Hello sir ,
My parents want me to invest 15K of their money every month in MF . We are new to investing so I've asked around and decided to invest in the following funds . So are these good enough for 3 to 5 years period ? And Once I start earning which is after 2 years I'll continue the same by stepping up the money . 1)Paragh Parikh Flexi 3k 2)Hdfc/Edelweiss Balanced Advantage Fund 7k 3)Mirae Assets Elss fund 2.5k 4)ICICI blue chip 2.5k
Ans: Investing Rs 15,000 per month in mutual funds is a great decision. Your chosen funds are a mix of equity, balanced, and tax-saving funds. Let’s evaluate your choices and ensure they align with your goals.
Understanding Your Investment Goals
You are investing for a 3 to 5-year period. This timeframe is suitable for a mix of equity and balanced funds. Equities provide growth, while balanced funds offer stability and moderate returns. Your goal to step up investments once you start earning is commendable.
Evaluating Your Chosen Funds
Your selected funds include a flexi-cap fund, a balanced advantage fund, an ELSS fund, and a blue-chip fund. These choices provide diversification and a mix of growth and stability.
Flexi-Cap Fund: This fund invests in companies of all sizes. It offers flexibility to shift between large, mid, and small-cap stocks based on market conditions. This diversification helps in capturing growth opportunities across the market.
Balanced Advantage Fund: This fund dynamically adjusts its allocation between equity and debt based on market conditions. It provides a balance of growth and stability, reducing risk during market downturns.
ELSS Fund: Equity Linked Savings Scheme (ELSS) funds offer tax benefits under Section 80C. They invest primarily in equities, providing growth while saving taxes. ELSS funds have a lock-in period of 3 years, aligning with your investment horizon.
Blue-Chip Fund: This fund invests in large-cap companies with a strong track record. These companies provide stability and moderate growth, making them suitable for conservative investors.
Assessing the Fund Allocation
Your allocation is well-diversified, with a focus on growth and stability. Here’s a breakdown:
Flexi-Cap Fund (Rs 3,000): This fund offers diversified equity exposure, balancing growth and risk.
Balanced Advantage Fund (Rs 7,000): This fund provides stability and moderate returns by adjusting equity and debt exposure.
ELSS Fund (Rs 2,500): This fund provides tax benefits and equity growth, with a 3-year lock-in period.
Blue-Chip Fund (Rs 2,500): This fund invests in large-cap stocks, providing stability and moderate growth.
Benefits of Your Chosen Funds
Diversification: Your portfolio is diversified across different types of funds and market capitalizations. This reduces risk and captures growth opportunities.
Tax Efficiency: Investing in an ELSS fund provides tax benefits, reducing your taxable income under Section 80C.
Growth Potential: The flexi-cap and blue-chip funds offer growth potential, while the balanced advantage fund provides stability.
Professional Management: These funds are actively managed by experienced fund managers, aiming to outperform the market.
Importance of Actively Managed Funds
Actively managed funds have the potential to outperform index funds. Fund managers adjust the portfolio based on market conditions and research. This can provide higher returns compared to index funds, which merely replicate a market index. Although actively managed funds have higher fees, the professional management and potential for better returns make them valuable.
Benefits of Regular Funds vs. Direct Funds
Investing through a Certified Financial Planner (CFP) using regular plans provides professional advice and expertise. A CFP can help in selecting the right funds, rebalancing your portfolio, and aligning investments with your goals. The additional cost of regular funds is often offset by the benefits of professional guidance, making it a wise choice for new investors.
Steps to Enhance Your Investment Strategy
Monitor Performance: Regularly review the performance of your funds. Ensure they are meeting your financial goals and expectations.
Rebalance Portfolio: Rebalance your portfolio periodically to maintain the desired asset allocation. This ensures your investments remain aligned with your risk tolerance and goals.
Stay Invested: Stay invested for the full investment horizon of 3 to 5 years. This helps in capturing market growth and averaging out volatility.
Increase Investments: Once you start earning, consider increasing your SIP amount. This enhances your investment corpus and accelerates wealth creation.
Importance of Financial Planning
Engage with a Certified Financial Planner to create a comprehensive financial plan. A CFP can provide tailored advice, help in goal-setting, and offer strategies to achieve your financial objectives. Professional guidance ensures that your investments are optimized for growth and aligned with your risk profile.
Conclusion
Your decision to invest Rs 15,000 per month in a mix of funds is a prudent step towards wealth creation. The chosen funds provide diversification, growth potential, and tax benefits. Regular monitoring, portfolio rebalancing, and increasing investments over time will help achieve your financial goals. Engaging with a Certified Financial Planner will further enhance your investment strategy and ensure long-term success.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
