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36-Year-Old Seeks High-Risk Mutual Funds for Long-Term Investment

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 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 - Nov 06, 2024Hindi
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Sir, can you please suggest some good mutual fund in financial services. I m looking for long term and risk appetite is high. I am willing to take higher risk.

Ans: Investing in the financial services sector can offer high growth potential, especially for those with a high-risk tolerance and a long-term horizon. Let’s explore how you can approach this sector through mutual funds while considering both potential and strategic risks.

1. Understanding Sector-Specific Mutual Funds
High Growth Potential: Financial services funds focus on banks, non-banking financial companies (NBFCs), insurance firms, and other financial institutions. This sector has historically delivered good growth as the economy expands, but it is also sensitive to economic cycles.

Volatility Consideration: Financial services funds are inherently more volatile due to their dependence on economic and interest rate cycles. Investors with a high risk tolerance, like you, may find these funds suitable for long-term growth. However, they might experience sharp fluctuations during downturns.

2. Actively Managed Funds over Index Funds
Avoiding Index Funds: While index funds mirror the market’s overall performance, they don’t offer sector-focused options in financial services. Furthermore, index funds don’t leverage fund managers’ expertise in navigating specific sector cycles.

Benefits of Actively Managed Funds: Actively managed mutual funds with a skilled fund manager can capitalise on opportunities within the financial sector, making them suitable for long-term, high-risk investors. These managers carefully select high-growth financial companies and adjust the portfolio based on economic changes, thus offering better growth potential.

3. Choosing Regular Funds with an MFD & CFP
Drawbacks of Direct Funds: Direct funds may appear to have lower expense ratios, but they lack ongoing advisory support. With sector-specific funds, periodic review and expert advice become more critical due to sector volatility.

Advantages of Regular Funds: Investing in regular funds through a Mutual Fund Distributor (MFD) who holds a Certified Financial Planner (CFP) credential adds significant value. They can provide personalised guidance, help rebalance your portfolio, and ensure it aligns with your financial goals, especially given the risks of sector-specific investments.

4. Diversification within Financial Services
Select Sub-Sector Exposure: In financial services, diversification across banking, insurance, and asset management companies can offer balanced exposure. Some funds may concentrate on large-cap financial companies, while others include mid-cap and small-cap players with higher growth potential.

Balancing with Broader Equity Funds: While it’s good to capitalise on financial services, holding a portion of your portfolio in broader, diversified equity mutual funds can add stability. A high exposure to financial services may result in excessive risk during economic downturns, while broader funds provide stability and reduce sector concentration risk.

5. Tax Efficiency and Recent Rules
Equity Mutual Fund Taxation: For long-term capital gains (LTCG) above Rs 1.25 lakh, the tax rate is 12.5%. Short-term gains (STCG) attract a 20% tax. Considering these tax rules, it is best to aim for long-term holding in equity funds to optimize post-tax returns.

Rebalancing Based on Tax Implications: Working with a CFP can help you strategically rebalance based on tax efficiency, avoiding unnecessary churn and capital gains tax.

6. Monitoring and Reassessing Regularly
Regular Portfolio Review: Sector-specific funds require ongoing monitoring due to economic and market cycles. Financial services are highly sensitive to government policies, interest rate changes, and economic conditions.

Guidance from a Certified Financial Planner: A CFP can help you navigate market changes, review your portfolio annually, and adjust based on sector performance. This can help optimise your returns while keeping risk within your comfort level.

Final Insights
Investing in financial services mutual funds can align with your high-risk appetite and long-term goals. By selecting actively managed funds through an MFD with a CFP, you can maximise potential growth and leverage sector-focused insights. Diversifying within the financial sector and balancing with broader equity investments will offer stability and reduce concentrated risk. Regular monitoring and tax-efficient rebalancing are essential for achieving sustainable growth.

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  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 06, 2024

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Sir I want invest 30 to 35 k every month for for long term for 10 yrs please suggest good mutual funds I want to diversify in large,mid cap and small cap and hybrid , debt etc risk wise allocation and I need 1 cr after 10 year. Please share the list of mf percentage wise investment
Ans: As a Certified Financial Planner I'm here to offer guidance on your investment queries. Let's dive in:

• Firstly, kudos to all of you for taking the initiative to seek advice on your financial future. Planning for the long term is crucial, and it's commendable that you're thinking ahead.

• Investing wisely requires careful consideration of various factors, including your financial goals, risk tolerance, and investment horizon. It's essential to align your investments with your objectives.

• Diversification is key to managing risk effectively. By spreading your investments across different asset classes, sectors, and geographical regions, you can mitigate the impact of market volatility.

• When it comes to building wealth over the long term, consistency is key. Regularly investing a fixed amount, such as through SIPs, allows you to benefit from rupee-cost averaging and smooth out market fluctuations.

• As a Certified Financial Planner, my role is to understand your unique circumstances and tailor an investment strategy that suits your needs. I'll take into account factors like your age, income, expenses, and financial goals.

• It's natural to feel overwhelmed or uncertain about investing, especially with so many options available. Rest assured, I'm here to simplify the process and provide guidance to the best of my abilities.

• Remember, investing is a journey, not a destination. It's essential to stay disciplined, patient, and focused on your long-term goals, even during periods of market volatility.

• As individuals seeking financial advice, I encourage you to consider consulting with a Certified Financial Planner. A CFP can provide personalized guidance and help you navigate the complexities of investment planning.

In conclusion, by seeking advice from a Certified Financial Planner, you can gain valuable insights and make informed decisions to achieve your financial aspirations. Let's embark on this journey towards financial success together!

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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Maam pls suggest me 5or 6 mutual fund which i can do invest long time 12 to 20 years .my capacity is 10k per months i will take 50 percent risk if i take 100 percent risk can do this same in 10 years my goal is 1 cr
Ans: It’s great to see your commitment to securing your financial future. Let’s explore how you can achieve your goal of Rs. 1 crore by investing Rs. 10,000 per month.

Understanding Your Investment Horizon and Risk Appetite
You have a long-term investment horizon of 12 to 20 years. This gives you the advantage of time, allowing your investments to grow and compound. With a willingness to take up to 50% risk, you can consider a mix of equity and hybrid funds. If you are comfortable with 100% risk, you can focus more on equity funds.

Importance of Diversification
Diversification is key to managing risk while aiming for high returns. By spreading investments across various mutual funds, you reduce the impact of poor performance in any single fund. This approach enhances the stability of your portfolio.

Benefits of Actively Managed Funds
Actively managed funds have professional fund managers who make strategic decisions. They aim to outperform the market by selecting high-potential stocks. This active management can provide better returns compared to passive funds, especially over long periods.

Potential Mutual Fund Categories for Your Portfolio
1. Large-Cap Funds
Large-cap funds invest in well-established companies with a large market capitalization. These funds are relatively stable and can provide steady returns. They are less volatile compared to mid-cap and small-cap funds, making them suitable for moderate risk tolerance.

2. Mid-Cap Funds
Mid-cap funds invest in medium-sized companies that have high growth potential. These funds are riskier than large-cap funds but can offer higher returns. For an investor with a 50% risk appetite, mid-cap funds can be a good choice.

3. Small-Cap Funds
Small-cap funds invest in smaller companies with significant growth prospects. These funds are more volatile but can provide substantial returns. If you are willing to take 100% risk, including small-cap funds in your portfolio can be beneficial.

4. Multi-Cap Funds
Multi-cap funds invest across companies of various sizes and sectors. They offer a balanced approach by combining large-cap stability with mid-cap and small-cap growth. This diversification within the fund itself reduces risk and enhances returns.

5. Hybrid Funds
Hybrid funds invest in a mix of equity and debt instruments. They provide exposure to the growth potential of equities while offering the stability of debt. For investors with moderate risk tolerance, hybrid funds can be a safe yet profitable option.

Regular Monitoring and Rebalancing
Investing in mutual funds requires regular monitoring. Rebalance your portfolio periodically to maintain the desired asset allocation. This ensures your investments remain aligned with your risk tolerance and financial goals.

Advantages of Investing Through a Certified Financial Planner
A Certified Financial Planner (CFP) can help you select suitable mutual funds. They provide expert advice and personalized strategies based on your financial situation. Investing through a Mutual Fund Distributor (MFD) with CFP credentials ensures professional management of your investments.

Disadvantages of Direct Funds
Direct funds require investors to make all decisions independently. Without professional guidance, it can be challenging to choose the right funds and manage the portfolio. Regular funds, advised by a CFP, offer better management and informed decision-making.

SIPs: A Disciplined Investment Approach
Systematic Investment Plans (SIPs) are an excellent way to invest regularly. They help inculcate a disciplined investment habit. SIPs allow you to invest small amounts consistently, reducing the impact of market volatility.

Evaluating Fund Performance
When selecting mutual funds, consider their historical performance. Look for funds with a consistent track record of outperforming their benchmarks. Evaluate the fund manager’s expertise and the fund’s expense ratio to ensure efficient management.

Importance of Patience and Long-Term Perspective
Long-term investments require patience and a steady approach. Market fluctuations are normal, but staying invested allows your money to grow. The power of compounding works best over extended periods, helping you achieve your financial goals.

Conclusion
With a disciplined investment strategy and the right mix of mutual funds, you can achieve your goal of Rs. 1 crore. Diversify your portfolio, monitor regularly, and seek professional guidance from a Certified Financial Planner. This approach will help you balance risk and returns effectively, ensuring a secure financial future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...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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