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Sanjeev

Sanjeev Govila  | Answer  |Ask -

Financial Planner - Answered on Feb 06, 2024

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more
Kunal Question by Kunal on Jan 27, 2024Hindi
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Which mutual funds are best in 15 to 20 timespan to earn better returns, when I would invest Rs 4000/Month.

Ans: "Certainly! For a 15 to 20-year investment horizon with Rs 4000/month, consider the following mutual fund options:

Large Cap Equity Funds: Invest in established, large companies for stability and moderate returns.

Multi-Cap Equity Funds: Offers flexibility by investing across companies of all sizes for potential higher returns.

Mid-Cap Equity Funds: Invest in medium-sized companies with potential for rapid growth. They offer higher growth potential than large-cap funds but with higher risk due to the volatility of mid-sized companies.

Small-Cap Equity Funds: Focus on investing in small companies with significant growth potential. They can offer the highest returns among equity funds but also come with the highest level of risk due to the volatility and potential for business failure of small companies.

Ensure you research fund performance, expense ratios, and consult with a financial advisor to align investments with your goals and risk tolerance."
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  |6995 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 28, 2024

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i have invested lump sum 20000 in parag flexi cap fund and 6000 in kotak quant fund i want to invest aroung 20000 a month suggest me mutual fund with 5 years horizon
Ans: With a 5-year investment horizon, your focus should be on balancing growth potential with some risk management. Since you have already invested in a flexi cap and a quant fund, you have made a good start. Below are some mutual fund categories that can further diversify your portfolio and align with your 5-year financial goal.

1. Aggressive Hybrid Funds
Aggressive hybrid funds invest about 65%-80% in equities and the rest in debt. These funds are designed to provide growth with a cushion of safety through their debt component. For a 5-year horizon, these funds can help you capture equity growth while reducing volatility.

These funds help limit downside risk if the equity market corrects in the short term.
Over a 5-year period, aggressive hybrid funds may offer better risk-adjusted returns than pure equity funds.
2. Large and Mid-Cap Funds
Large and mid-cap funds offer a balance between stability and growth. Large-cap stocks are more stable, while mid-caps provide the potential for higher returns.

Large-caps tend to provide stability during volatile periods.
Mid-caps, although riskier, can offer higher returns in a growth market.
Over a 5-year period, this category can provide a balance between risk and reward. You already have exposure to flexi caps through your Parag Flexi Cap Fund, but large and mid-cap funds can further strengthen this strategy.

3. Multi-Asset Funds
Multi-asset funds are designed to invest across multiple asset classes such as equities, debt, and gold. This diversification helps reduce the impact of market volatility. In the short-to-medium term, these funds can provide a more stable growth trajectory.

These funds are suitable for investors who want diversification without actively managing different asset classes.
They offer a balanced return, reducing the dependency on just one asset class.
For a 5-year horizon, these funds can give you peace of mind by spreading the risk across various assets.

4. Dynamic Bond Funds
Dynamic bond funds adjust their portfolio based on interest rate movements. Since interest rates can fluctuate over a 5-year period, dynamic bond funds offer flexibility in managing this.

These funds can offer more stability compared to equity funds.
While they generally provide lower returns than equity funds, they can be part of your portfolio for a balance of stability and growth.
For a 5-year horizon, dynamic bond funds can add a layer of stability to your portfolio without completely moving out of growth opportunities.

5. ELSS Funds for Tax Saving
Though primarily tax-saving instruments, ELSS (Equity Linked Savings Scheme) funds can also serve your investment needs. They have a mandatory 3-year lock-in, which ensures you remain invested for the short term and benefit from equity growth.

ELSS funds offer tax deductions under Section 80C, making them an attractive option.
They primarily invest in equities, which can help your portfolio grow over the medium term.
Considering your 5-year horizon, the 3-year lock-in period is manageable. You can continue to hold the funds for two more years to maximize your returns.

Key Considerations
Risk Tolerance: Since you have a 5-year horizon, it’s important to balance risk and return. While equities provide growth, debt and hybrid funds can reduce volatility.
Diversification: You’ve already invested in equity-based funds. Now, you can consider adding hybrid or multi-asset funds to diversify your portfolio.
Review Your Portfolio: Although a 5-year horizon isn’t long enough for frequent changes, it's important to review your portfolio periodically to ensure it's aligned with your goal.
Disadvantages of Index Funds
Index funds, while low-cost, lack the flexibility of actively managed funds. Over a 5-year period, actively managed funds can better adapt to market conditions. Index funds merely track a market index, and during downturns, they offer no protection from losses.

Actively managed funds have the potential to outperform the market in the short-to-medium term.
Fund managers can take advantage of market inefficiencies, which index funds cannot.
Given your 5-year horizon, active fund management is preferable for potentially better returns.

Final Insights
Your decision to invest Rs 20,000 monthly is a smart step towards building a robust financial future. With a 5-year horizon, a balanced approach combining equity and hybrid funds can provide both growth and stability. Diversifying across different fund types will ensure that your portfolio remains resilient in the face of market volatility.

While your existing investments in a flexi cap and quant fund are a good start, adding large and mid-cap, aggressive hybrid, and multi-asset funds will strengthen your portfolio. Dynamic bond funds can offer stability, and ELSS funds can help you save on taxes while investing for growth.

By choosing actively managed funds over index funds, you allow your portfolio the flexibility to adapt to changing market conditions. A certified financial planner can guide you in selecting the right mix of funds and regularly reviewing your portfolio to stay on track.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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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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