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I am planning to invest monthly 10,000 in nifty ETF, 10,000Motilal Oswal NASDAQ 100 ETF, 8000 in Axis Midcap fund, 6,000 in Tata small cap Fund, 3,000 in SBI innovation Fund, 3000 in Tata consumer fund, 3,000 in Tata nifty 200 alpha 30 fund and 2,000 in Motilal oswal nifty 500 momentum 50 fund. I am planning to invest for next 25 years for my daughter's education and marriage. My risk appetite is high. Is above strategy or funds are good for maximum return? I am planning to deploy more whenever market corrects and hold investment for 25 years, will it work for maximize portfolio return over long run?
Ans: Your long-term investment plan is well-structured. It is good to see a disciplined approach.

Investing for 25 years can generate significant wealth. But fund selection and strategy must be optimized.

Let’s analyse your portfolio.

Investment Horizon and Risk Appetite
You plan to invest for 25 years. This is ideal for wealth creation.
Your risk appetite is high. This allows you to invest aggressively.
Long-term investing reduces market volatility impact.
Staying invested through market cycles is key.
Issues with ETF Investments
You plan to invest in Nifty and Nasdaq ETFs.
ETFs follow an index and lack active management.
No fund manager works to generate extra returns.
Active funds can outperform during different market cycles.
ETFs do not adjust to changing market conditions.
Expense ratio is low, but returns are also market-linked.
Actively managed funds have delivered better long-term returns in India.
Fund Selection Analysis
Your portfolio has midcap, small-cap, innovation, consumer, and factor-based funds.
Midcap and small-cap funds provide high growth. But they are volatile.
Innovation and sectoral funds focus on specific themes. These funds carry high risk.
Factor-based funds follow a strategy like momentum or alpha. Performance varies in different market conditions.
Portfolio lacks a strong large-cap or flexi-cap fund. These provide stability.
Diversification and Balance
Portfolio is highly tilted towards high-risk funds.
Lack of a flexi-cap fund may impact risk-adjusted returns.
Large-cap funds give stability in market downturns.
A mix of large, mid, and small-cap funds creates a balanced portfolio.
Too many thematic and factor-based funds increase unpredictability.
Market Timing Strategy
Deploying more in corrections can increase returns.
But market corrections are unpredictable.
Staggered investments through SIPs and STPs work better.
Avoid lump sum investments unless valuations are very attractive.
Portfolio Optimisation Recommendations
Reduce exposure to index ETFs. Shift to actively managed large-cap or flexi-cap funds.
Keep midcap and small-cap allocation but balance with a flexi-cap fund.
Reduce allocation to thematic and factor-based funds. These should be only 10-15% of your portfolio.
Ensure a strong large-cap or flexi-cap presence for stability.
Maintain liquidity for market corrections, but do not try to time the market aggressively.
Final Insights
Your investment horizon and discipline are strengths.
Portfolio needs better balance between growth and stability.
Actively managed funds can generate better long-term returns than index ETFs.
Midcap and small-cap exposure should be paired with large-cap stability.
Market timing should be done cautiously to avoid overexposure in corrections.


Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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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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