Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ulhas

Ulhas Joshi  |279 Answers  |Ask -

Mutual Fund Expert - Answered on Jun 14, 2023

With over 16 years of experience in the mutual fund industry, Ulhas Joshi has helped numerous clients choose the right funds and create wealth.
Prior to joining RankMF as CEO, he was vice president (sales) at IDBI Asset Management Ltd.
Joshi holds an MBA in marketing from Barkatullah University, Bhopal.... more
manjunath Question by manjunath on Feb 09, 2023Hindi
Listen
Money

Hi sir my question is building independent house (second house ) for renting out is a good invetment or investing in mutual funds is a good investment. For building house 50 lakh is required which i will raise thru second home loan. or for same EMI (paying to home loan )can i invest in mutual funds in SIP mode.If so what is the minimum return per annum is expected in MF and which is better one Kindly guide me. manju

Ans: Hello Manjunath and thanks for writing to me.

While we see that over the long run, equity investments beat other investment avenues like fixed deposits, one cannot assure any returns.
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.
Money

You may like to see similar questions and answers below

Ulhas

Ulhas Joshi  |279 Answers  |Ask -

Mutual Fund Expert - Answered on Mar 06, 2023

Listen
Money
Sir, I am 27 years old and my goal is to buy house of 1 cr after 5 years and collect good amount of money for its down payment at least 50% of it I am planning to start following sip HDFC nifty 50 index fund -15000 HDFC nifty next 50 index fund -15000 Canara robecco ELSS fund -4000 Quant tax plan direct growth -4000 Canara robecco small cap fund-2500 Quant small cap/axis small cap fund -2500 Should I invest more than above specified in funds . Please comment on selection of mutual fund and amount and changes in fund and amount to achieve goal. Thankyou in anticipation.
Ans: Hi Murgendra, thank you for writing in.

I notice you are currently investing around 70% of your funds in index funds, HDFC Nifty 50 & HDFC Nifty Next 50. With this, your portfolio returns will mostly mirror index returns.

You can consider investing Rs.10,000 in HDFC Nifty 50 Index Fund and Rs.10,000 in HDFC Nifty Next 50 Index Fund & invest the balance Rs.10,000 as follows:
1-SBI Magnum Midcap Fund-Growth Rs.5,000
2-Franklin India Smaller Companies Fund- Growth Rs.5,000

This will give you more midcap and smallcap exposure that have the potential to outperform the index and help you generate higher returns.

To create a corpus of Rs.50 Lakh in 5 years, you will need to invest around Rs.60,500 per month, that is increase your SIP’s by Rs.17,500. You need not invest in any new schemes, but simply increase the SIP amounts in the same proportion.

Annual step ups of around 10% will help you achieve your goals faster.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2024

Listen
Money
Hello, Iam a software professional,I want to buy house please guide me how much percentage i need to save out of loan amount assuming cost of flat may be 1 crore, also please suggest and also please advise me some mutual funds to invest in which i can expect return of around 30% and currently i have an active car loan which cost me an emi of 13k per month, i want to invest 10k in sip please suggest me some good mutual funds which can give me return around 25 to 30%
Ans: Thank you for reaching out. Your goal of buying a house and investing in mutual funds is commendable. Let’s break down your questions and provide a structured plan.

Saving for a House Purchase
Understanding Down Payment and Loan Amount
When buying a house, financial discipline is crucial. Typically, banks require a down payment of 20% of the property value. For a flat costing Rs. 1 crore, you need to save Rs. 20 lakhs as a down payment.

Planning Your Down Payment
Assess Your Savings: Calculate your current savings and how much you need to accumulate.

Monthly Savings Goal: Determine how much you need to save monthly to reach Rs. 20 lakhs. This will depend on your timeframe.

Automate Savings: Set up an automatic transfer to a high-interest savings account or a liquid mutual fund. This ensures disciplined saving.

Managing Your Loan
Loan Amount: After the down payment, you will need a loan of Rs. 80 lakhs.

Loan EMI Calculation: Ensure your EMI does not exceed 40% of your monthly income to maintain financial stability.

Investment Strategy for High Returns
Realistic Expectations
Achieving a 25-30% annual return consistently is unrealistic and risky. The Indian equity market averages around 12-15% annually over the long term. High returns come with high risk, and such expectations can lead to significant losses.

Recommended Mutual Funds
While aiming for high returns, consider a balanced approach with diversified equity funds and some exposure to mid and small caps. Here are some fund types to consider:

Flexi Cap Funds: These funds invest across market capitalizations and adapt to market conditions.

Mid Cap Funds: Focus on mid-sized companies with growth potential but higher risk than large caps.

Small Cap Funds: Invest in smaller companies with high growth potential and high risk.

Sectoral/Thematic Funds: Target specific sectors which may offer high returns but are also very risky.

Suggested Mutual Funds Allocation
Flexi Cap Fund: 40%

Mid Cap Fund: 30%

Small Cap Fund: 20%

Sectoral/Thematic Fund: 10%

Your Current Financial Commitments
Existing Car Loan
Your car loan EMI is Rs. 13,000 per month. Ensure this does not strain your finances when combined with other obligations.

Investing Rs. 10,000 in SIPs
Given your goal of high returns, here’s how you can allocate your Rs. 10,000 monthly SIP:

Flexi Cap Fund: Rs. 4,000

Mid Cap Fund: Rs. 3,000

Small Cap Fund: Rs. 2,000

Sectoral/Thematic Fund: Rs. 1,000

Risk Management and Diversification
Diversification
Diversification reduces risk. Spread your investments across different asset classes and sectors to mitigate potential losses.

Regular Review and Rebalancing
Review your portfolio every 6-12 months. Rebalance to align with your financial goals and market conditions.

Professional Guidance
Certified Financial Planner
Consult a Certified Financial Planner (CFP) for personalized advice. A CFP can help tailor your investment strategy, manage risks, and achieve your financial goals.

Conclusion
Your financial discipline and clear goals are commendable. By saving diligently for your down payment and investing wisely, you can achieve your dream of buying a house and building substantial wealth. Remember, while high returns are desirable, maintaining a balanced and diversified portfolio is key to long-term success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 01, 2024

Listen
Money
I'm 48 years old, and I have 30 lakhs. Should I invest in SIP or build another house? Which is better? I currently own one house, and I intend build one more house with the rent my balance ;life will be secure? which is best
Ans: At 48, your focus on securing your financial future is commendable. You currently have Rs 30 lakhs and are considering two options: investing in SIPs or building another house. Both options have their advantages, but it’s essential to evaluate them based on your long-term financial goals and risks.

SIPs vs. Building Another House
Before making a decision, it’s essential to weigh the pros and cons of both options—investing in SIPs versus building another house. Both have different risk factors, returns, and levels of liquidity.

Investing in SIPs
Investing in Systematic Investment Plans (SIPs) can provide the following benefits:

Diversified Growth: SIPs spread your investment across various assets. This reduces risk and maximizes returns.

Regular Compounding: SIPs benefit from compounding over time. The longer you stay invested, the higher your potential returns.

Liquidity: Unlike real estate, mutual funds through SIPs offer high liquidity. You can withdraw money whenever you need, giving you more flexibility.

Tax Efficiency: While SIPs in equity mutual funds attract long-term capital gains tax, they can still be more tax-efficient than rental income from real estate.

Inflation Beating Returns: Over time, equity mutual funds tend to outperform inflation. This is crucial to ensure your wealth grows.

Building Another House
Building a second house has the following features:

Stable Rental Income: Owning a rental property can provide a steady monthly income. This can supplement your retirement income.

Low Liquidity: Real estate is not a liquid asset. If you need funds urgently, selling the property could take time.

High Maintenance Costs: Property comes with regular maintenance, taxes, and possible vacancies, which can reduce your rental returns.

Market Volatility: Real estate markets fluctuate. Depending on the location and demand, property prices may not appreciate as expected.

Concentration of Wealth: Investing heavily in real estate ties up a large portion of your wealth in one asset. This reduces diversification and increases risk.

Analytical Comparison
SIPs:
Risk-Adjusted Growth: SIPs provide steady, inflation-beating returns if invested in a well-diversified portfolio.

Flexibility: You can easily adjust your monthly SIP contributions based on your financial situation.

Compounding Effect: Over time, SIPs allow for the compounding of returns. This can significantly increase your corpus by retirement.

Building a House:
Illiquidity: A house is not easily liquidated. If you need cash for emergencies or other needs, selling the house may take time.

Rental Income Uncertainty: Rental income is not guaranteed and can fluctuate based on market conditions.

High Costs: There are ongoing costs for maintenance, property taxes, and possible vacancies.

Which Option is Best?
Now, let’s evaluate your situation:

You already own one house, which provides security. Building another house would concentrate a significant portion of your wealth in real estate. This increases your financial risk due to potential market fluctuations and vacancies.

SIPs offer a more diversified and flexible approach. Over the next 10-15 years, if you invest regularly, your wealth can grow significantly. This will provide you with a more flexible income stream in the future.

Since you are 48 years old, planning for retirement is crucial. SIPs can give you consistent growth and liquidity for your retirement needs.

Final Insights
Given your age and current financial situation, investing in SIPs seems to be a better option. It offers flexibility, growth, and diversification, which are essential for long-term financial security. While building a house for rental income may sound appealing, the risks involved—such as market volatility, low liquidity, and maintenance costs—make it a less attractive option compared to the potential returns from SIPs.

Opting for SIPs can give you better control over your money and provide more stable growth in the long run. You can always adjust your SIP contributions based on your financial situation, ensuring that your wealth grows at a steady pace.

Best Regards,

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

..Read more

Latest Questions
Ravi

Ravi Mittal  |431 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 22, 2024Hindi
Listen
Relationship
A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

...Read more

Milind

Milind Vadjikar  |682 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
Listen
Money
Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x