'Investing in less than 5 equity funds is sufficient'

Do you have personal finance queries?
Please ask your questions here and rediffGURU Ramalingam Kalirajan, founder, Holistic Investments (external link), will answer them.

Roshan: Hi sir, I have done multiple funds.

1. Tata Digital fund - 1500 PM

2. Kotak Multicap Fund - 2000pm

3. Axis Growth opportunities fund - 2000pm

4. PGIM Midcap - 3000 PM

5. Mirae asset Large & Midcap Fund - 2000pm

6. Canara Robeco smallcap - 1000pm

7. Sundaram flexi cap - 500pm

8. HDFC NIFTY SMALLCAP250 - 1000 pm

9. HDFC SIlver ETF FOF - 500pm

10. Bandhan transportation and logistics - 300pm

I am 23. Should I Stop anything or increase/decrease any amount. How is the fund selection?

Hi, investing in less than 5 equity funds is sufficient. Over-diversification can dilute the returns.

Also, sector-specific funds are to be invested for a much longer time frame. The fund manager cannot change the sector even if the outlook for that particular sector is weak.

In a diversified equity fund, the fund manager can freely do sector rotation based on her/his analysis and outlook.

Amarendra: I will retire next month. Will get approx. 2.0 cr. Suggest where to invest to get maximum monthly income

A combination of debt and equity is needed. Debt can be in FD, POMIS, SCSS and SWP from debt funds.

Equity can be in diversified equity funds. Approximately 70 per cent can be in debt and 30 per cent can be in equity in a retirement portfolio.

In order to arrive at a specific asset allocation ratio and withdrawal plan, please consult a financial planner.

Anonymous: My father passed away last year. He had way back in 2000 invested money in mutual funds. After his death i got the mutual funds transferred in my name. There are few mutual funds for which i am receiving payout which is credited to my saving account and i will add this amount to my total income and pay relevant income tax. There are few mutual funds where, as i understand, the dividend received is converted into units and added to the existing units. Is this taxable or i have to pay tax only when i redeem the mutual fund? If it is to taxed than how do i find the dividend received for each mutual fund? Thanking you in advance

If it is growth fund and the value is appreciating, then no need to pay tax now. Taxability will arise only on withdrawal.

If the fund is in the dividend reinvestment option, then for the dividends reinvested also, you need to pay tax.

Anonymous: What is meant long-term capital gains and short term capital gains?

You get short-term capital gains if you redeem your equity fund units within one year. These gains are taxed at a flat rate of 15 per cent, irrespective of your income tax bracket.

You get long-term capital gains by selling your equity mutual fund units after holding them for over one year.

These capital gains of up to Rs 1 lakh a year are tax-exempt. Any long-term capital gains exceeding this limit attracts LTCG tax at 10 per cent, without indexation benefit.

Anonymous: Hi sir, I have the following mutual funds in SIP Axis Focused 25 Fund - Growth - 10k (Started in 2019) current value is 4.5L with overall gain only at 5 per cent Tata India Consumer Reg-G - 5K (started in 2021) current value is 1.4L with overall gain at 5 per cent Axis Flexi Cap Fund - Growth - 5k (started in 2021) current value is 1.8L with overall gain at 5 per cent Can you please suggest me some good funds as I plan to redeem the above invest lumpsum with a horizon of 3+ years.

Please allow 5-7 years for a fund to show performance. In the last 2 years, the market is range-bound. So expecting above-average returns in this period is not correct.

Also avoid, investing in thematic funds as they have a concentrated portfolio of 1 or 2 sectors.

• You can ask rediffGURU Ramalingam Kalirajan your questions HERE.

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Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.