Ramalingam Kalirajan |10872 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 30, 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 - Jun 30, 2024Hindi

THello sir this Vk Here... My age is 30 years My sallary -75k now My monthly expenses around - 25k I have invested - 2 lac in Stock market till now in 20 different shares I have - 20 lac in my PPF (12500 monthly sip) Recently I have - 3 lac cash in my account Sir please guide me For further better investment where should I invest these rupees. Should I buy mutual fund (please tell which is better ) SIP or lumpsum ?? I feel fear in investing in stock market now because it's on its peak level all time... Please suggest me some strategy to make 2 CRORE rupees in 10 years ?? Sorry for my bad English ???? , Hope to get reply from u sir ..

Ans: I understand you’re looking for an elaborate and well-detailed investment strategy to reach Rs. 2 crores in the next 10 years. You've already done an impressive job with your savings and investments. Let's dive deeper into a comprehensive plan to achieve your financial goal.

Introduction: Where You Stand
At 30 years old, you have a solid foundation with the following:

Salary: Rs. 75,000 per month
Monthly expenses: Rs. 25,000
Stock market investment: Rs. 2 lakhs in 20 shares
PPF: Rs. 20 lakhs with a SIP of Rs. 12,500
Cash: Rs. 3 lakhs in your account
This leaves you with a healthy savings rate and a strong base to build on. Now, let's explore how to grow your wealth to Rs. 2 crores in 10 years.

Understanding Risk and Investment Horizon
Before we dive into the specifics, it's essential to understand your risk tolerance and investment horizon. Since you're looking to achieve a significant financial milestone in a decade, you'll need a mix of investments that balance growth potential and risk.

Investment Options: SIP vs. Lumpsum
Systematic Investment Plan (SIP)
SIPs are a disciplined way to invest regularly. They help mitigate market volatility by averaging the cost of investment over time. This approach is particularly effective in equity markets where prices fluctuate.

Advantages of SIP:

Rupee Cost Averaging: By investing a fixed amount regularly, you buy more units when prices are low and fewer when prices are high, averaging out the cost.
Disciplined Approach: Regular investments encourage a disciplined savings habit.
Reduced Risk of Market Timing: Since you invest regularly, you avoid the risk of investing a large sum at an unfavorable time.
Lumpsum Investment
Investing a lumpsum amount can be beneficial if you invest in debt funds or hybrid funds during stable market conditions. However, timing the market perfectly is challenging and risky.

Advantages of Lumpsum:

Higher Potential Returns: If invested at the right time, lumpsum investments can yield higher returns.
Suitable for Stable Funds: Ideal for investing in debt or hybrid funds where market timing is less critical.
Diversifying Your Portfolio
Diversification is crucial to manage risk and optimize returns. Here’s a detailed look at various investment avenues:

Mutual Funds
Mutual funds offer diversification across different asset classes. They are managed by professional fund managers and provide exposure to a variety of sectors and companies.

Types of Mutual Funds:

Equity Mutual Funds
These funds invest primarily in stocks. They are suitable for long-term goals and offer higher returns compared to other mutual funds. Consider large-cap or diversified equity funds for stability and growth.

Recommended Allocation:

Large-Cap Funds: These funds invest in well-established companies with a strong track record. They provide stable returns and lower risk compared to mid-cap or small-cap funds.
Diversified Equity Funds: These funds invest across various sectors and market capitalizations, providing balanced exposure.
Debt Mutual Funds
Debt funds invest in fixed income securities like bonds, government securities, and corporate debt. They are less volatile than equity funds and provide steady returns.

Recommended Allocation:

Short-Term Debt Funds: Suitable for a 3-5 year horizon, these funds invest in debt securities with shorter maturities.
Income Funds: These funds invest in a mix of government and corporate bonds and are suitable for a medium-term horizon.
Hybrid Mutual Funds
Hybrid funds invest in both equity and debt, offering a balanced approach with moderate risk.

Recommended Allocation:

Aggressive Hybrid Funds: These funds have a higher allocation to equities and a smaller portion in debt. They are suitable for investors looking for growth with moderate risk.
Conservative Hybrid Funds: These funds have a higher allocation to debt and a smaller portion in equities, suitable for conservative investors.
Your Investment Strategy
Given your current financial status and goal, here’s a tailored investment strategy:

1. Continue Your PPF Contributions
Public Provident Fund (PPF) is a safe and tax-efficient investment. It offers guaranteed returns and should remain a core part of your portfolio. Continue your SIP of Rs. 12,500 per month in PPF.

2. Increase Equity Exposure via SIPs
Equity mutual funds should be the backbone of your growth strategy. Start SIPs in a mix of large-cap and diversified equity mutual funds. Aim to allocate around 40% of your monthly savings here.

Example Allocation:

Large-Cap Fund SIP: Rs. 10,000 per month
Diversified Equity Fund SIP: Rs. 10,000 per month
3. Debt Mutual Funds for Stability
To balance risk, invest in debt mutual funds. Allocate around 30% of your monthly savings to these funds. They provide steady returns and reduce overall portfolio volatility.

Example Allocation:

Short-Term Debt Fund SIP: Rs. 7,500 per month
Income Fund SIP: Rs. 7,500 per month
4. Hybrid Funds for Balance
Hybrid funds offer the best of both worlds, combining equity and debt. Allocate around 20% of your savings to hybrid funds. This provides a balanced risk-return profile.

Example Allocation:

Aggressive Hybrid Fund SIP: Rs. 5,000 per month
Conservative Hybrid Fund SIP: Rs. 5,000 per month
5. Emergency Fund
Maintaining an emergency fund is crucial. Your Rs. 3 lakhs in cash is a good start. Ensure it covers at least six months of expenses. This fund should remain liquid and easily accessible.

Evaluating and Rebalancing
Regularly reviewing and rebalancing your portfolio is essential to ensure it stays aligned with your goals. Aim to review your investments every six months.

Steps for Rebalancing:

Assess Performance: Review the performance of your mutual funds and overall portfolio.
Adjust Allocations: If any fund is underperforming or overperforming, adjust your allocations to maintain the desired balance.
Stay Disciplined: Stick to your investment plan and avoid impulsive changes based on market movements.
Avoiding Common Pitfalls
To ensure success, here are some pitfalls to avoid:

1. Don’t Time the Market
Attempting to time the market often leads to losses. Stick to your SIPs regardless of market conditions. Consistent investing will yield better long-term results.

2. Avoid High-Risk Investments
Given your risk concerns, avoid direct stock investments. Stick to mutual funds where professional managers handle the risk.

3. Avoid Over-Diversification
Investing in too many funds can dilute returns and complicate portfolio management. Stick to a few well-performing mutual funds for optimal results.

Benefits of Actively Managed Funds Over Index Funds
You might have heard about index funds. While they are low-cost, they simply mimic the market. In contrast, actively managed funds, guided by skilled managers, aim to outperform the market.

Disadvantages of Index Funds:

No Outperformance: They only track the market, so they can't outperform it.
Market Risk: They carry the same risk as the market.
Lack of Flexibility: Fund managers can't make strategic moves based on market conditions.
Benefits of Actively Managed Funds:

Potential Outperformance: Skilled managers can outperform the market.
Risk Management: Managers can adjust portfolios based on market conditions.
Strategic Allocation: Funds can be tailored to changing economic scenarios.
Benefits of Regular Funds Over Direct Funds
Direct mutual funds have lower expense ratios, but investing through a Certified Financial Planner (CFP) offers significant advantages.

Disadvantages of Direct Funds:

No Professional Guidance: You miss out on expert advice and strategy.
More Responsibility: You handle all the research and monitoring.
Potential Mistakes: Without guidance, mistakes can lead to losses.
Benefits of Regular Funds Through CFP:

Expert Advice: A CFP provides professional advice tailored to your goals.
Portfolio Management: Ongoing monitoring and adjustments to your portfolio.
Holistic Planning: Comprehensive financial planning, including tax and retirement planning.
Final Insights
Consistency, diversification, and professional guidance are key to achieving your Rs. 2 crore goal. Regular investments through SIPs in a balanced portfolio of equity, debt, and hybrid mutual funds will help you reach your target. Keep a disciplined approach, avoid common pitfalls, and regularly review your portfolio.

By following this strategy, you can confidently work towards your financial goal while managing risk and optimizing returns. Stay committed to your plan, and you’ll be well on your way to financial success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Asked on - Jul 03, 2024 | Answered on Jul 03, 2024

Thank you so much Sir for your insightful advice it means a lot to me

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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.

MoneyReply

I m 49yrs, investing in SIP since 2019, started with Rs.10k/month, now Rs.20k/month. This month invested Rs.10lk in 4 equity linked MFs. Expecting Rs.43lks from PPF by 2031. How should I go further to have monthly income of Rs.2lk after 60yrs of age? How can I earn Rs. 80,000 in 12 months by investing just Rs. 4,000? Not possible in my opinion. I will continue to track answers i wish to learn from other experts.. I am 31 years-old & investing INR 110k/ month in various SIPs in India since July 2015. How can I make 10 Crores in 10 years from now? I have invested in PPF and Bank FD, and asset allocation in my SIP portfolio is appropriate as of March 2016. Good job! your thinking process is abolutely perfect. You have a set goal to achieve an end number of Rs10crores. But it will lead to utter failure- I will explain in a moment- And you also have a good savings rate of Rs1.1l per month which adds up to Rs13.2l per year. So assume even if your investments yield 0% returns over the long period it would still amount to Rs1.32crores. Now don’t get upset when I say 0% returns. When you invest in equities, you have the worst scenario in your mind before you venture. Preparing for the worst is preparing to succeed. Now lets look at your preferred mode of If I invest 15000 INR every month in SIPs, how much returns can I expect by the end of 15-20 years? *Answering this question from my perspective* As I am going to invest for a long term, I would choose EQUITY funds. ( No debt or hybrid) Per month I am going to invest Rs 15000. So, it amounts to 1 lakh 80 thousand per year and 36 lakhs for 20 years. In this case, I am assuming an annual returns of 12% as it is equity fund and any good equity fund can give 12% returns. At the end of 15 years, Amount Invested= 27 lakhs Wealth Gain= 48.7 lakhs Expected Total amount= 75.7 lakhs At the end of 20 years, Amount Invested= 36 lakhs Wealth Gain= 1.1 crore Expected Total amount= 14987219 ( 1.5 Crores) I hope this an If I invest ?1000 for 10 years in SIP what will be my returns? I want to invest 2K per month for two years in SIP. What are the best SIP Plans for that? If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? I have Rs. 50,000 with me to invest. Where can I invest so that I get an insured monthly return of Rs. 10,000? Rs. 10000 per month means 240 percent per annum rate of interest You cannot get through investments anywhere in the world If you have financial discipline and know the techniques of doing any business activity, you can definitely get the return in the long run See the example: Buy clothes worth Rs. 50000 (need not be in a single day). You have purchased 500 pieces at Rs. 100 per piece. Start selling th Where should I invest Rs 30,000 every month? Hey Keshav, I am not a Financial Adviser, so i can’t advise where to invest, but here’s what i will do as a middle class investor. Split that 30K into three parts: 15,000 - Plan A I will invest this money in Fixed , PPF or RD deposit every month without fail, i will make sure, all the interest generated will also be put back into this account again and again. until i really need it for emergency or re-investing it in Home down payment, This money will only be for the most important need. 10,000 - Plan B I will take the next 10K, and split it in to 7K and 3K. With 7K i will find two good mutual funds If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? First of all, any mutual fund question is incomplete without a Goal and Individual Age. Have you thought why you are investing 3000 and till what period ? What is your target amount? Without having answers to these questions it doesn't matter you invest in 1 fund or 100 funds. Now for your purpose we make assumption that you are now 25 years old and you need 80 lakhs amount for your child higher education after 25 years (that is your child may be at a age of 21) So as you are investing early I assume you could take a bit higher risk and target small cap funds with 15% annual returns expectation I If I invest 2,000 rupees per month in SIP for 10 years, in which fund should I invest, and how much will I get a return after 10 years? My suggestion would be to go for Mid Cap Mutual Funds. There are quite a number of Good Mid Cap Funds available for investments like: Quant Mid Cap Fund, Nippon India Growth Fund, HDFC Mid Cap Opportunities fund, SBI Magnum Mid Cap fund etc. etc. Now how much you will get after 10 Years. For Example Quant Mid Cap Fund - Direct Plan has NAV of Rs 197.99 its 3 years returns are 36.83 % and returns since launch of fund is 18.64 % and its assets under management is Rs 3781 Crores. Suppose you do Monthly SIP in this fund for 10 years or 120 months and we assume the fund will return 15 % average then you I want to invest in SIP, 1000 per month for 5 years. Is there any SIP available with this amount? You can start your investment in mutual funds via SIP of Rs. 1000 for 5 years. Checkout following schemes in which you can begin your investment. Reliance Tax Saver ELSS G Axis Long Term Equity Fund G SBI Magnum Multicap Fund G ICICI Pru Value Discovery Fund G L&T Tax Saver Fund G HDFC Long Term Advantage Fund G Franklin India Tax Shield Fund G Sundaram Diversified Equity G UTI Mastershare G UTI Balanced Fund G UTI Bond Fund G Sundaram Money Fund G Following calculations are takes place : Monthly Investment (SIP) = Rs. 1000 Time Horizon (in years) = 5 years Expected Return (%) = 12.5 Total SIP Amount Invested What should I do with Rs. 50,000 to earn Rs. 10,000 per month? There are lots of things you can do with your Rs 50,000 but if you invest in bitcoin, stock exchange or start trading you first have to know how these things work don't Just invest blindly. I would suggest you invest it in yourself get knowledge, get smarter. Look at it this way right now the 2ND richest person on this planet is Jeff Bozos the CEO of Amazon. Yes he's a billionaire. Now think about it for a second does Amazon have physical store ? No. Does it advertise on TV ? No. It all started form internet and it's where it generates it's traffic from. In America about 50% of people earn from I want to invest 15-20k per month in SIP, how much return is expected after say 2-3 years? Of Rs.20,000 invest Rs.10,000 in Equity mutual funds, Rs.5,000 in Balanced funds and Rs.5,000 in Debt mutual funds. Normally it will more than 3 years to see decent return from equity & balanced mutual funds but the return will be good around 13% to 15% (Tax free). As for debt funds, you will see returns sooner and it will be around 9% (Taxable). In three years returns won’t be much. You will be investing around Rs.7 lakh and you may have return of around Rs.60,000 after 3 years. But as years goes on, power of compounding takes effects and you will see massive returns in long term like in 15 ye I have Rs. 50,000 with me to invest. Where can I invest so that I get an insured monthly return of Rs. 10,000? I recommend you to invest in yourself by doing a professional course so that you stop asking these type of question. By investing money in yourself you may open a business for yourself and can much more. On investment term, the monthly return of 20% is possible only in a poonzi scheme where chances of losing money are very high. How can I generate a monthly income of Rs 50,000 from Rs 20 lakh? Learn “Income investing” method which goes on like this: Buy a basket of banks : HDFC BANK, ICICI and Kotak. These 3 make the major market cap of all banks. You can put these “Shares as Margin” with good brokers like ICICIDIRECT and get up to 85% of amount as margin. Thus investment of 20L gives u a margin of about 17L. Sell Banknifty (BN) call contracts about 40–50 days from current date and such that the premium comes close to ?50,000 ?50k premium needs to write 2500 points of BN contracts as the lot size is 20. Writing 1 Lot requires about 60k of capital. With 17L capital, you can write about 2 If I invest 1000 per month in SIP for 20 years, how much will I return after 20 years? For this amount, which fund is best for me? If you Invest in SBI Small Cap Mutual Fund thru SIP of Rs 1000 per month for 20 Years or 240 months then your Expected Fund value at the end of the 20 th Year would be Rs 24,38,856.38 approx. SBI Small Cap Fund is currently returning 25.81 % average since its launch. However, in the above calculation I have considered only 20 % average returns. Your total Investment Rs 1... If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? It depends. If u want to have sound sleep in nights without worrying about fluctuations, balanced advantage funds r great. In theory they follow the principle of BUY LOW and SELL HIGH. Again it's a very individual preference. Everyone is UNIQUE and should invest as per his/her capacity and personal situation. Ideal would be to invest in combination of NIFTY 50 index funds and NIFTY next 50 index funds Again the proportion can vary from 70:30 to 50:50. Many people will say I have high risk tolerance but remember to recover 5% loss u haveto earn double 10 % of profit and so on. So it's better to have hi If I invest ?1000 for 10 years in SIP what will be my returns? I want to invest 2K per month for two years in SIP. What are the best SIP Plans for that? If I plan to invest Rs. 3000 in SIP every month, should I put it all in 1 best MF or Rs. 500 each in 6 different MFs? Where do I invest Rs. 2000 per month for SIP? What if I started investing 2000rs / month in SIP for 40 years? Which SIPs are good for investing Rs 500 per month to get Rs 20 lakh and above after 16 years? Which are the best long-term MF SIPs to invest Rs. 4,000 per month? How do I invest 500 Rs per month? What capital do I need to invest to get Rs.20K per month in dividends? I want to invest 5000 (fixed) as SIP every month for my sister for 10-15 years for a corpus of 30 lakhs. What are some good funds for investment?