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Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 31, 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 - Sep 19, 2023Hindi
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I am planning to do sip of Rs 7000 each for next 20 years in Mutual funds of Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund and Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund .Pls advise

Ans: Evaluating Investment Choices
Investing in Mutual Funds can be a great way to grow your wealth over the long term. However, it's important to choose the right funds based on your financial goals and risk appetite.

Understanding Sectoral Funds
Sectoral funds, like the ones you mentioned focusing on Artificial Intelligence & Technology and Electric & Autonomous Vehicles, are more focused on specific industries or sectors. While these funds can offer high returns during favorable market conditions, they also come with higher risks.

Risks Associated with Sectoral Funds
Sectoral funds are highly sensitive to the performance of the specific sector they are invested in. Any adverse developments in that sector can significantly impact the fund's performance. Additionally, these funds may be more volatile compared to diversified funds, which invest across multiple sectors.

Benefits of Diversified Funds
Diversified funds, on the other hand, spread their investments across various sectors and industries. This diversification helps reduce the impact of any adverse events in a particular sector on the overall fund performance. Diversified funds tend to be more stable and less volatile compared to sectoral funds.

Investment Strategy Recommendation
Considering your investment horizon of 20 years and the risk associated with sectoral funds, it's advisable to diversify your investments. Instead of allocating the entire SIP amount to sectoral funds, consider investing in a combination of diversified equity funds.

Building a Balanced Portfolio
A balanced portfolio typically consists of a mix of equity, debt, and other asset classes. By diversifying across different sectors and asset classes, you can reduce overall portfolio risk while potentially maximizing returns.

Regular Review and Rebalancing
Regularly review your portfolio's performance and rebalance if necessary. Rebalancing involves adjusting the allocation of your investments to maintain the desired asset allocation based on your risk tolerance and financial goals.

Conclusion
While sectoral funds can offer attractive returns, they also come with higher risks. Diversifying your investments across multiple sectors and asset classes is key to building a resilient portfolio that can weather market fluctuations. Consult with a Certified Financial Planner to develop a personalized investment strategy that aligns with your goals and risk tolerance.

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  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

Asked by Anonymous - Sep 19, 2023Hindi
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I am planning to do Sip of Rs 7000 each for next 20 years in Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund and Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund .Pls advise
Ans: Strategic SIP Allocation in ETFs for 20 Years: Considerations and Recommendations

Investing in Exchange-Traded Funds (ETFs) can be a strategic approach to building wealth over the long term. However, it's essential to understand the implications, especially when investing in sector-specific funds like Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund and Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund.

Understanding Sector Funds and Their Perils

Sector-specific funds, such as those focused on electric vehicles, autonomous vehicles, artificial intelligence, and technology, offer targeted exposure to specific industries. While they may seem enticing due to potential high returns, they come with inherent risks:

High Volatility: Sector funds are susceptible to fluctuations in the particular industry they track. Any adverse developments in the sector can lead to significant volatility and potential losses.

Lack of Diversification: Sector funds are concentrated in a single industry or theme, resulting in limited diversification. This concentration amplifies the impact of adverse events within the sector on the overall portfolio.

Cyclical Nature: Sector performance is cyclical, influenced by various economic and market factors. Investing solely in sector funds exposes investors to the cyclicality of the chosen industry, which may not always align with broader market trends.

Recommended Approach for SIP Allocation

While investing Rs. 7000 each month in Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund and Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund for the next 20 years may seem appealing, it's crucial to consider the risks associated with sector funds.

Diversification is Key: Instead of solely focusing on sector-specific funds, consider diversifying your investment across a broader range of asset classes and sectors. Diversification helps mitigate risk by spreading investments across different industries and geographies.

Consider a Core-Satellite Approach: Adopt a core-satellite approach by allocating a significant portion of your portfolio to diversified equity funds or ETFs that provide exposure to the overall market. Use sector funds as satellite investments to complement your core holdings.

Regular Monitoring and Review: Continuously monitor the performance of your investments and periodically review your portfolio's asset allocation. If sector-specific funds become overweight due to market movements, rebalance your portfolio to maintain diversification.

Consultation with a Certified Financial Planner: Seeking guidance from a Certified Financial Planner (CFP) can help you devise a well-rounded investment strategy aligned with your financial goals and risk tolerance. A CFP can provide personalized advice and recommend suitable investment options based on your individual circumstances.

Final Considerations

While sector funds offer the potential for high returns, they also come with elevated risks. It's essential to strike a balance between growth potential and risk management by diversifying your investment portfolio across various asset classes and sectors.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..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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