Dear Team, I want to invest Rs.1.5 laks in MF for 5 years. please guide which MF is better to get high groth refund?

Ans: Given your investment horizon of 1-3 years and considering your age and risk profile, it's essential to prioritize capital preservation while aiming for modest returns. Here are some mutual fund options that may suit your investment needs:

Short-Term Debt Funds: These funds invest in fixed-income securities with relatively shorter maturities, providing stability and liquidity. They are suitable for investors looking to preserve capital while generating better returns than traditional savings accounts or fixed deposits. Consider investing in reputable short-term debt funds with a track record of delivering consistent returns and maintaining low volatility.
Liquid Funds: Liquid funds invest in short-term money market instruments with very high liquidity and minimal interest rate risk. They offer stability of capital and can be an excellent option for parking funds temporarily or meeting short-term financial goals. Liquid funds typically have a low expense ratio and can provide relatively higher returns compared to savings accounts or fixed deposits.
Ultra Short Duration Funds: These funds invest in fixed-income securities with short to ultra-short maturities, offering a balance between stability and yield. They can be suitable for investors with a slightly longer investment horizon of 1-3 years who are willing to take on slightly higher risk for potentially higher returns than traditional fixed deposits or savings accounts.
Arbitrage Funds: Arbitrage funds aim to generate returns by exploiting price differentials between cash and derivative markets. They offer relatively low volatility and tax-efficient returns, making them suitable for short-term investments. However, it's essential to note that arbitrage funds are subject to market risks and may not guarantee fixed returns.
Before making any investment decisions, it's advisable to consult with a certified financial planner or investment advisor who can assess your financial goals, risk tolerance, and investment horizon. They can help you select mutual funds that align with your investment objectives and provide personalized guidance based on your unique financial situation. Additionally, carefully review the fund's investment objectives, past performance, expense ratio, and risk factors before investing.

Ans: Hello Runkuraj and thanks for writing to me. It is difficult to predict the best performing fund. If you share details like your investment horizon, risk appetite and objectives, I may be able to suggest some schemes.

Ans: Minimum Risk and High Return are oxymorons. You will not get it. To get a reasonable return of 12% with market risk, you can choose to invest in diversified equity funds.

Ans: It's wonderful to hear that you're considering investing for the long term. Investing with a horizon of over five years can offer the potential for growth while allowing your investments time to ride out market ups and downs. Have you thought about your risk tolerance and how comfortable you are with market fluctuations over this period?

A Certified Financial Planner would typically recommend a diversified approach to capture growth opportunities across different sectors and market caps. This can help spread the risk and potentially enhance returns over the long run.

Remember, investing is a journey, not a sprint. It's about patience, consistency, and making informed choices. As you embark on this journey, it's essential to stay updated, periodically review your investments, and make adjustments as needed.

May your investment journey be rewarding, both financially and in the wisdom it brings.

Ans: It’s great that you want to invest Rs.10,000 per month.
Doing it for 5 years shows clarity and discipline.
A good investment habit is more important than just returns.
Let’s create a 360-degree plan for this journey.

? Start With a Clear Goal for the 5-Year Investment
– Know why you are investing.
– Is it for a car, house, travel, or child's education?
– The goal decides the risk level.
– It also helps in selecting the right fund type.

? Understand That 5 Years Is a Medium-Term Horizon
– Less than 3 years is short-term.
– More than 7 years is long-term.
– 5 years sits in between.
– So, investment should balance growth and safety.
– Full equity may be too risky.
– Full debt may not give good growth.

? Mix of Equity and Debt is Needed
– Hybrid funds suit this 5-year goal.
– They offer a mix of equity and debt.
– This gives better returns than full debt.
– It also gives lower risk than full equity.
– They suit medium-term investors like you.

? Prefer Actively Managed Mutual Funds
– Actively managed funds have better research teams.
– They try to beat the market returns.
– Fund manager takes care of stock selection.
– They adjust portfolio based on market changes.
– In 5 years, active management matters a lot.
– Index funds cannot do this.

? Why Index Funds Are Not Suitable Here
– Index funds just copy the index.
– They don’t protect you during market fall.
– No active fund manager involvement.
– They are passive and rigid.
– In 5 years, even one bad year can hurt.
– So, don’t choose index funds for this plan.

? Choose Regular Funds, Not Direct Plans
– Direct plans offer no personal help or support.
– You need to do research and track on your own.
– This increases chances of wrong fund selection.
– Also, rebalancing is missed often.
– Regular funds through Certified Financial Planner-guided MFDs give full service.
– They help in review, tracking, and goal alignment.

? Disadvantages of Direct Plans You Must Know
– No guidance or review at all.
– Risk of overexposure or wrong fund category.
– Can lead to underperformance.
– Many investors panic during market correction.
– In regular plans, expert guidance avoids panic.
– You also get behavioural coaching, which is valuable.

? Start with SIP in Growth Option of Mutual Fund
– SIP keeps discipline.
– Growth option helps build corpus faster.
– Don’t choose dividend or IDCW options.
– They reduce compounding benefit.
– Let the fund grow fully for 5 years.

? If You Want Liquidity, Choose Hybrid with Low Volatility
– You may need partial money anytime.
– Choose a fund with low drawdown.
– This gives peace even if markets go down.
– Low volatility gives confidence to stay invested.

? Don’t Depend on Past Returns
– Past returns don’t repeat always.
– Choose funds based on process, not just numbers.
– Fund consistency matters more than one-time outperformance.
– Look for risk-adjusted returns, not only high returns.

? Use SIP STP Combo for Smooth Investing
– You may park one month’s SIP in liquid fund.
– Use STP to move it weekly to equity fund.
– This gives better cost averaging.
– It reduces market timing risk.
– Useful when markets are volatile.

? Avoid ULIPs or Insurance-Based Investments
– These are poor options for 5 years.
– They have high charges and low flexibility.
– Returns are neither stable nor high.
– If you already hold any, consider surrendering.
– Reinvest that amount in mutual funds.

? Rebalance the Portfolio Annually
– Your 5-year investment may need changes every year.
– Equity-debt mix may shift due to performance.
– Rebalancing keeps risk in control.
– Your Certified Financial Planner will help do this.
– Don’t ignore yearly reviews.

? Consider Taxation When Redeeming After 5 Years
– Equity funds held over 1 year are long-term.
– LTCG above Rs.1.25 lakh is taxed at 12.5%.
– Short-term gains under 1 year are taxed at 20%.
– Debt mutual funds are taxed as per your tax slab.
– Your Certified Financial Planner will guide on tax-efficient withdrawal.

? Avoid SIP Top-Ups Without Review
– Increasing SIP each year is good.
– But review fund performance before top-up.
– Don’t just increase SIP blindly.
– Check if your fund is still suitable.
– Regular review prevents mismatch with your goal.

? Keep Emergency Fund Separate
– Don’t use this Rs.10,000 SIP amount for emergencies.
– Keep separate funds for that purpose.
– At least 3–6 months’ expenses in liquid fund.
– This keeps your SIP running in tough times.
– Never stop SIP for temporary needs.

? Avoid Real Estate for This Goal
– Real estate doesn’t suit 5-year goals.
– Very hard to buy and sell quickly.
– No monthly returns in most cases.
– Maintenance costs are high.
– Mutual funds give better liquidity and growth.

? Protect the Goal With Term Insurance
– In case of unexpected death, family gets money.
– Buy a pure term plan only.
– Don’t mix insurance with investment.
– ULIPs or endowments are low-return options.
– If you have them, surrender and reinvest in mutual funds.

? Don’t Chase Fancy or Trendy Funds
– Sector funds or thematic funds are risky.
– They may shine for short periods.
– But can fall deeply without warning.
– For 5 years, choose well-diversified hybrid or equity funds.

? SIP Delay Can Reduce Final Corpus
– Every month’s delay matters.
– Start immediately. Even one missed SIP affects growth.
– Time in market is more important than timing.
– Don’t wait for market bottom to start.

? Keep Investment Linked to Your Goal
– If the goal is near, reduce equity exposure.
– Don’t take high risk in last year.
– Move funds to safer options in final year.
– This protects your gains from sudden market fall.

? Don’t Withdraw Early Without Purpose
– Many investors withdraw early due to fear.
– This breaks compounding and reduces returns.
– Stay committed to your 5-year goal.
– Trust the process and stay invested.

? Final Insights
– Your Rs.10,000 monthly SIP for 5 years is a solid start.
– Choose hybrid or balanced mutual funds with active management.
– Avoid index, direct, annuity, or insurance-linked investments.
– Don’t follow past returns blindly.
– Choose regular plans with Certified Financial Planner support.
– Review yearly. Rebalance as per need.
– Don’t panic in market correction. Stay invested.
– Link to a goal. Stay disciplined.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment