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36-Year-Old Sandeep Needs Investment Advice - I Want to Invest an Additional 7k per Month for 20 Years.

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 27, 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 26, 2024Hindi
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HI Sir , My self Sandeep .36 years old .Need your advice on my investments . currently ,I have a monthly SIP of following funds- UTI Nifty 50 Index fund - 3K, HDFC Retirement saving fund-1K, HDFC children Gift fund-1K.I want to invest 7 K more as monthly SIP . I have gone through various analysis and thinking of investing in below manner - 1- 2K as monthly SIP in flexicap - either Parag Parikh Flexicap or JM Flexicap 2- 3k as monthly SIP in ICICIpru nifty 150 midcap index fund /kotak equity opportunity fund/ Motilal oswal midcap Fund 3- 2K in small cap fund - Axis small cap fund/Nippon India small cap fund Kindly suggest the investment strategy and the funds in respective area for next 20 years horizon . Thanks & Regards Sandeep

Ans: Sandeep, it’s great that you are already investing regularly and have a clear plan for long-term wealth creation. Your current SIPs show discipline and thoughtfulness, which are essential for building a solid financial future. Here’s a detailed breakdown of how to approach your additional Rs 7,000 SIP and fine-tune your portfolio for the next 20 years.

Assessing Your Existing Portfolio
UTI Nifty 50 Index Fund (Rs 3,000 SIP): While index funds offer low-cost exposure to the market, they typically follow the market and don’t outperform it. Actively managed funds, when chosen wisely, can potentially give better returns. Though index funds provide simplicity, keep in mind that over the long term, they may miss out on market-beating opportunities.

HDFC Retirement Saving Fund (Rs 1,000 SIP): This is likely a balanced fund meant for long-term retirement planning. Balanced funds are useful as they offer both growth and stability, but they may underperform compared to pure equity funds in a bull market. It’s a good conservative addition to your portfolio, but should not dominate.

HDFC Children’s Gift Fund (Rs 1,000 SIP): Similar to the retirement fund, this fund might focus on long-term stable returns. However, ensure that you evaluate its long-term performance. These kinds of funds sometimes have a more conservative approach than growth-focused equity funds.

Proposed Additional Investments (Rs 7,000 SIP)
You have wisely considered diversifying your portfolio across flexicap, midcap, and small-cap categories. Here’s an assessment of your choices:

1. Flexicap Funds (Rs 2,000 SIP)
Flexicap funds provide flexibility to invest across large, mid, and small-cap stocks based on market conditions, which offers a balanced approach to risk and growth.

Your Choice of Parag Parikh Flexicap or JM Flexicap: These funds have flexibility in their investment strategy, making them versatile. Flexicap funds are ideal for navigating different market phases, providing long-term growth potential while managing risk.
Recommendation: Continue with your plan to invest in a flexicap fund as they offer a good balance of diversification and risk-adjusted returns.

2. Midcap Funds (Rs 3,000 SIP)
Midcap funds target companies with strong growth potential but higher volatility. Over the long term, midcap funds tend to outperform large-cap funds, making them suitable for your 20-year horizon.

ICICI Pru Nifty 150 Midcap Index Fund, Kotak Equity Opportunity Fund, or Motilal Oswal Midcap Fund: Midcap index funds track midcap indices, but actively managed midcap funds like Kotak or Motilal Oswal can offer better returns if the fund manager picks strong-performing companies.
Recommendation: Opt for an actively managed midcap fund instead of a midcap index fund. Actively managed funds have a better chance of delivering higher returns over a 20-year horizon by selecting companies with high growth potential.

3. Small Cap Funds (Rs 2,000 SIP)
Small-cap funds target smaller companies, which offer high growth potential but with higher volatility. Over a 20-year period, small caps can significantly enhance your returns but require a longer commitment to ride out the volatility.

Axis Small Cap Fund or Nippon India Small Cap Fund: Both are strong performers, but small-cap funds are highly volatile in the short term. Since your horizon is 20 years, small-cap funds make sense as they can deliver substantial long-term growth.
Recommendation: Invest in a small-cap fund for higher long-term returns, but understand that short-term fluctuations are inevitable.

Key Points for a Balanced Portfolio
Diversification: You have a well-diversified portfolio with a good mix of large-cap (via index), flexicap, midcap, and small-cap funds. This diversification will help balance risk and maximize growth opportunities over time.

Active vs Passive Investing: While index funds (passive) have their place in a portfolio for low-cost exposure, actively managed funds generally offer better opportunities for higher returns, especially in midcap and small-cap categories. With a 20-year horizon, consider focusing more on actively managed funds.

SIP Discipline: Your current strategy of investing via SIP is excellent for long-term wealth creation. SIPs help you ride market volatility, average out costs, and allow consistent investment without trying to time the market.

Considerations for the Long Term
Asset Allocation: As you approach key financial goals (like retirement or children’s education), you may want to gradually reduce exposure to volatile small-cap and midcap funds, shifting more towards large-cap or flexicap funds to safeguard your wealth.

Risk Appetite: Since you’re 36 years old, you have ample time to take on more risk through small-cap and midcap investments. However, always review your risk tolerance every 5 to 10 years to ensure your portfolio remains aligned with your changing financial goals and risk capacity.

Tax Efficiency: Make sure to review the tax implications of your investments. Equity funds enjoy favorable tax treatment, especially over the long term. Any gains held for more than 1 year are taxed at a lower rate (12.5% beyond Rs 1.25 lakh of gains).

Final Insights
You’re on a great path with your disciplined SIP strategy. Diversifying across flexicap, midcap, and small-cap funds will give your portfolio the right mix of stability and growth. Flexicap funds provide the flexibility you need in dynamic market conditions, while midcap and small-cap funds will offer the growth potential needed for your 20-year investment horizon.

Keep in mind to monitor your portfolio annually or biannually to ensure it stays aligned with your long-term goals. Over time, you might want to shift a part of your portfolio to more stable funds, depending on how close you are to achieving your financial goals.

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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I am 33 years old. I have started investment in mutual fund SIPs from last 3.5 years. Till now I have increased my SIP investment to 16K per month (recently added 4 new mf in my portfolio), portfolio details provided below. So could you please review and let me know whether below investment is good for long term purpose or do I need to do any changes in it? Apart from this I am planning to invest 5K per month in Gold (in the form of SGB) as well. Please advance if you have anyone investment ideas for me, thanks in advance. My Investment categories:  Large Cap: 3K/month Large-Mid and Mid Cap: 6.5K/month Small Cap: 6.5K/month MF investment details:  SBI Blue Chip Fund - Direct Plan – Growth (cost value: 79K and current value: 1.26L): 1K/month SIP Mirae Asset Emerging Bluechip Fund - Direct Plan - Growth (cost value: 1.5L and current value: 2.06L): 4K/month SIP L&T Emerging Businesses Fund - Direct Plan - Growth (cost value: 1.5L and current value: 2.65L): 2.5K/month SIP Nippon India Small Cap Fund - Direct Plan - Growth (cost value: 20K and current value: 21.4K): 2K/month SIP Axis Bluechip Fund - Direct Plan - Growth (cost value: 37K and current value: 37.6K): 2K/month SIP Quant Small Cap Fund - Direct Plan Growth - Growth (cost value: 6K and current value: 6K): 2K/month SIP PGIM India Midcap Opportunities Fund - Direct Plan - Growth - Growth (cost value: 7.5K and current value: 7.4K): 2.5K/month SIP
Ans: Hello Prashant. The portfolio seems aligned with market. I would advice reconsider your schemes of AXIS Bluechip Fund better alternative peer schemes. The selected portfolio is finely selected for long term horizon.

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Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 18, 2024

Asked by Anonymous - Nov 18, 2024Hindi
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Please suggest if following investment are good as SIP started last year sep 2023 HDFC Flexi cap 5000, Parag Parikh 5000,SBI L & Mid cap 2500/-, Axis Blue chip fund 2500, AXis Mid cap fund 2500/- HDFC mid-cap opportunities fund 5000, Kotal emerging fund 2500/- Nippon India smal cap fund 5000/- HDFC Pharma & healthcare fund 4000/- Nippon India multicap fund 2500/- HSBC value fund 3000/- Investment are on monthly basis. Pease advise
Ans: Your portfolio demonstrates a proactive approach to wealth building. It includes diverse mutual funds across categories. Monthly SIPs indicate your long-term financial discipline. This is commendable. However, let’s evaluate its alignment with your financial goals.

Below are detailed insights for your portfolio assessment:

Strengths of Your Portfolio
Diversification

You’ve invested in funds from multiple categories. This includes large-cap, mid-cap, small-cap, flexi-cap, and sectoral funds.
A diversified portfolio reduces overall risk. It balances growth potential across market segments.
Consistency

Monthly SIPs ensure disciplined investments. This helps capture market volatility effectively.
Long-term SIPs can create substantial wealth through compounding.
Exposure to Growth Opportunities

Investments in mid-cap and small-cap funds offer higher growth potential. These funds are suitable for long-term wealth creation.
Sectoral funds provide concentrated exposure to booming sectors like healthcare.
Inclusion of Value and Multicap Funds

Value funds identify undervalued stocks. This can deliver long-term growth.
Multicap funds offer flexibility to invest across market capitalizations.
Areas for Improvement
Overlapping Fund Categories

Having multiple funds in the same category might lead to redundancy. For example, multiple mid-cap and flexi-cap funds.
Similar funds can increase portfolio overlap. This reduces the benefit of diversification.
Sectoral Fund Allocation

Sectoral funds like healthcare have high risk. These funds depend on sector-specific performance.
Such funds should have limited allocation in a balanced portfolio.
Number of Funds

A portfolio with too many funds can be hard to track. It dilutes returns without adding significant diversification.
Fewer funds with distinct strategies are easier to manage and monitor.
Portfolio Insights
Risk Assessment

Your portfolio leans towards high-risk categories like mid-cap and small-cap.
Consider balancing it with funds having stable growth, such as large-cap or flexi-cap.
Goal-Based Allocation

Align investments with specific financial goals. For example, retirement, child’s education, or buying a house.
Define timelines for each goal. Adjust fund categories based on risk tolerance and time horizon.
Taxation Awareness

Equity fund gains above Rs 1.25 lakh are taxed at 12.5%. Short-term gains attract 20% tax.
Ensure to account for these taxes in your investment strategy.
Regular Fund Investment Benefits

Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) offers advantages.

They provide expert insights, fund tracking, and timely rebalancing.

Direct fund investments might lack professional guidance. This could lead to suboptimal decision-making during market volatility.

Suggested Course of Action
Streamline the Portfolio

Reduce the number of overlapping funds. Keep one or two funds per category.
Focus on high-quality funds with a proven track record.
Adjust Sectoral Fund Exposure

Limit sectoral fund exposure to a small percentage of your total investment.
Use these funds only for specific, high-risk goals.
Rebalance Annually

Review your portfolio at least once a year. Rebalance it to maintain desired asset allocation.
Shift funds if they no longer align with your goals or risk tolerance.
Emergency Fund Allocation

Maintain a liquid fund or emergency fund equivalent to 6-12 months of expenses.
This avoids withdrawing SIPs during unexpected financial needs.
Monitor Fund Performance

Regularly review the performance of each fund against its benchmark.
Replace consistently underperforming funds with better alternatives.
Long-Term Discipline

Stick to your SIPs, especially during market downturns. This helps average out costs.
Avoid making decisions based on short-term market fluctuations.
Final Insights
Your portfolio reflects a strong commitment to financial growth. However, streamlining your investments can enhance efficiency and returns. Focusing on goal-based allocation ensures better alignment with your financial objectives.

Consider professional guidance to refine your portfolio and stay on track. This ensures your investments work harder for your future.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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Meri family ki income 80 lakhs hai yearly aur 40 lakhs expense hai aur age meri 48 hai capital family ki 4 cr hai to unko kaise manage aur kaha invest kare
Ans: Current Financial Snapshot
Annual Income: Rs 80 lakhs
Annual Expenses: Rs 40 lakhs
Capital Available: Rs 4 crores
Age: 48 years
Your income and existing capital provide a strong foundation. With proper planning, you can secure your financial future and achieve your goals.

Key Financial Goals
Retirement Planning: Build a corpus to sustain your post-retirement lifestyle.
Wealth Growth: Invest capital for inflation-beating returns.
Risk Management: Ensure adequate insurance coverage for family security.
Tax Efficiency: Optimise investments to reduce tax liabilities.
Suggested Investment Allocation
1. Emergency Fund
Maintain 6-12 months of expenses (Rs 20-40 lakhs) in liquid funds or a high-interest savings account.
This ensures liquidity for any unforeseen circumstances.
2. Equity Mutual Funds
Allocate 50-60% of your capital (around Rs 2-2.4 crores) to equity mutual funds.
Use diversified funds like large-cap, flexi-cap, and mid-cap funds for growth.
Avoid index funds due to lack of flexibility and active management.
Invest monthly through systematic investment plans (SIPs) for disciplined investing.
3. Debt Investments
Invest 20-25% of your capital (Rs 80 lakhs-1 crore) in debt mutual funds or fixed-income instruments.
Choose funds with low risk to ensure stability and predictable returns.
These funds act as a safety net during market downturns.
4. Children’s Education or Marriage
Allocate funds for long-term goals like education or marriage.
Invest in balanced advantage funds or equity mutual funds for higher returns.
5. Retirement Planning
At 48, focus on building a retirement corpus.
Allocate 20% of your capital (Rs 80 lakhs) to retirement-specific investments.
Use a mix of equity and debt for growth and safety.
Risk Management
Life Insurance
Ensure you have a term insurance cover of at least Rs 2-3 crore.
This protects your family’s financial future in your absence.
Health Insurance
Take a family floater health insurance plan of Rs 25-30 lakh.
Include critical illness coverage to address rising healthcare costs.
Tax Efficiency
Maximise Section 80C benefits by investing in ELSS mutual funds or PPF.
Use NPS for additional tax deductions under Section 80CCD.
Invest in tax-efficient instruments to reduce liabilities.
Regular Monitoring
Review your investments every six months with a Certified Financial Planner.
Rebalance your portfolio to align with market trends and life changes.
Final Insights
You have a strong financial base with high income and significant capital.

With disciplined investing, risk management, and tax efficiency, you can grow your wealth and achieve your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 22, 2024Hindi
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Namaskar Sir, I am 30 years old and want to start SIP @10,000/-pm in Mid cap mutual fund for next 30 years for a target of Rs 20 Cr (18-20%/year). You are requested to guide me about risks may come in future in MF industry and risk regarding sustainability of the fund house for next 30 years.
Ans: Investing Rs. 10,000 monthly in a mid-cap mutual fund is a commendable strategy. It shows your commitment to achieving a robust corpus of Rs. 20 crore in 30 years. However, there are risks and considerations to address.

1. Potential Risks in the Mutual Fund Industry
Market Volatility
Mid-cap funds are more volatile than large-cap funds.

Short-term fluctuations can impact returns during market corrections.

Economic Slowdowns
Economic instability can adversely affect mid-cap stocks.

Such slowdowns could lower the growth trajectory of the fund.

Regulatory Changes
SEBI and government regulations may impact mutual fund operations.

For example, changes in taxation or investment limits can affect returns.

Inflation Risk
Inflation can erode purchasing power and real returns over 30 years.

This risk must be factored into your long-term goal.

2. Risks of Fund House Sustainability
Fund House Stability
A fund house with a poor track record may not survive for 30 years.

Choose an established and reputed fund house with strong governance.

Fund Manager Risk
Performance depends on fund manager decisions.

Manager changes may impact the strategy and consistency of the fund.

Operational Risks
Fund houses may face risks like technology failures or poor compliance.

Verify the operational strength and risk management policies of the fund house.

3. Realistic Return Expectations
Expecting 18-20% annualised returns over 30 years is optimistic.

Historical data shows mid-cap funds average around 12-15% returns.

Relying on higher returns can lead to unrealistic expectations.

4. Diversification for Stability
Do not rely solely on mid-cap funds for your goal.

Diversify with large-cap or flexi-cap funds to reduce volatility.

Balanced funds can provide a mix of growth and stability.

5. Importance of Periodic Review
Monitor your SIP performance regularly, at least once a year.

Assess fund performance against benchmarks and peers.

Make necessary adjustments to align with your goals.

6. Role of Active Fund Management
Actively managed funds can outperform benchmarks during volatile markets.

Fund managers actively track market changes and rebalance portfolios.

This approach offers an edge over passively managed index funds.

7. Tax Implications on 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%.

Understanding tax implications helps plan withdrawals effectively.

8. 360-Degree Financial Planning
Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses.

This ensures financial stability during unforeseen situations.

Adequate Insurance
Secure yourself with adequate life and health insurance.

Avoid using ULIPs or investment-linked insurance for this purpose.

Retirement Planning
Parallelly invest in retirement-specific instruments for long-term security.

Diversify your portfolio to include stable growth options.

Education and Marriage
Plan separate investments for future education and marriage expenses.

Diversify investments to balance risk across different life goals.

Finally
Mid-cap funds are a promising option for wealth creation, but they come with risks. Diversify, review periodically, and adjust your strategy as needed. Consult a Certified Financial Planner to build a robust, long-term investment plan tailored to your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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I am Pushpinder Singh I will be 24 years in January 2024 and I have almost 12.5 lacs in financial markets 6.71 lac and 5.8 lac in mutual funds I have sip of 22000 per months divided in multiple mutual funds from mostly nippon mid cap fund and some other funds divided in small caps us equities large cap and government bonds and psu debt fund and I will be increasing my Sip to 25000 or 27000 including nps and my father and parents are giving me money for SIPs and mutual fund currently I am in Canada looking for job and planning to come back to India in march 2025 because my permit will expire then. Could you tell me what to do I am really confused and frustrated could you help me please thank you
Ans: At 24, managing Rs 12.5 lakh in investments is impressive.

Your SIP of Rs 22,000 reflects disciplined investing.

Planning to increase your SIP shows future financial awareness.

You’ve diversified across equity, debt, and international funds.

Relying on family for investments now provides flexibility.

However, it’s vital to plan for financial independence.

Clarity on Long-Term Goals
Define your financial goals clearly for better direction.

Examples include building wealth, home purchase, or retirement corpus.

Returning to India in 2025 changes your financial planning needs.

Review Current Investment Strategy
1. Mutual Funds Portfolio
Your focus on mid-cap and small-cap funds is growth-oriented.

These funds are volatile but perform well long-term.

Balance them with large-cap funds for stability.

PSU debt funds are safe but offer limited growth.

International equity exposure adds diversification but check fund performance.

2. SIP Increment
Increasing your SIP to Rs 25,000-27,000 is wise.

Focus on equity funds for inflation-beating returns.

Monitor underperforming funds and replace them if needed.

NPS Contribution and Benefits
Including NPS in your portfolio provides retirement-specific savings.

NPS allows tax benefits under Section 80CCD.

Opt for higher equity exposure in NPS for better returns.

As you near retirement, rebalance towards safer investments.

Financial Independence in Canada
Job search in Canada should focus on income stability.

Allocate part-time earnings to emergency funds or SIPs.

Build a liquid emergency fund covering at least six months’ expenses.

This fund can support you during job transitions in Canada or India.

Financial Adjustments Upon Returning to India
1. Reassess Your Expenses
Post-2025, review living expenses in India.

Adjust investments based on changes in cost of living.

2. Optimise Tax Efficiency
NRI status changes tax rules for your investments.

Understand mutual fund taxation when switching residency.

Keep debt funds minimal as they have higher tax rates.

3. Health Insurance and Risk Management
Ensure adequate health insurance coverage upon return.

Consider personal health policies in addition to family coverage.

Addressing Emotional Stress
Feeling frustrated at 24 is natural during transitions.

Focus on achievable milestones rather than everything at once.

Talk to family about shared expectations for clarity.

Final Insights
Your disciplined start provides a strong financial foundation.

Balance high-growth funds with stability-oriented investments.

Build financial independence while relying on family support initially.

Maintain focus on long-term goals even during temporary setbacks.

Regularly monitor and realign investments to match your evolving life stages.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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who is better tata new fund nifty 500 multi cap momentum quality 50 index and nifty 500 quality 50 fund
Ans: Below is a detailed evaluation of the two funds mentioned, with insights to help you choose the better option based on a holistic approach.

Understanding the Fund Categories
Nifty 500 Multi Cap Momentum Quality 50 Index Fund
This fund invests based on momentum and quality factors within the Nifty 500 universe.
Momentum-based funds favour stocks with recent price performance, which may lead to volatility.
Quality parameters ensure investments in financially strong companies, offering stability.
However, being an index fund, it lacks active management and adaptability.
Nifty 500 Quality 50 Fund
This fund focuses on top-quality companies from the Nifty 500, based on key metrics.
It emphasises financial strength, earnings stability, and low debt levels.
Quality funds are less volatile during market downturns but may underperform in bull markets.
As an index-based fund, it does not dynamically adjust to market changes.
Drawbacks of Index Funds
Lack of Active Management
Index funds do not adapt to changing market trends or economic conditions.
They follow a predetermined list of stocks, limiting flexibility.
Limited Customisation
Index funds focus on specific factors and cannot tailor strategies to optimise returns.
This approach can lead to missed opportunities during market fluctuations.
Risk of Overlap
Funds tracking the same index may lead to over-diversification and reduced overall returns.
Benefits of Actively Managed Funds
Dynamic Portfolio Management
Actively managed funds adjust to market trends, improving performance potential.
Professional fund managers ensure strategic allocation to maximise returns.
Flexibility to Navigate Risks
Actively managed funds can avoid underperforming sectors or stocks.
They rebalance portfolios to ensure a balance between risk and return.
Long-Term Growth Potential
Fund managers aim to outperform benchmarks over the long term.
They focus on growth-oriented stocks, delivering better inflation-adjusted returns.
Evaluating Your Investment Needs
Investment Objective
Choose funds aligned with your long-term financial goals.
Momentum funds may suit aggressive investors but can be volatile.
Quality funds offer stability and are ideal for conservative or balanced investors.
Risk Tolerance
Momentum-focused funds are riskier due to market fluctuations.
Quality-focused funds provide consistent returns with lower downside risk.
Tax Efficiency
Gains above Rs 1.25 lakh from equity mutual funds are taxed at 12.5%.
Actively managed funds, despite higher expense ratios, optimise after-tax returns.
Recommended Approach
Opt for Actively Managed Quality Funds
Quality-focused actively managed funds provide stable returns with lower risk.
A Certified Financial Planner can help select suitable schemes for your goals.
Avoid Index-Based Funds
Index funds lack the adaptability needed for consistent long-term performance.
They do not align with a strategic approach to portfolio management.
Focus on Diversified Actively Managed Funds
Diversified funds with a mix of large-cap, mid-cap, and small-cap stocks balance risk and reward.
These funds provide exposure to different sectors and themes for enhanced returns.
Final Insights
Active management remains the better option for achieving financial goals efficiently.

Index-based funds, though cost-effective, lack the strategic edge required for long-term success.

Consult a Certified Financial Planner for tailored advice and ongoing portfolio review.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

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Sir I have been investing in aditya birla sun life psu equity fund ,SIP of 5k every months, since April 2024 . Its performance is very very poor, since I have invested, even my principle amount has already drown in june ???????? Still I'm continuing my SIP regularly Kindly please advice me should i continue or make exit.
Ans: You have been consistently investing in a sector-specific fund. This demonstrates financial discipline, which is admirable. However, the fund's poor performance raises valid concerns.

1. Understand Sector-Specific Funds
PSU equity funds invest in public sector companies.

Their performance depends on the government’s policies and sectoral growth.

These funds can underperform during market corrections or sector-specific downturns.

2. Performance Evaluation of Your Fund
Short-term market volatility often affects sector funds.

Review the fund’s performance over 3 to 5 years instead of a few months.

Compare its returns with the benchmark index and peer funds in the same category.

3. Analyse Your Financial Goals
Consider if this fund aligns with your investment goals.

Sector funds are suitable only for specific, high-risk strategies.

If your goal requires stable and consistent returns, diversified funds are better.

4. Consider Opportunity Cost
Poor-performing funds can hinder your wealth creation journey.

Investing in well-managed diversified equity funds can yield better long-term growth.

Active fund management in large-cap or flexi-cap funds can provide a balanced risk-reward ratio.

5. Tax Implications on Exit
Redeeming investments within one year incurs short-term capital gains tax (20%).

For investments held beyond a year, long-term capital gains above Rs 1.25 lakh are taxed at 12.5%.

Evaluate your tax liability before exiting this fund.

6. Regular vs Direct Funds
Direct funds often lack the professional guidance available through regular plans.

A Certified Financial Planner can help you choose funds matching your goals and risk profile.

7. Steps for a 360-Degree Solution
Assess Your Portfolio
Review your overall portfolio, including other investments.

Check if any other funds are underperforming or overlapping in focus.

Diversify for Stability
Reallocate your SIP to diversified equity or flexi-cap funds.

These funds balance risk across multiple sectors and capitalise on growth opportunities.

Monitor Fund Performance
Regularly review the performance of all your investments.

Set clear benchmarks for evaluating their success.

8. Should You Continue or Exit?
Continue investing only if you believe the PSU sector will rebound in the long term.

Exit if you find consistent underperformance compared to the benchmark.

Redirect your SIP to better-performing, diversified funds for higher stability and returns.

Finally
Your decision should align with your long-term financial goals and risk tolerance. Consult with a Certified Financial Planner for a detailed portfolio review and actionable recommendations. This will ensure your investments grow steadily and meet your objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 17, 2024Hindi
Money
I & my wife is 32. What would our ideally retirement corps. I assume 20Cr. Correct me if I'm wrong. My current saving & income are below - 1) Rs 2,40,000 take home per month combined. 2) We both have PPF for the last 7 years contributing 1.5L each year from starting and plans to continue till 60. 3) LIC will give us 2Cr when we hit 60. 4) NPS we contribute 1L per each year form 2022 combined plans continue till 60. 5) Mutual Fund of SIP Rs 10,000 each month for last 1 year combined plans continue till 60. 6) APY we will get 5000 per month at 60. 7) FDs of Rs 36Lakh 8) Gold of Rs 15Lakh bonds 9) Got Inherited Rs 1.6Cr in form of FDs 10) Have Medeclaim of 40Lakhs and have own house. 11) Monthly expenses is around 40,000. 12) Have 1 year old Kid. 13) Have PF of 8 lakhs and will grow till 60. Also taking Gratuity in account
Ans: Planning for Rs 20 crore retirement corpus is ambitious yet realistic for your profile.

It’s essential to evaluate your goals, current assets, and future savings growth.

Below is a detailed breakdown to assess your situation and strategy:

Estimating Future Requirements
At 32, you have 28 years to retire.

Current expenses are Rs 40,000 monthly, translating to Rs 4.8 lakh annually.

Considering inflation at 6%, annual expenses will multiply significantly by 60 years.

By retirement, your monthly expense may be Rs 3 lakh (adjusted for inflation).

To sustain expenses for 30 years post-retirement, Rs 20 crore is a reasonable goal.

Existing Investments and Their Growth Potential
1. PPF Contributions
Current contribution: Rs 1.5 lakh each per year.

With consistent contributions till 60, expect substantial compounded growth.

PPF is secure but offers moderate returns, around 7%-8%.

2. LIC Plan
LIC will provide Rs 2 crore at age 60.

Consider this a fixed component of your retirement corpus.

3. NPS Contributions
Current combined contribution: Rs 1 lakh annually.

NPS can generate higher returns (8%-10%) with exposure to equity and debt.

This will supplement your retirement corpus significantly.

4. Mutual Fund SIPs
SIPs of Rs 10,000 per month for 28 years can grow substantially.

Equity mutual funds are ideal for long-term growth.

Ensure the funds are actively managed for higher returns.

5. Fixed Deposits
Rs 36 lakh and Rs 1.6 crore in inherited FDs offer stability.

FD returns are lower and taxable.

Consider allocating some FD amounts into equity funds for better growth.

6. Gold Bonds
Rs 15 lakh in gold is a valuable inflation hedge.

Hold it as part of your diversified portfolio.

7. APY Pension
APY will provide Rs 5,000 monthly from age 60.

This is supplementary income for basic needs.

8. Provident Fund (PF) and Gratuity
Current PF corpus is Rs 8 lakh.

PF and gratuity will grow significantly by 60.

Consider this part of your core retirement corpus.

Investment Adjustments for Better Growth
1. Increase SIP Contributions
Increase your mutual fund SIPs from Rs 10,000 to Rs 50,000 gradually.

Equity funds provide better inflation-beating returns than other options.

2. Diversify Across Mutual Fund Categories
Invest in large-cap, mid-cap, and flexi-cap funds for a balanced portfolio.

Avoid relying heavily on debt-oriented funds due to inflation risks.

3. Review FD Allocation
Reallocate a portion of inherited and personal FDs to higher-growth assets.

Keep only the amount needed for short-term emergencies in FDs.

4. Monitor NPS Allocation
Choose a higher equity exposure (up to 75%) within NPS for growth.

Shift to safer funds five years before retirement.

5. Set Up Emergency Fund
Retain at least 6-12 months of expenses in liquid assets.

This protects against unforeseen expenses without disrupting long-term investments.

Strategies for Your Child’s Future
Start a separate SIP for your 1-year-old child’s education and future needs.

A Rs 10,000 monthly SIP in equity funds can build a strong education corpus.

Consider child-specific plans for goal-oriented investments.

Tax Efficiency in Investments
1. Tax on FDs
FD interest is taxable as per your income tax slab.

This reduces net returns.

2. NPS Tax Benefits
NPS contributions provide tax deductions under Section 80CCD.

Withdrawals have partial tax-free benefits.

3. Mutual Funds Taxation
Equity mutual funds attract LTCG above Rs 1.25 lakh at 12.5%.

Short-term gains are taxed at 20%.

Maintain a balance to minimise tax liabilities.

Health and Life Insurance
Rs 40 lakh mediclaim is good coverage for now.

Consider increasing it to Rs 1 crore for rising medical costs.

Review your LIC coverage to ensure it complements your investments.

Final Insights
Your current plan is on track for a Rs 20 crore retirement corpus.

Optimise by increasing SIPs, reducing FDs, and reviewing asset allocation.

Focus on equity-driven investments for long-term growth.

Regularly monitor and adjust your portfolio to stay aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 13, 2024Hindi
Money
I am 42 yr old ,married and having a 13 yr old Kid. My monthly take home after deduction is 3,30,000 INR. My parents stay with me My investments/month are as below SIP per month is 37K Axis Mid Cap Fund-> 7000 UTI Flexicap Fund Gr-> 7000 ICICI PRu BlueChip Fund- Gr-> 3000 Kotak Emerging Equity Fund 5000 Axis Axis Small Cap Fund 10000 DSP DSP Nifty Next 50 Index.. 5000 RD/month is 136000 eNPS around 23k/month I don’t have any loans, my EPF amount is around 50 lacs. I stay in my own house. Please suggest a plan so that I can retire at the age of 50. My monthly expenses are around 60k
Ans: Current Financial Overview
Your monthly take-home income of Rs 3,30,000 is substantial.
You are disciplined in investments, which is commendable.
No loans and owning a house is a strong foundation.
Your monthly expenses are well within limits, allowing significant savings.
With these points in mind, here’s a 360-degree approach to help you retire at 50.

Investment Review
Systematic Investment Plans (SIPs)
Your SIP allocation shows a balanced mix of mid-cap, flexi-cap, large-cap, small-cap, and emerging equity.
Actively managed funds outperform index funds in volatile markets. They offer better returns with expertise.
If your funds are direct plans, consider shifting to regular plans via a Certified Financial Planner. Regular plans ensure ongoing guidance and fund monitoring.
Monthly Recurring Deposit (RD)
Rs 1,36,000 in RD ensures safety but offers low returns compared to inflation.
Gradually reduce RD contributions and allocate more to equity mutual funds for better growth.
eNPS Contribution
Rs 23,000 monthly contribution to eNPS aligns with your retirement goals.
Tier-I eNPS has tax benefits, but liquidity is low. Balance this with flexible investments.
EPF Corpus
Your EPF corpus of Rs 50 lakhs will provide a safety cushion during retirement.
Continue EPF contributions for assured returns and tax-free withdrawals at maturity.
Suggested Investment Adjustments
Equity Allocation
Gradually increase your equity exposure from SIPs. Equity delivers higher returns over the long term.
Diversify into flexi-cap and multi-cap funds, as they adapt to market conditions.
Avoid overconcentration in small-cap funds, as they carry higher risk.
Debt Allocation
Shift a portion of your RD to debt mutual funds. Debt mutual funds can offer higher post-tax returns.
Avoid traditional options like FDs due to lower returns.
Emergency Fund
Maintain an emergency fund covering 12 months’ expenses (around Rs 7.2 lakhs).
Park this in a liquid fund or a high-interest savings account for easy access.
Tax Efficiency
Invest in equity mutual funds wisely to optimise long-term capital gains tax.
Long-term capital gains (LTCG) above Rs 1.25 lakh on equity mutual funds are taxed at 12.5%.
For debt mutual funds, gains are taxed per your income slab. Plan redemptions to minimise tax impact.
Insurance Review
Ensure you have a term insurance cover of at least Rs 1 crore for your family’s security.
Review health insurance to include Rs 25-30 lakh family floater coverage, especially with your parents living with you.
Avoid ULIPs or investment-linked insurance policies. They have high costs and low returns.
Retirement Planning
Corpus Requirement
Retiring at 50 means planning for a post-retirement period of over 30 years.
Estimate retirement expenses at Rs 1 lakh per month, adjusted for inflation.
Factor in healthcare costs, lifestyle changes, and contingencies.
Asset Allocation
Maintain a 70:30 equity-to-debt ratio for the next eight years.
Post-retirement, gradually shift to a 50:50 ratio for stability and regular income.
Withdrawal Strategy
Opt for a systematic withdrawal plan (SWP) from mutual funds for steady cash flow.
SWP ensures tax efficiency and avoids depleting your corpus too quickly.
Additional Suggestions
Children’s Education and Marriage
Start a dedicated SIP for your child’s higher education and marriage.
Use a mix of equity and balanced advantage funds to build this corpus.
Parents’ Financial Security
Ensure adequate health insurance coverage for your parents.
Create a separate contingency fund to address any medical emergencies.
Regular Monitoring
Review your portfolio every six months with a Certified Financial Planner.
Realign investments based on market conditions and life goals.
Key Considerations for Index Funds and Direct Plans
Index Funds
Index funds track the market but lack active management, which limits flexibility.
Actively managed funds offer better returns by adapting to market trends.
Direct Plans
Direct funds might save costs but lack professional oversight.
Regular plans through Certified Financial Planners provide strategic advice, regular reviews, and informed decisions.
Final Insights
Your financial foundation is strong, and you are on track for early retirement.

With strategic adjustments, enhanced equity exposure, and professional guidance, you can achieve your goal by 50.

Focus on tax efficiency, regular reviews, and comprehensive planning to secure your family’s future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7320 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Listen
Money
Hi I am 50 years now and presently I am working in a pharma sales. I need a corpus of 7 cr in next 5 years. I have 2 daughters ages 18 yrs and 11 yrs. I got a monthly salary after deductions 2.3laks per month. But every month my emi hors 1.65 laks. My overall property value now 3cr as per market value today. I am investing monthly SIP of Rs. 42000 and my total SIP invested value as on date is 23.85 laks since 2014 in different funds in midcap and small cap and the present value is 49 laks, also my PF is around 15 laks,.PPF is 3.5 laks and also I am investing ICICI signature growth which i have invested lumpsum amount of 7 lakhs for 3 yrs back and today the value is 14 lakhs. Also I am getting a monthly rental value in amount rs. 45000 per month. Plz suggest how I can reduce my emi and i would like to.plan for my retirement, my both the daughters education and marriage.
Ans: You have outlined a complex financial situation. You are working towards multiple goals, which require strategic planning. Your current financial position indicates significant strengths, but there is also a need for optimisation.

1. Evaluate Your EMI Burden
Your EMI of Rs. 1.65 lakh is consuming 72% of your monthly salary.

This is a high debt-to-income ratio. Reducing EMIs is essential for liquidity.

Contact your lender to restructure the loan. Extend the tenure to reduce monthly payments.

Use part of your liquid investments, like PPF or ICICI growth, to prepay a portion of the loan.

2. Planning for Retirement
You aim for Rs 7 crore in 5 years. This is an ambitious goal.

Start by maximising your SIP contributions. Increase your SIP gradually every year.

Allocate more to equity funds, especially large-cap and flexi-cap categories.

Balanced advantage funds can provide stability to your portfolio as you near retirement.

3. Education and Marriage Planning for Daughters
For Your Elder Daughter (18 years old):
Higher education expenses may arise soon.

Avoid withdrawing from equity investments for this need.

Use your monthly rental income or fixed income instruments like PPF.

For Your Younger Daughter (11 years old):
Invest in equity mutual funds for her education and marriage.

Set aside a portion of your rental income for her future needs.

Review the investments periodically to ensure they align with her goals.

4. Review Your Current Investments
Your SIP investments have grown significantly. Continue investing in mid-cap and small-cap funds.

Add large-cap and flexi-cap funds for diversification and stability.

Your ICICI signature growth plan has performed well. Assess the exit charges and tax implications if you plan to redeem.

Your PPF and PF are safe investments. Continue contributing to them for fixed returns.

5. Build an Emergency Fund
Maintain an emergency fund equal to 6 months of expenses.

Use liquid mutual funds or fixed deposits for this purpose.

This fund will help avoid financial strain during unexpected situations.

6. Tax Planning
Your rental income and mutual fund gains are taxable.

Long-term capital gains (LTCG) on equity funds above Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

Debt mutual funds are taxed as per your income tax slab.

Consult with a Certified Financial Planner to optimise tax savings.

7. Insurance Planning
Ensure you have adequate life and health insurance.

Term insurance should cover at least 10 times your annual income.

Health insurance is essential for your family’s security.

8. Strategic Use of Property
Your property value of Rs 3 crore is a significant asset.

Avoid selling the property unless it is the only option to reduce debt.

Consider generating additional rental income if possible.

9. Set Clear Financial Goals
Prioritise your goals: retirement, education, and marriage.

Assign specific timelines and amounts for each goal.

Review and adjust your financial plan annually.

Finally
You are in a challenging yet promising financial situation. Focus on reducing debt, increasing investments, and planning systematically for your goals. Seek professional guidance to optimise your portfolio and achieve financial stability.

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.

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