Equity or Debt Funds? Seeking Guidance with a High BSE Level (81k+)

Ans: Hi Vivek,

Loan is provided at an specified interest rate and for a specified tenure (years/months) and these depend on the type of Loan you have taken e.g. Personal Loan, Home Loan etc. This determines the monthly installment that is required to be paid by you for the tenure agreed.
As you have mentioned Principal amount is 65K and now the Lender is asking to pay 1 Lac - this must include the interest due on the principal amount.
As you have not mentioned type of loan, the interest rate and the duration of this loan, its difficult to understand the terms of the loan and whether you have defaulted on it. Loan payments usually take into account the income and repayment capacity of individual.
Suggest you approach the Lender and discuss the terms and agree on a plan for repayment which is acceptable for both.
Please understand that if you default on a loan payment, the credit score gets impacted.

Regards
Janak Patel
Certified Financial Planner.

Ans: Your approach to starting a SIP in a combination of large-cap, balanced, and multi-cap mutual funds shows a thoughtful effort toward diversification. This is a great starting point, and I appreciate the time you've taken to create a mix of equity-focused funds. However, before you proceed, there are several points to consider. I will break down the analysis by fund type to help you understand whether this portfolio suits your financial goals, risk profile, and investment horizon.

Large-Cap Mutual Funds
You have selected four large-cap funds with an investment of Rs. 500 per month each, totaling Rs. 2,000.

Diversification Issue: Large-cap funds generally invest in the same set of top companies in India. While large-cap funds are stable, having multiple large-cap funds may lead to portfolio overlap. That means different funds might invest in the same companies, limiting diversification benefits.

Recommendation: You might consider reducing the number of large-cap funds. You could keep one or two large-cap funds and allocate the remaining amount to another fund category for better diversification. This will help balance your portfolio and reduce duplication of holdings.

Balanced Funds (Equity & Debt Mix)
Balanced funds aim to reduce volatility by investing in both equity and debt. This adds stability, especially during market downturns.

Suitability: The two balanced funds you've chosen offer a mix of aggressive equity exposure and debt, which helps cushion your portfolio in volatile market conditions.

Investment Horizon: Since you are looking at a long-term horizon, this allocation is beneficial as these funds provide moderate risk and can help you during market corrections.

Recommendation: Continue with these balanced funds as they serve the purpose of balancing risk with potential returns. Keep monitoring their performance and ensure that they stay aligned with your financial goals.

Multi-Cap Funds
Multi-cap funds are a great addition to your portfolio as they invest in large, mid, and small-cap companies. This provides you with diversified exposure across the market spectrum.

Suitability: The two funds you've selected offer you a balanced growth opportunity by investing in companies of various market capitalizations. Multi-cap funds tend to be more volatile than large-cap funds but have the potential for higher returns over the long term.

Recommendation: Multi-cap funds are a good option for investors with a long investment horizon, such as yourself. They will allow you to participate in the growth of companies across sectors and sizes. You can continue with this allocation, but monitor the portfolio periodically to ensure its performance aligns with your risk tolerance.

Overall Portfolio Assessment
Diversification: Your portfolio is moderately diversified across large-cap, balanced, and multi-cap categories. However, due to the multiple large-cap funds, you might see overlap, as discussed earlier. For a more optimized portfolio, you can consider adding a mid-cap or small-cap fund instead of having too many large-cap funds. These categories can provide higher growth potential over the long term, but they come with higher risk.

Risk and Return Balance: Your current portfolio is balanced between high-stability funds (large-cap and balanced funds) and higher growth potential funds (multi-cap). This combination works well for investors who seek steady growth with limited risk.

General Suggestions on Mutual Fund Selection
Avoid Overlapping: As mentioned earlier, holding multiple funds from the same category, especially in large-cap funds, can lead to overlapping holdings. Try to consolidate and focus on fewer but stronger funds within each category to avoid unnecessary duplication.

Regular vs. Direct Plans: You may want to consider investing through regular plans with a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD). Direct plans seem attractive because they come with lower expense ratios. However, regular plans offer the benefit of professional advice, which is essential for long-term portfolio maintenance. A CFP or MFD can help you rebalance your portfolio, monitor fund performance, and provide tax-efficient strategies.

Active Funds Over Index Funds: Active funds, which you have chosen, can outperform index funds in the long run. Unlike index funds, which merely track the market, active funds are managed by experienced fund managers. They have the flexibility to pick and choose stocks that have the potential for higher returns, which could be beneficial for you given your long-term goals.

Taxation of Mutual Funds
Equity Funds: Long-term capital gains (LTCG) tax on equity mutual funds is 12.5% for gains above Rs. 1.25 lakh. This means that after holding equity funds for more than one year, your returns will be taxed at this rate.

Short-Term Capital Gains (STCG): Equity funds held for less than one year are taxed at 20%. Ensure you have a long-term approach to minimize this taxation.

Balanced Funds: Balanced funds are taxed based on their equity exposure. If they hold more than 65% in equity, the taxation is similar to equity funds. Otherwise, they will be taxed like debt funds.

Debt Funds: Long-term capital gains on debt funds are taxed based on your income tax slab. Given this, holding debt funds for over three years helps in availing indexation benefits, reducing tax liabilities.

Retirement Planning and Financial Goals
Given your age and your desire to build a retirement corpus in 10 years, your portfolio should focus on growth. Based on the mix of funds you’ve selected, here’s an evaluation:

Retirement Corpus: You will need a solid growth strategy to accumulate the desired retirement corpus in the next decade. Given your current portfolio allocation, it is important to keep your equity exposure high, as it offers the best growth potential over the long term.

Children's Education and Marriage: With two young children, education and marriage expenses will be significant. Keep in mind that education costs rise faster than inflation. To manage these future needs, consider segregating your investments: one portfolio for retirement and another for education.

Emergency Fund: Ensure you also maintain a sufficient emergency fund in liquid instruments such as fixed deposits or liquid mutual funds. This fund should cover at least 6 to 12 months of expenses.

Final Insights
Consolidate Funds: Instead of multiple large-cap funds, consider focusing on 1 or 2 strong performers. This will reduce duplication and enhance your returns.

Monitor and Review: Regularly review the performance of your funds with a Certified Financial Planner. This will ensure your portfolio stays aligned with your goals and risk tolerance over time.

Tax Planning: As your investments grow, it’s important to remain mindful of the tax implications of your gains. Keeping a long-term approach will help minimize taxes.

Long-Term Vision: Focus on maintaining an equity-heavy portfolio for the next 10 years, as equity investments tend to outperform in the long run. Balanced and multi-cap funds can provide a good mix of stability and growth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

Ans: As per Income tax provision, possession date is not important but date of completion certificate is important.

For tax exemption on LTCG, you can check provisions of 54EC and invest the gain amount (if possible) in specified bonds within 6 months of receiving completion certificate.

Ans: Hello;

It is not advisable to surrender the policy now.

Hold it till maturity. After that you have the option to decide whether you want entire fund value to be used for buying annuity or commute 60% and use balance 40% to buy annuity.

Best wishes!!

Ans: Hello;

The 1.5 Cr corpus will grow into a sum of 5.09 Cr after 10 years.

While the current 4 L monthly sip will grow into a corpus of 9.87 Cr after 10 years.

Therefore your comprehensive corpus 10 years hence will be:
9.87+5.09=14.96 Cr.

If you buy an immediate annuity from an insurance company for your corpus of 14.96 Cr, considering annuity rate of 5.5%, you may expect monthly income of 6.85 L as desired. A modest return of 13% is assumed for investment in pure equity mutual funds.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Dear Anonymous,
I am glad that neither one of you decided to rush into committing to one another. Let me address all the issues one by one

First, I understand that you are not judging his lifestyle, but that does not mean you are not allowed to be concerned about it. We all have our preferences and there is nothing wrong with that.

Second, why should you be the only one putting in the work? A healthy connection is forged when both parties take an equal part in building it. Moreover, don't you think you deserve someone who would love to put some effort into building a relationship with you?

Third, if he isn't sure about this marriage, it is okay. But that does not mean he should leave you hanging. If it has been over two months and you are finding it difficult to give him any more time and space, you can communicate that to him. You can ask him if he has made up his mind and what his intentions are.

Fourth, please do not build a relationship with a person you are not entirely satisfied with because you do not have a better option right now. Do not set your bar low. Lack of options should not be the reason you choose him; you should only decide to marry him when you firmly believe that he is the right man for you.

Best Wishes.

Ans: Hello;
If you do a monthly sip of 10 K in a flexicap type mutual fund say for eg. PPFAS flexicap fund for 10 years then you may expect to accumulate a corpus of 24.67 L considering modest return of 13%.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Hello.
No doubt, Forensic Science has a promising career, but yet multiple times before going for it. You have to work in criminal investigation, law enforcement, and laboratory analysis. The work culture may or may not suit everybody. If you have strong willpower, are ready to deal with adverse situations, and can manage things then only think about it. If you still pursue it, then try to try to complete LLB with distance learning to become more expert in dealing with the worst conditions/situations.
Here are a few universities for Forensic Science:
(1) Gujarat Forensic Sciences University (GFSU), Gandhinagar
(2) Amity University, Noida
(3) Osmania University, Hyderabad
(4) Manipal Academy of Higher Education (MAHE), Manipal
(5) Banaras Hindu University (BHU), Varanasi
(6) University of Delhi (DU) – Department of Anthropology
(7) Lovely Professional University (LPU), Punjab
(8) Dr. Harisingh Gour University, Sagar, Madhya Pradesh
(9) Institute of Forensic Science, Mumbai
(10) Chandigarh University, Punjab
If possible, Choose the university near your home town.

If you are dissatisfied with the reply, please ask again without hesitation.
If satisfied, please like and follow me.
Thanks.

Radheshyam

Ans: Hello.
Your daughter is just in the 10th class. There are a lot of career options with PCB. But there is no need to think at this early stage. First, ask her to focus on NEET and score more in the examination. If you think, your daughter is weak and can't do better in NEET, then here are some options:
(1) Medicine and Allied Health Sciences
(2) Pharmacy
(3) Biotechnology
(4) Microbiology, Genetics, and Life Sciences
(5) Environmental Science
(6) Zoology and Botany
(7) Nursing and Allied Health Professions
(8) Agriculture and Food Science
(9) Psychology
(10) Forensic Science
(11) Nutrition and Dietetics
(12) Teaching and Academia
(13) Veterinary Sciences
Yet to conclude, please do not try to explore the options at this early stage. Let your daughter complete at least 11th science. Take a brief review of her studies and test her eligibility to face NEET confidently. If the answer is negative, then search for other options. Yet the final choice will depend on your daughter's consent. Pl take a brief review of all courses, job placement, and scope in the future on your own when your daughter enters into 11th class.

If you are dissatisfied with the reply, please ask again without hesitation.
If satisfied, please like and follow me.
Thanks.

Radheshyam