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Ulhas

Ulhas Joshi  |279 Answers  |Ask -

Mutual Fund Expert - Answered on Aug 23, 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
Apurv Question by Apurv on Aug 22, 2023Hindi
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Hi ! I am a retired person 62 yrs old . Recently I sold my equity portfolio , so I am having a spare corpus of about 60-70 lacs . I had kept this amount solely for equity/MF investments as I had also invested in FDs /Gold bonds separately .I want to invest it in an instrument which can give me less risk/good returns (above FDs & inflation beating ) , say about 9-10 % to the least in next 3 year & even better returns in the long run in my seventies /Eighties . Please illuminate me on the following- 1. Is it desirable to put this entire amount in MFs or there should be some direct investment in equities also ? 2. If Yes , what should be the ideal mix of portfolio for me ?Should it have equity ( Large cap /Mutli cap) or Balance Hybrid funds will be more suitable from the risk angle as I am a retired person ? .Please suggest an ideal mix with category & names of fund with the amount to be invested . 3.If no , then please suggest alternatives . Thanks & Regards Apurv Chandra

Ans: Hello Apurv and thanks for writing to me.

Note that I only discuss mutual funds in this column and so will not advise for or against any other asset classes.

To generate inflation beating returns, given that you are retired and would not like to take undue risk, I believe a mix of balanced advantage funds and multi asset funds will be ideal to invest in for a period of around 3 years. Starting SWP's from those schemes after 3 years will help you meet living expenses while your corpus continues to grow.

You can consider investing your funds equally in:
1-ICICI Prudential Regular Savings Fund
2-SBI Conservative Hybrid Fund
3-Tata Balanced Advantage Fund
4-Aditya Birla Sun Life Balanced Advantage Fund
5-Nippon India Multi Asset Fund
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  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 10, 2024

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Dear Dev , I am a retired person 62 yrs old . Recently I sold my equity portfolio , so I am having a spare corpus of about 60-70 lacs . I had kept this amount solely for equity/MF investments as I had also invested in FDs /Gold bonds separately .I want to invest it in an instrument which can give me less risk/good returns (above FDs & inflation beating ) , say about 9-10 % to the least in next 3 year & even better returns in the long run in my seventies /Eighties . Please illuminate me on the following- 1. Is it desirable to put this entire amount in MFs or there should be some direct investment in equities also ? 2. If Yes , what should be the ideal mix of portfolio for me ?Should it have equity ( Large cap /Mutli cap) or Balance Hybrid funds will be more suitable from the risk angle as I am a retired person ? .Please suggest an ideal mix with category & names of fund with the amount to be invested . 3.If no , then please suggest alternatives . Thanks & Regards Apurv Chandra
Ans: You’ve wisely accumulated a significant corpus of Rs 60-70 lakhs. Now, you want to ensure this money continues to grow, provides inflation-beating returns, and does so with minimal risk. Your goal of achieving 9-10% returns in the short term, while aiming for better returns in the long term, is reasonable. As a retired person, maintaining a balance between growth and safety is crucial.

Let’s delve into your questions to help craft a suitable investment strategy.

Should You Invest Entirely in Mutual Funds?
Mutual funds offer diversification, professional management, and potential for good returns. Given your situation, investing the entire corpus in mutual funds could be a prudent move. However, balancing between equity and hybrid funds can help manage risks effectively.

1. Balancing Risk and Returns
Large-Cap Funds: These invest in well-established companies, offering stability with moderate growth. They are suitable for conservative investors seeking steady returns.

Multi-Cap Funds: These invest across companies of various sizes. They offer a mix of stability and growth potential, ideal for those with a balanced risk appetite.

Balanced or Hybrid Funds: These funds invest in a mix of equities and debt instruments. They offer a buffer against market volatility, making them suitable for retired investors like you.

Given your age and goals, a balanced approach with a mix of equity and hybrid funds seems appropriate. This can provide the growth you seek while managing risk.

Direct Equities vs. Mutual Funds
Investing directly in equities can offer higher returns, but it comes with higher risks. As a retired person, your focus should be on preserving capital while achieving reasonable growth.

1. Benefits of Mutual Funds Over Direct Equities
Professional Management: Mutual funds are managed by professionals who make informed decisions, reducing the risk of poor stock selection.

Diversification: Mutual funds spread investments across various sectors and companies, reducing the impact of any single stock's performance.

Convenience: Mutual funds require less time and expertise compared to managing a direct equity portfolio.

For someone in your position, relying on mutual funds instead of direct equities offers a safer, more convenient way to achieve your financial goals.

Ideal Portfolio Mix for You
Considering your objectives, here’s a suggested portfolio mix that balances risk and returns:

1. Large-Cap Funds (30-35% of Corpus)
Stability with Growth: Large-cap funds provide steady growth with relatively low risk. They invest in well-established companies that are less volatile.

Inflation-Beating Returns: These funds typically offer returns that outpace inflation, which is crucial for preserving your purchasing power.

Suggested Allocation: Invest Rs 18-24 lakhs in large-cap funds. This will form the stable core of your portfolio.

2. Multi-Cap or Flexi-Cap Funds (25-30% of Corpus)
Balanced Growth: Multi-cap funds offer a mix of large, mid, and small-cap stocks. They provide a balance between stability and higher growth potential.

Market Opportunities: These funds can adjust based on market conditions, allowing fund managers to capitalize on growth opportunities.

Suggested Allocation: Invest Rs 15-21 lakhs in multi-cap or flexi-cap funds. This provides a balanced approach to growth.

3. Balanced or Hybrid Funds (35-40% of Corpus)
Risk Mitigation: Balanced funds reduce risk by combining equity and debt investments. They provide a cushion during market downturns.

Steady Returns: These funds are designed to offer moderate returns with lower risk, ideal for retirees.

Suggested Allocation: Invest Rs 21-28 lakhs in balanced or hybrid funds. This ensures your portfolio has a solid defense against volatility.

Alternatives to Consider
If you prefer not to invest entirely in mutual funds, there are other options to explore. These alternatives can provide additional safety or income streams.

1. Debt Funds
Low Risk: Debt funds invest in fixed-income securities like bonds, offering lower risk compared to equities.

Moderate Returns: While returns are lower than equity funds, they still beat traditional FDs, making them a safer alternative.

Suggested Allocation: If you prefer less exposure to equities, consider allocating 20-30% of your corpus to debt funds. This would provide a stable, low-risk component to your portfolio.

2. Senior Citizen Savings Scheme (SCSS)
Safe and Secure: SCSS is a government-backed scheme offering regular income with safety of capital.

Attractive Interest Rates: The interest rates are higher than regular FDs, and they are also tax-efficient under Section 80C.

Suggested Allocation: If safety is your primary concern, you could allocate 10-20% of your corpus to SCSS. This will provide regular income and peace of mind.

Final Insights
Your investment strategy should reflect your risk tolerance, financial goals, and retirement needs. Given your situation, here’s a recap of the suggested approach:

Invest 30-35% in large-cap funds for stability and steady growth.

Allocate 25-30% to multi-cap or flexi-cap funds for balanced growth.

Place 35-40% in balanced or hybrid funds to manage risk and ensure moderate returns.

Consider debt funds and SCSS as safer alternatives if you prefer less equity exposure.

This diversified portfolio is designed to achieve your desired 9-10% returns while managing risk effectively. It offers a mix of growth and security, which is crucial as you enjoy your retirement years.

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

..Read more

Nitin

Nitin Narkhede  |36 Answers  |Ask -

MF, PF Expert - Answered on Sep 14, 2024

Asked by Anonymous - Sep 13, 2024Hindi
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Hi, am 45-year-old seeking retirement planning advice. Am having a net saving of 4 Crores (2.75 Crores in MF, 1 Crores in FD and the rest in PPF and Sukanya scheme. If I keep on investing 3 lacs /month for 5 years what kind of corpus am looking to create .My MF portfolio consist of: Axis Mid cap, DSP Equity opportunities, Edelweiss Balanced advantage, Edelweiss Midcap, HDFC Small cap, HSBC Midcap,Invensco india Midcap, Invesco India small cap, Kotak emerging equity, Koal flexicap , Mirae assets large and midcap, SBI balanced advantage, Tata balanced advantage, Tata Mid cap, Whiteoak capital . thanks in advance
Ans: Dear Friend,
Great to that you are committed in your investments and keen to have your retirement planning query resolved. It's great to see that you're proactively managing your finances. Very few people are managing their own finances. I always recommend my clients to take hold of your finances and do not depend on any other person or advice. Let’s see what kind of corpus you might expect after five years, along with some suggestions for your mutual fund portfolio. Assumed Annual Return 6% Fixed Deposit, Assumed Annual Return:** 7.5% for PPF and Sukanya Scheme. Assumed Annual Return 10% on Mutual Funds. you can expect approximately ?8.45 Crores after 5 years. your investment is highly dependent on Equity related Mutual funds which consider high risk .
Some recommendations, Consolidate Similar Funds, Having too many funds in the same category can lead to overlapping investments and doesn't significantly increase diversification.
Diversify Across Market Caps Ensure you have exposure to large-cap, mid-cap, and small-cap funds for balanced growth. They offer low-cost diversification and track market indices.
Regularly Review Performance of your funds against benchmarks. As you're approaching 50, consider gradually shifting a portion of your investments to less volatile instruments like debt funds or fixed-income securities. Consider Index Funds or ETFs.
Ensure you have an emergency fund covering at least 6 months of expenses. Be mindful of the tax implications of your investments, especially when redeeming or rebalancing. Consult a Financial Advisor
Best regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

..Read more

Latest Questions
Milind

Milind Vadjikar  |741 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 03, 2024

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What happens when a Mutual Fund company shuts down / gets sold off?
Ans: Hello;

If a mutual fund company gets sold or fails, the process is prescribed by SEBI:

In case MF company is Sold,
The new fund house may:
1. Continue the scheme with a new name and management.

2. Merge the scheme with similar funds and offer investors the option to exit without any exit load.

In case MF company shuts down,
The fund house will:
1. Pay out investors based on the fund's last recorded Net Asset Value (NAV) and the number of units the investor holds, after deducting expenses.

2. If the company is not in a position to do so then SEBI may liquidate the funds assets and distribute the proceeds to unit holders.

It is also pertinent to note that mutual fund regulation in India is one of the most stringent and hence best, from investor's point of view, globally.

This is not just in theory. We have seen how the Franklin Templeton abrupt closure of debt funds was handled with surgical precision, by SEBI, with no loss to unitholders.


Skin in the game regulation mandates that 20% salary of key mutual fund personnel and fund managers is paid in terms of units of their funds with a 3 year lock-in.

The stocks and bonds purchased by the AMC for the fund are held by a custodian, appointed by the trust that administers the fund.

The trust engages into a investment management agreement with the AMC for managing the fund as per their mandate and within regulatory guidelines.

Registrar and Transfer Agents handle the investor registration,kyc, maintaining records, providing account and tax statements etc.

Happy Investing;
X: @mars_invest

...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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