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Ramalingam

Ramalingam Kalirajan  |7592 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 20, 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 - Jan 04, 2025Hindi
Money

Hi Ramalingam sir, i have started SIP of 50k each since January 2024 in Kotak emerging equity fund (growth), Nippon small cap fund (growth) and Nippon large cap fund (growth). I wish to continue this for 5 years and i would be retiring at the end of 2028. What would be likely of this investment at the end of 2028? Please let me know if it would be worth keeping the money and don't withdraw .. me expenses post retirement could be covered by PF & PPF. Is Parag Parikh Flexi cap fund good for investing for 5 years?

Ans: Your SIPs in Kotak Emerging Equity Fund (Growth), Nippon Small Cap Fund (Growth), and Nippon Large Cap Fund (Growth) reflect a balanced approach. Investing Rs 50,000 each per month demonstrates a strong commitment towards building wealth. Here is an analysis of these funds and their potential outcomes:

Kotak Emerging Equity Fund focuses on mid-cap companies. It can offer high returns but carries moderate risk.

Nippon Small Cap Fund invests in smaller companies. These funds usually deliver higher returns over a long period, but they are volatile.

Nippon Large Cap Fund is relatively safer. It invests in large, established companies and provides stability to your portfolio.

If you continue this investment for five years until 2028, the portfolio could grow significantly. Equity investments typically outperform other assets in the long run. However, market volatility is natural, and patience is key.

Growth Estimation for 2024–2028
Assuming a moderate annual return of 12–15% (historical average for equity mutual funds), your portfolio value at the end of five years could range between Rs 1.6 crore to Rs 1.8 crore.

Small Cap and Mid Cap Funds: These can drive higher growth in a bull market. However, they may be volatile during downturns.

Large Cap Funds: These add stability and provide consistent returns, even in uncertain markets.

Continuing the SIPs will help you benefit from rupee cost averaging, which smoothens market volatility. This disciplined approach ensures long-term wealth creation.

Should You Withdraw After Five Years?
Based on your plan to retire in 2028, it is worth keeping the investments and not withdrawing unless absolutely necessary. Here’s why:

Compounding Effect: Equity investments grow exponentially with time. Redeeming early interrupts compounding.

Post-Retirement Use: Your PF and PPF will cover expenses, so you won’t need to withdraw. Allow the portfolio to grow for a few more years.

Volatility Consideration: Markets may fluctuate in the short term. Holding the investment longer reduces this risk.

Is Parag Parikh Flexi Cap Fund Suitable for Five Years?
Parag Parikh Flexi Cap Fund is a popular option among investors, but let’s assess its suitability for your five-year horizon:

Positives: This fund invests across large-cap, mid-cap, and small-cap stocks, offering diversification. It has a history of stable returns and lower risk compared to pure small-cap or mid-cap funds.

Risks for 5 Years: While flexi cap funds are less volatile, five years is still considered a medium-term horizon. Equity investments, including flexi cap funds, perform better with longer horizons (7–10 years).

If your goal is strictly five years, you may consider a balanced advantage fund or a mix of equity and debt funds for lower risk.

Recommendations for Your Investments
Continue Existing SIPs: Keep investing Rs 1.5 lakh monthly in your current funds. They are aligned with your goals.

Avoid Parag Parikh Fund for 5 Years: While it is a good fund, a 5-year horizon is too short for aggressive equity investments. Stick to your current portfolio.

Avoid Direct Plans: Direct funds require expertise. Stick to regular funds and consult a Certified Financial Planner (CFP) for guidance.

Plan Withdrawal Strategically: As retirement approaches, shift some funds to debt instruments for stability. This will reduce the impact of equity market volatility.

Tax Considerations for Equity Mutual Funds
Keep in mind the new mutual fund capital gains taxation rules:

LTCG Tax: Gains above Rs 1.25 lakh are taxed at 12.5%.
STCG Tax: Gains are taxed at 20% for withdrawals before one year.
Plan your withdrawals accordingly to minimise tax liability.

Post-Retirement Planning
With PF and PPF covering your expenses, your equity portfolio can remain untouched. Focus on the following:

Emergency Fund: Maintain 12–18 months of expenses in a liquid fund or fixed deposit.

Health Insurance: Ensure sufficient coverage to handle medical emergencies.

Debt Allocation: Gradually increase debt allocation post-retirement to safeguard your capital.

Key Suggestions for a 360-Degree Approach
Diversify: Your portfolio is equity-heavy. Add some debt mutual funds or hybrid funds for balance.

Review Regularly: Monitor your portfolio performance every 6 months with a CFP.

Avoid Real Estate: Real estate may lock funds and reduce liquidity. Stick to mutual funds for flexibility.

Stay Patient: Short-term volatility is natural. Stay invested for long-term wealth creation.

Retirement Corpus: Let your equity investments grow after retirement. Use them only for big expenses.

Final Insights
You have a well-structured financial plan and a strong saving habit. Your SIPs, coupled with PF and PPF, provide a solid base for a secure retirement. Stay disciplined and avoid unnecessary withdrawals. Consult a CFP to fine-tune your strategy and make informed decisions.

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  |7592 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 08, 2024

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I am 26 years old and investing Rs.5100 each in Kotak Small Cap Fund & PP Flexi Cap Fund, through SIP since last 18 months. I have a long term view of over 10 years and may even like to continue even after 10 years. These fund have not shown much appreciation in last 2 years. Is there any need to review my investiment or I may continue above SIPs ? I am also thinking to start another SIP of 5000 in a large cap fund i.e. Mirae Asset Emerging Bluechip Fund, for a long term view. Whether it will be a good decision OR please suggest any other good option for large cap fund. Please guide.
Ans: Given your long-term investment horizon and diversified portfolio, it's natural to experience periods of lower growth or volatility, especially in specific market segments like small caps. However, it's essential to periodically review your investments to ensure they align with your financial goals and risk tolerance.

Considering your existing SIPs in Kotak Small Cap Fund and PP Flexi Cap Fund, it's advisable to assess their performance against their respective benchmarks and peer funds. If they consistently underperform, you may consider reallocating or discontinuing these SIPs.

Regarding starting a new SIP in Mirae Asset Emerging Bluechip Fund or any other large-cap fund, it's a prudent move to diversify your portfolio across different market segments. However, before making a decision, thoroughly research the fund's historical performance, fund manager's track record, expense ratio, and investment philosophy.

Alternatively, you can explore other large-cap funds known for consistent performance and stability, ensuring they complement your existing investments and contribute to your long-term financial objectives.

Remember, regular portfolio reviews and adjustments are crucial to optimize returns and mitigate risks over the long term. Consulting a financial advisor can provide personalized guidance based on your individual circumstances and investment goals.

..Read more

Ramalingam

Ramalingam Kalirajan  |7592 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 14, 2024

Asked by Anonymous - Jul 14, 2024Hindi
Money
I am 37 years old and a govt servant.i just recently started sip in four funds 1.Mirae asset large and midcap fund direct growth. _1k 2.quant large and mid cap fund direct growth_1k 3.kotak equity opportunities fund direct growth_1k 4.icici prudential retirement fund pure equity plan direct growth -5k Is it good for a term like 10 years?and if i want to invest 5k more then where should i invest for a term of 15 to 20 years.please advice .thank you
Ans: As a government servant at 37, planning for the future is crucial. Starting SIPs in mutual funds is a wise step, but evaluating and refining your strategy can optimize your returns. This analysis will guide you through your current investments and suggest additional avenues for a long-term horizon.

Current SIP Analysis

You've begun SIPs in four mutual funds with a 10-year perspective:

Mirae Asset Large and Midcap Fund
Quant Large and Midcap Fund
Kotak Equity Opportunities Fund
ICICI Prudential Retirement Fund Pure Equity Plan
Your current allocation in these funds is commendable. Let's evaluate the benefits and potential improvements.

1. Mirae Asset Large and Midcap Fund

This fund invests in both large and midcap stocks. It offers growth potential from midcaps and stability from large caps. This balanced approach can yield good returns over the long term.

2. Quant Large and Midcap Fund

Similar to the Mirae Asset Fund, this fund also diversifies between large and midcap stocks. Diversification is a key strategy to mitigate risk while aiming for growth.

3. Kotak Equity Opportunities Fund

This fund focuses on equity opportunities across market caps. It's known for good management and consistent performance. It adds diversity to your portfolio.

4. ICICI Prudential Retirement Fund Pure Equity Plan

This fund is designed for long-term goals like retirement. It invests primarily in equities, which can offer higher returns over an extended period.

Your portfolio currently has a good mix of large-cap stability and mid-cap growth potential. However, since you're considering a long-term investment horizon of 15-20 years, let's explore where you can invest an additional Rs 5,000 per month.

Evaluating Direct Funds vs Regular Funds

You've invested in direct plans, which typically have lower expense ratios. However, regular funds through a Certified Financial Planner (CFP) have their advantages. A CFP provides personalized advice, timely reviews, and adjustments to your portfolio. These services can potentially enhance your investment performance, justifying the slightly higher expense ratios.

Long-term Investment Strategy

For a long-term investment horizon of 15-20 years, consider the following factors:

Diversification: Spread investments across different asset classes and sectors.
Risk Tolerance: Understand your risk appetite and invest accordingly.
Consistent Review: Regularly review and adjust your portfolio based on market conditions and personal goals.
Recommended Investment Avenues

To invest an additional Rs 5,000 per month, here are some funds and strategies to consider:

1. Flexi Cap Funds

Flexi cap funds invest in stocks across market capitalizations. They offer flexibility to shift investments between large, mid, and small caps based on market conditions. This dynamic allocation can capture opportunities across the spectrum and provide robust returns over the long term.

2. Mid Cap Funds

Mid cap funds focus on medium-sized companies with high growth potential. These companies often grow faster than large caps and can offer higher returns. However, they come with higher risk, suitable for a long-term horizon.

3. Sectoral or Thematic Funds

These funds invest in specific sectors like technology, healthcare, or financial services. Investing in a growing sector can yield substantial returns. However, they are riskier and require careful selection and timing. For example, the healthcare sector in India is poised for significant growth due to increasing health awareness and spending.

4. International Funds

Investing in international funds provides exposure to global markets. This diversification can reduce risk associated with the Indian market. It also allows you to capitalize on the growth of developed economies and emerging markets. For instance, a fund investing in US technology stocks can offer high growth potential.

5. Balanced or Hybrid Funds

Balanced funds invest in both equity and debt instruments. They provide growth potential with equity and stability with debt. This mix can be suitable for moderate risk tolerance and long-term investment. These funds can provide a cushion during market volatility, ensuring smoother returns.

6. Multi-Asset Funds

Multi-asset funds diversify across various asset classes, including equity, debt, and gold. This diversification reduces risk and can provide steady returns. Investing in multiple assets helps in balancing the portfolio against market fluctuations.

The Benefits of Actively Managed Funds

While index funds passively track market indices, actively managed funds have fund managers making strategic decisions. Actively managed funds aim to outperform the market, providing higher returns. They adjust portfolios based on market trends, economic conditions, and company performance. This active management justifies the slightly higher expense ratios, as it can potentially lead to better returns than passive funds.

Implementing the Strategy

Based on the analysis, here's a suggested allocation for your additional Rs 5,000 investment:

Flexi Cap Fund: Rs 1,500
Mid Cap Fund: Rs 1,000
Sectoral/Thematic Fund: Rs 1,000
International Fund: Rs 1,000
Multi-Asset Fund: Rs 500
This allocation provides a balanced mix of growth potential and risk mitigation.

Regular Review and Adjustment

Investing is not a one-time activity. Regularly review your portfolio to ensure it aligns with your goals. A Certified Financial Planner can assist in this process, providing insights and adjustments based on market trends and your evolving financial situation.

Final Insights

Investing for the long term requires a strategic approach. Your current SIPs are a good start, and with the additional Rs 5,000 investment, you can further strengthen your portfolio. Diversification across different asset classes and sectors is key to maximizing returns and minimizing risk.

Consider the benefits of regular funds through a Certified Financial Planner. While they have higher expense ratios, the personalized advice and active management can enhance your investment performance.

Focus on a balanced mix of flexi cap, mid cap, sectoral/thematic, international, and multi-asset funds. This diversified approach can capture growth opportunities across markets and sectors, ensuring a robust and resilient portfolio.

Regularly review your investments, adjust based on performance and market conditions, and stay committed to your long-term goals. With careful planning and strategic investments, you can build a substantial corpus for your future needs.

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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