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Should I Rebalance My Mutual Fund Portfolio with Rs.22 Lakh Investment Now Valued at Rs.32.5 Lakh? - Umesh

Ramalingam

Ramalingam Kalirajan  |6977 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 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
UmesH Question by UmesH on Jul 20, 2024Hindi
Money

hi i am umesh i have 2200000 investment in mutual fund that now 3250000 is rebalancing of fund necessary, if yes how i can do it

Ans: Hi Umesh, it’s great that your mutual fund investment has grown from Rs. 22,00,000 to Rs. 32,50,000. This shows that you’ve made some good choices. With this growth, it’s important to reassess your portfolio and consider if rebalancing is necessary.

Why Rebalancing is Important

Rebalancing ensures that your investments stay aligned with your financial goals and risk tolerance. Over time, some funds may perform better than others. This can change the risk profile of your portfolio. For example, if equity funds grow faster, your portfolio might become more equity-heavy. This means more risk, especially if the market turns volatile.

Rebalancing helps in maintaining your desired asset allocation.

Assessing Your Current Asset Allocation

Start by reviewing the current allocation between equity, debt, and other asset classes in your portfolio. Compare this with your original investment strategy. Has the equity portion increased? Has the debt portion reduced? If yes, then your portfolio might have become riskier than you initially planned.

It’s essential to match your investment mix with your risk tolerance.

Steps to Rebalance Your Portfolio

If you find that your asset allocation has shifted, you can follow these steps to rebalance:

Evaluate Your Financial Goals: First, revisit your financial goals. Are they short-term, medium-term, or long-term? Ensure that your current portfolio aligns with these goals.

Determine the Desired Asset Allocation: Based on your goals, decide the ideal mix of equity and debt. For example, if you have a long-term horizon, you might want to keep a higher percentage in equity. If you are closer to your goal, you might want to shift more towards debt.

Sell Overweight Assets: If equity has grown more than debt, consider selling some equity funds. This helps in reducing the risk.

Invest in Underweight Assets: If your debt allocation is lower than desired, reinvest the proceeds into debt funds. This helps in stabilising your portfolio.

Frequency of Rebalancing

Rebalancing is not something you need to do frequently. Typically, it’s advisable to review and rebalance your portfolio once a year. However, if there are significant market movements, you might want to consider doing it sooner.

Remember, rebalancing too often can lead to unnecessary transaction costs and taxes.

Tax Implications of Rebalancing

When you sell mutual funds to rebalance, be aware of the tax implications. Equity funds held for less than one year attract short-term capital gains tax at 15%. If held for more than one year, long-term capital gains above Rs. 1 lakh are taxed at 10%. For debt funds, short-term capital gains are added to your income and taxed at your applicable slab rate. Long-term capital gains are taxed at 20% with indexation.

Rebalancing should be done with a focus on minimising tax liability.

The Importance of Professional Guidance

It’s commendable that you are thinking about rebalancing. However, the process can be complex. Consulting a certified financial planner (CFP) can be beneficial. They can provide a detailed analysis of your portfolio and suggest the best course of action. A CFP will ensure that your portfolio remains aligned with your financial goals and risk tolerance.

Professional advice adds value by tailoring strategies to your specific needs.

Disadvantages of Direct Funds

If you are investing in direct mutual funds, you may save on the expense ratio. However, direct funds require you to make decisions on your own. This can be challenging if you lack the expertise. A certified financial planner can guide you with regular funds, ensuring that your investments are well-managed and aligned with your goals.

Regular funds through a CFP offer ongoing advice and support.

Why Actively Managed Funds Are Better

Index funds and ETFs might seem attractive due to lower costs. However, they only track the market and do not aim to outperform it. In contrast, actively managed funds have the potential to generate higher returns, especially in a dynamic market. Fund managers make decisions based on market conditions, which can lead to better outcomes.

Actively managed funds offer flexibility and the potential for higher returns.

Finally

Rebalancing is an essential part of maintaining a healthy investment portfolio. Given the significant growth in your mutual fund investments, it might be the right time to rebalance. Assess your current asset allocation, align it with your financial goals, and take the necessary steps. Consulting a certified financial planner can ensure that your decisions are sound and beneficial in the long run.

Investing wisely is not just about returns; it’s about achieving your financial goals with confidence.

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.
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I am 31 years old. I am investing in these funds 5k Parag Parikh Flexi 4k Kotak Emerging fund - mid cap 4k Quant small cap 3k ICICI prud technology fund 3k Quant infra fund 8k Nifty 50 Index fund 5k in Nasdaq 100 etf Please suggest if I have to do any changes or rebalance or change in amount where I have to increase or decrease for any fund. Thanks in Advance
Ans: It's great to see your proactive approach towards investing at a relatively young age. When reviewing your investment portfolio, it's essential to consider your financial goals, risk tolerance, and investment horizon. While your current allocation seems diversified, it's always wise to periodically reassess and rebalance your portfolio to ensure alignment with your objectives.

Consider evaluating the performance and prospects of each fund in your portfolio. Are they meeting your expectations in terms of returns and risk management? Are there any funds that have consistently underperformed or carry higher volatility than desired?

Additionally, reassess your asset allocation strategy. Are you comfortable with the current mix of equity and index funds, or would you prefer to adjust the allocation based on market conditions and your risk appetite?

Lastly, remember that investment decisions should be driven by a well-thought-out plan rather than short-term market movements. Consider consulting with a Certified Financial Planner who can provide personalized guidance tailored to your unique financial circumstances and goals. With careful planning and periodic review, you can work towards achieving long-term financial success.

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Mutual Funds, Financial Planning Expert - Answered on Jul 02, 2024

Asked by Anonymous - Jun 19, 2024Hindi
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I am 35 years working as an IT professional.Due to other responsibilities I started MUtual fund last year with 40k every month. quant active, small and Mid cap and ICICI prudential bharat Should I re balance these funds or need to check some other funds.
Ans: I understand your situation as an IT professional managing multiple responsibilities. Starting mutual funds with Rs 40k every month is a great step! Let's dive into how you can optimize your investments for the best results.

Understanding Your Current Investment
You’ve started investing in active, small, and mid-cap funds, as well as an ICICI Prudential Bharat fund. Each type of fund serves different purposes and has unique risks and rewards.

Small and mid-cap funds can provide high returns but are more volatile.

Active funds aim to beat the market through expert stock selection.

Evaluating Fund Performance
Firstly, it's important to evaluate how your current funds have been performing. Check the returns of each fund over the past year, three years, and five years.

Consider their performance compared to their benchmark and category peers.

If any fund consistently underperforms, it might be time to consider alternatives.

Importance of Diversification
Diversification helps in spreading risk. By investing in different types of funds, you reduce the impact of any single fund's poor performance.

It's great that you have a mix of active, small, and mid-cap funds.

However, it's crucial to ensure you’re not overly concentrated in any one sector or market cap.

Actively Managed Funds vs. Index Funds
Actively managed funds aim to outperform the market through strategic stock selection. This can lead to higher returns, especially in a volatile market.

Index funds, on the other hand, simply track a market index. They tend to have lower costs but often provide lower returns compared to actively managed funds.

Considering your choice of actively managed funds, you're positioned to potentially benefit from higher returns, provided the fund manager's strategies pay off.

Regular Funds vs. Direct Funds
Direct funds have lower expense ratios as they don't include distributor commissions. However, they require you to choose and manage your investments independently.

Investing through a Certified Financial Planner (CFP) with mutual fund distributor (MFD) credentials ensures professional guidance. They can help you navigate market changes and rebalance your portfolio when needed.

The slightly higher cost of regular funds can be worthwhile due to the expert advice and support you receive.

Rebalancing Your Portfolio
Rebalancing involves adjusting your portfolio to maintain your desired asset allocation. It’s essential to review your portfolio at least once a year.

Look at the performance of each fund and your overall investment goals.

If one type of fund has grown significantly, it may dominate your portfolio, increasing risk.

Rebalancing can help you realign your investments with your risk tolerance and goals.

Considerations for Adding or Switching Funds
Before adding new funds or switching existing ones, consider the following:

Fund Objectives: Ensure the fund’s objective aligns with your financial goals.

Risk Profile: Understand the risk associated with each fund and ensure it matches your risk tolerance.

Expense Ratio: Lower expense ratios can significantly impact your returns over the long term.

Past Performance: While past performance is not a guarantee of future returns, consistent performance over time is a good indicator.

Professional Advice
A Certified Financial Planner can provide personalized advice based on your financial situation and goals. They can help you choose the right funds, monitor their performance, and make necessary adjustments.

Their expertise can be invaluable in navigating market fluctuations and optimizing your investment strategy.

Staying Informed
Stay updated with market trends and fund performance. Regularly read financial news, attend webinars, and consult with your financial planner.

Being informed helps you make better investment decisions and stay on track with your financial goals.


It's commendable that you have started investing Rs 40k every month despite your busy schedule. Balancing work, responsibilities, and investments is not easy.

Your commitment to securing a financially stable future is truly impressive. Keep up the excellent work!

Continuous Learning and Adaptation
The financial market is dynamic, and continuous learning is crucial. Adapt your strategy as needed based on market conditions and personal circumstances.

Remember, the goal is not just to invest but to invest wisely.

Final Insights
Investing is a journey, and you’ve taken significant steps by starting mutual funds. Regularly evaluate and rebalance your portfolio to align with your goals.

Seek professional advice to navigate complexities and optimize your strategy. Stay informed and adaptable to changes.

Keep up the dedication, and you’ll likely achieve your financial aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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instead of dealing with the problem at hand, you decided to go and create more problems?
What prevented you from actually talking to your wife. If you felt cheated, was it not possible for you to channel the anger by having a conversation with her about it? Revenge never helped anyone, but well...
Now, by blaming her, what can happen is that she will defend and you will again accuse and this will go on...
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Ans: Dear Anonymous,
Your husband perhaps is someone who is not great at conflict management; he finds it easier to avoid it and avoidance can mean that he hopes that it will go away or that you will stop talking about it or that he can find ways of actually pinning the blame on you for the way that he is feeling.
So, you will come across as nagging and may also feel guilty for asking him to listen to the way that you feel about the past incident. This is classic avoidance response from him that will make you wonder of you are actually wrong and at some point you may even start justifying his actions.
Repression is temporary; eventually all the emotions will collect themselves and hit back when you least expect it. If you want him to hear you and the way you have felt about his cheating, he will again get pushed into an avoidance mode. He has not learned any other way of handling conflicts. So, either you can go to couples counseling together OR you accept this side of him. Sounds too much to do, yeah? But how can you change a person who does not want to change. Some people also cannot express their love the way you have mentioned.
Since you still love him, I can only assume that the marriage holds a lot of significance for you. Then you can be happy only when he changes OR you accept him... which one seems more doable, start with that first...who knows if an external person like an expert can actually guide the two of you, things may fall in place!
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Ans: Dear Anonymous,
If you have to ask "Are we the one for each other?" something must be going really wrong in the relationship. Moreover, you also mentioned dragging it, so reconsidering the relationship can't hurt. There is another option- you can try couple's therapy and get to the bottom of this detachment. It can be time; it happens to many long-term couples. Nothing comes without effort- you will have to work on it every day and explore new things to bring back the spark. If you don't want to let go of this relationship, try these suggestions. But to continue lugging it because this relationship is all too familiar and comfortable now is not the right decision. If it's okay with both of you, take a break and venture out for new partners. See how things pan out. The choice is yours. The only thing that I can confirm is that at this point, you should not rush into getting married and focus on sorting things out first.

Best Wishes.

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Dr Nagarajan J S K

Dr Nagarajan J S K   |153 Answers  |Ask -

Health Science and Pharmaceutical Careers Expert - Answered on Nov 06, 2024

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Career
My daughter has completed BSc in Life Science and Masters in Microbiology in June 2024. She is searching/applyin for jobs in pharma companies but no success Please guide
Ans: Hi Sir,

I am glad to hear that she has completed her MSc in Microbiology. Could you let me know what type of project she worked on during her final year? Additionally, what skills has she acquired during her postgraduate studies? While eligibility might be determined by her percentage, it's important to note that skills play a significant role in the job market.

Did she complete an internship in the pharma industry? Nowadays, many candidates claim to have experience, but often lack competency in their subjects.

One essential aspect is preparing her resume. She should highlight her skills, any internships she has completed, and the projects she worked on during her postgraduate program.

Industries are currently facing various challenges due to human resource issues, making them cautious in selecting candidates for specific roles.

I also recommend that she consider an internship at Biocon for six months. They have an academy focused on biotech-related training, and completing this prograHi Sir,

I am glad to hear that she has completed her MSc in Microbiology. Could you let me know what type of project she worked on during her final year? Additionally, what skills has she acquired during her postgraduate studies? While eligibility might be determined by her percentage, it's important to note that skills play a significant role in the job market.

Did she complete an internship in the pharma industry? Nowadays, many candidates claim to have experience, but often lack competency in their subjects.

One essential aspect is preparing her resume. She should highlight her skills, any internships she has completed, and the projects she worked on during her postgraduate program.

Industries are currently facing various challenges due to human resource issues, making them cautious in selecting candidates for specific roles.

I also recommend that she consider an internship at Biocon for six months. They have an academy focused on biotech-related training, and completing this program successfully may lead to a job at Biocon, depending on her performance.

All the best! m successfully may lead to a job at Biocon, depending on her performance.

All the best!

...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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