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Ulhas

Ulhas Joshi  |279 Answers  |Ask -

Mutual Fund Expert - Answered on Oct 26, 2023

With over 16 years of experience in the mutual fund industry, Ulhas Joshi has helped numerous clients choose the right funds and create wealth.
Prior to joining RankMF as CEO, he was vice president (sales) at IDBI Asset Management Ltd.
Joshi holds an MBA in marketing from Barkatullah University, Bhopal.... more
Asked by Anonymous - Oct 20, 2023Hindi
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Dear Ulhas, I am 44 year old and want to start SIP of Rs5000 to 7000 per month. My time horizon is about 7 to 10 years and am looking for good capital appreciation/returns. Could you pls recommend me good mutual fund to acheive the objective

Ans: Hello and thanks for writing to me. As your goal is capital appreciation and wealth creation over the long term, you can consider starting monthly SIP' of Rs.1,400 in each of these funds:

1-DSP Quant Fund
2-Edelweiss NIFTY 100 Quality 30 Index Fund
3-SBI Focused Equity Fund
4-SBI Magnum Global Fund
5-UTI Focused Equity Fund
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  |7201 Answers  |Ask -

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

Asked by Anonymous - Aug 26, 2024Hindi
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i am 25 years old and want to invest and start SIP of rs.25000 for 10 year at least.I have other source of income too so i am able use these Rs. 25000 a months a without much worry. i am willing to take a risk in small cap too. Could u please suggest me best Mutual funds.
Ans: You’re 25 years old and have a stable income that allows you to invest Rs 25,000 monthly without much concern. You plan to invest this amount for at least 10 years, and you’re open to taking risks, including in small-cap funds. This is a strong foundation for building wealth over time. Let’s discuss how to maximize your investments and align them with your risk appetite and financial goals.

Understanding Your Risk Appetite
At 25, you have a long investment horizon. This allows you to take on more risk, particularly in small-cap funds. However, balancing your portfolio with a mix of fund categories will help mitigate risks while optimizing returns.

Benefits of Small-Cap Funds
High Growth Potential: Small-cap funds can deliver significant returns due to their potential for growth. They invest in companies with smaller market capitalizations, which can grow rapidly.

Volatility: These funds are volatile. While they offer high returns, they can also experience sharp declines. Therefore, your ability to withstand market fluctuations is crucial.

Importance of Diversification
While you’re willing to take risks, diversifying your investments across different types of funds is essential. This strategy helps spread risk and can improve your chances of achieving your financial goals.

Diversified Equity Funds
Balanced Exposure: Diversified equity funds invest in large, mid, and small-cap companies. This blend allows for steady growth while providing exposure to the higher returns of smaller companies.

Risk Management: These funds can cushion the impact of market downturns on your portfolio, balancing the high volatility of small-cap funds.

Flexi-Cap Funds
Flexibility: Flexi-cap funds give fund managers the freedom to invest across all market capitalizations. This allows them to adjust the portfolio based on market conditions, maximizing returns while managing risk.

Potential for Growth: These funds can offer strong returns by shifting investments between large, mid, and small-cap stocks, depending on where the best opportunities lie.

Active vs. Index Funds
You should avoid index funds and opt for actively managed funds. Active funds have the potential to outperform their benchmarks, especially in a dynamic market like India’s.

Disadvantages of Index Funds
Limited Upside: Index funds simply track a market index. They do not aim to beat the market, which limits your potential returns.

Lack of Downside Protection: In a market downturn, index funds fall as much as the market does. Actively managed funds, on the other hand, can protect against losses by rebalancing their portfolios.

Role of a Certified Financial Planner (CFP)
Investing through a Mutual Fund Distributor (MFD) with a CFP credential can be beneficial. They offer personalized advice, helping you select the right funds based on your goals and risk tolerance.

Disadvantages of Direct Funds
Lack of Guidance: Direct funds save you money on expense ratios, but they require you to make all investment decisions on your own. Without expert guidance, you may miss out on opportunities or make poor investment choices.

Long-Term Impact: Investing through an MFD with CFP credentials ensures your portfolio is aligned with your long-term goals. They provide ongoing support, helping you stay on track and adjust your investments as needed.

Strategic Allocation of Your SIPs
Now, let’s consider how to allocate your Rs 25,000 monthly SIP across different types of funds. This approach will maximize your returns while managing risk effectively.

Small-Cap Funds
High Allocation: Given your risk tolerance and long-term horizon, you could allocate a significant portion of your SIPs to small-cap funds. These funds can offer substantial returns, particularly if you remain invested through market cycles.
Diversified Equity Funds
Moderate Allocation: Allocate a portion of your SIPs to diversified equity funds. These funds will balance your portfolio, providing steady growth while exposing you to the potential of mid and small-cap stocks.
Flexi-Cap Funds
Flexibility: Consider investing in flexi-cap funds, which allow fund managers to adapt to market conditions. This flexibility can enhance your portfolio’s performance, especially during volatile periods.
Long-Term Wealth Creation
Your decision to invest Rs 25,000 monthly for 10 years demonstrates a commitment to long-term wealth creation. The power of compounding will play a significant role in helping you achieve your financial goals.

Power of Compounding
Growth Over Time: The longer you stay invested, the more your investments will benefit from compounding. By reinvesting your returns, you’ll earn returns on your returns, accelerating your wealth creation.

Discipline: Regular SIPs ensure that you remain disciplined in your investing, regardless of market conditions. This approach smooths out the impact of market volatility and helps you accumulate wealth consistently.

Monitoring and Adjusting Your Portfolio
Regular monitoring of your portfolio is essential to ensure it remains aligned with your financial goals. Adjustments may be needed based on market conditions, changes in your risk tolerance, or life events.

Annual Reviews
Portfolio Rebalancing: Conduct an annual review of your investments. Rebalance your portfolio if needed, ensuring it remains diversified and aligned with your long-term objectives.

Risk Management: As you approach the end of your investment horizon, gradually shift your portfolio towards lower-risk assets. This strategy will help preserve your capital while still generating returns.

Final Insights
You’re off to a strong start by committing to a Rs 25,000 SIP for 10 years. By diversifying your investments, focusing on actively managed funds, and working with a CFP, you can maximize your returns while managing risk effectively. Remember to monitor your portfolio regularly and make adjustments as needed. This disciplined approach will help you achieve your long-term financial goals and build substantial wealth over time.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Milind

Milind Vadjikar  |741 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 03, 2024

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What happens when a Mutual Fund company shuts down / gets sold off?
Ans: Hello;

If a mutual fund company gets sold or fails, the process is prescribed by SEBI:

In case MF company is Sold,
The new fund house may:
1. Continue the scheme with a new name and management.

2. Merge the scheme with similar funds and offer investors the option to exit without any exit load.

In case MF company shuts down,
The fund house will:
1. Pay out investors based on the fund's last recorded Net Asset Value (NAV) and the number of units the investor holds, after deducting expenses.

2. If the company is not in a position to do so then SEBI may liquidate the funds assets and distribute the proceeds to unit holders.

It is also pertinent to note that mutual fund regulation in India is one of the most stringent and hence best, from investor's point of view, globally.

This is not just in theory. We have seen how the Franklin Templeton abrupt closure of debt funds was handled with surgical precision, by SEBI, with no loss to unitholders.


Skin in the game regulation mandates that 20% salary of key mutual fund personnel and fund managers is paid in terms of units of their funds with a 3 year lock-in.

The stocks and bonds purchased by the AMC for the fund are held by a custodian, appointed by the trust that administers the fund.

The trust engages into a investment management agreement with the AMC for managing the fund as per their mandate and within regulatory guidelines.

Registrar and Transfer Agents handle the investor registration,kyc, maintaining records, providing account and tax statements etc.

Happy Investing;
X: @mars_invest

...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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