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HR, Recruitment Expert - Answered on Mar 17, 2024

Air Commodore Nitin Sathe (retd) is an IAF veteran with experience in aviation, aviation management, recruitment and HR.He has commanded a frontline base in Jammu and Kashmir, served with the UN Peace Keeping Force in Congo and volunteered for tsunami relief operations. Today, he is a certified recruiter and personality assessor.... more
Vijay Question by Vijay on Mar 14, 2024Hindi
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Hiii Sir I am working reliance fresh its growth in life my goal is join military and I am study's diploma and BTech civil engineering my mother dream and my goal is military she encourages and my grandmother supported lotoffrecently my grandmother and my mother expired

Ans: Vijay, am sorry to hear of the tragedy that has besieged you. My condolences. I, however haven’t understood what your query is. Please do work hard to make your dreams come true!
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Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 2024

Asked by Anonymous - Jul 20, 2024Hindi
Money
Me n my wife are in gvt service having monthly salary of 40k n 44k. Age 35y n 33y . Want to achive 1cr corpus in 15yr. Savings in mF sip 13k since 1yr, PPF 2k since 5yr, GPF 9k since 4yr. LIC 4k since 6yr Plan to take home loan 25l for 20yr. Please do help to achive my goal. All saving are together we do and have loang term goal.
Ans: You and your wife have a clear objective: to achieve a Rs. 1 crore corpus in 15 years. You have a structured approach towards savings, with a good mix of investments in mutual funds, PPF, GPF, and LIC. Your focus on long-term goals shows discipline and foresight. However, to reach the Rs. 1 crore target, you need a strategic plan. Let's break down your current situation and explore the necessary steps to achieve this goal.

Assessing Your Current Investments
Mutual Funds SIP
You have been investing Rs. 13,000 per month in mutual funds through SIP for the past year. This is a commendable start.
Mutual funds are a good vehicle for wealth creation over the long term. However, the choice of funds matters greatly.
It is important to invest in actively managed funds rather than index funds. Actively managed funds are overseen by experienced fund managers who can adjust the portfolio based on market conditions. This increases the potential for higher returns compared to passive index funds, which simply track the market.
While direct mutual funds have lower expense ratios, they require active monitoring. For those without the time or expertise, regular funds through a certified financial planner can be more beneficial. The planner can provide personalized advice and adjustments based on your evolving financial situation.
PPF (Public Provident Fund)
You have been consistently investing Rs. 2,000 per month in PPF for the past five years. PPF is a safe investment with tax benefits and guaranteed returns.
However, the returns on PPF are generally lower than equity-based investments. While it’s a good vehicle for stability, it won’t alone suffice for aggressive growth. Continue with PPF for the tax benefits and guaranteed returns, but consider it as part of a broader, diversified portfolio.
GPF (General Provident Fund)
Your monthly contribution of Rs. 9,000 in GPF for the past four years is another safe investment with stable returns.
Like PPF, GPF is suitable for risk-averse portions of your portfolio. It provides a safety net, but again, the returns are limited. Keep contributing for security, but don’t rely on it for aggressive corpus building.
LIC Policy
You have been paying Rs. 4,000 per month towards an LIC policy for the past six years.
While LIC policies offer life insurance, the returns on investment are generally low. These policies are not ideal for wealth creation.
Given your goal, it might be worth evaluating the benefits of continuing with this policy versus redirecting funds to more lucrative investments like mutual funds. If the LIC policy is an investment-cum-insurance plan, consider surrendering it and reinvesting the proceeds into more growth-oriented options, such as mutual funds or equity.
Evaluating the Home Loan Decision
You plan to take a home loan of Rs. 25 lakh for 20 years. While home ownership is a significant goal, it's essential to assess the impact of this loan on your cash flow and investment capacity.
The EMI for a Rs. 25 lakh loan over 20 years will reduce your monthly surplus, which could otherwise be invested. However, if managed well, this can also be a sound investment in your future.
Ensure that your home loan EMI does not exceed 30-40% of your combined monthly income. This will leave sufficient room for other financial commitments and investments.
Since a home loan offers tax benefits, it can complement your financial strategy. But, be cautious about stretching your finances too thin.
Steps to Achieve the Rs. 1 Crore Goal
Increase SIP Contributions
Your current SIP of Rs. 13,000 is a good start, but to reach Rs. 1 crore in 15 years, you may need to gradually increase this amount. Consider stepping up your SIP amount annually, even by a small percentage, to take advantage of compounding.
Focus on actively managed equity mutual funds with a good track record. Equity funds tend to offer higher returns over the long term compared to debt or hybrid funds, though they come with higher risk.
Reinvest any bonuses or windfalls into your SIPs to give your corpus an extra boost.
Maximize Tax-Saving Investments
Continue investing in PPF and GPF, as they provide tax benefits under Section 80C. These are important for reducing your taxable income and ensuring guaranteed returns.
Consider investing in ELSS (Equity Linked Savings Scheme) funds for tax-saving purposes. ELSS funds offer tax benefits under Section 80C and have the potential for higher returns due to their equity exposure.
Reassess the LIC Policy
Evaluate the return on your LIC policy. If it's an endowment or money-back plan, the returns are likely lower than what you could achieve with other investments.
Consider surrendering the policy and reallocating the funds to a higher-return investment like mutual funds or a diversified equity portfolio.
If the policy provides critical life insurance, ensure you have adequate term insurance before surrendering.
Build an Emergency Fund
Before aggressively pursuing your Rs. 1 crore goal, ensure you have an emergency fund. This fund should cover 6-12 months of living expenses and should be kept in a liquid and accessible form, such as a savings account or a liquid mutual fund.
An emergency fund protects your long-term investments from being liquidated prematurely in case of unexpected expenses.
Invest for Long-Term Growth
Diversify your investment portfolio to include a mix of equity, debt, and hybrid funds. This diversification will balance risk and return while ensuring steady growth towards your Rs. 1 crore goal.
Given your time horizon, a higher allocation to equity is advisable. Over 15 years, equities tend to outperform other asset classes, despite short-term volatility.
Monitor and Adjust Regularly
Regularly review your portfolio and financial plan. Monitor the performance of your mutual funds and other investments, and make adjustments as needed. A certified financial planner can help with this, providing expertise and advice tailored to your goals.
Stay updated on changes in tax laws and financial products to ensure your investments remain optimal.
Additional Considerations
Education and Child Planning
If you have or plan to have children, consider setting aside funds for their education. Start early with a dedicated education plan or child-specific mutual fund.
Child education expenses can significantly impact your financial planning, so factor these into your overall strategy.
Retirement Planning
While focusing on your Rs. 1 crore goal, don’t neglect retirement planning. Ensure you are contributing sufficiently to retirement-focused schemes like PPF, GPF, and NPS.
A well-rounded retirement plan should include a mix of fixed-income and equity investments to provide both stability and growth.
Final Insights
Achieving a Rs. 1 crore corpus in 15 years is an ambitious but achievable goal. With disciplined saving, strategic investment, and regular monitoring, you can reach this target and secure your financial future. It’s crucial to balance your immediate needs, such as home ownership, with long-term growth goals. By gradually increasing your SIP contributions, reassessing low-yield investments, and diversifying your portfolio, you can build a robust financial plan that aligns with your aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2025

Asked by Anonymous - May 13, 2025
Money
Greetings!!!! I am 43 years Old, I had started 10k per month TATA AIA SIP in previous year for total 7years Plan. I want to education plan for my 1 kid who is 6 years old now. Please advice and guide me about more investments plan, as i am still confused about future growth and any plan for my wife age 38years.
Ans: You're at a critical financial stage. Planning for your child’s education and securing your family’s future are both top priorities. You've already started a ULIP, which is a start. But let’s take a deeper 360-degree view of your situation.

Below is a detailed plan, broken into simple sections for better clarity.



Assessment of Your Current ULIP Investment

You're investing Rs. 10,000 per month in a 7-year ULIP.



ULIPs mix insurance with investment. That reduces the growth power of your money.



Charges like premium allocation, fund management, and mortality charges reduce returns.



Your actual invested amount is much lower in the first few years.



ULIPs have limited flexibility in fund switching and partial withdrawal rules.



Maturity benefits are taxed if the annual premium exceeds Rs. 2.5 lakh. Be cautious of this.



A ULIP is not ideal for education goals or long-term wealth building.



As a Certified Financial Planner, I suggest surrendering this policy and moving funds to mutual funds.



You can continue till 5 years to avoid surrender charges if already started.



But do not renew after the 7-year term. Don't increase contributions in this ULIP.



Planning for Your Child’s Higher Education

Your child is 6 years old. You have around 11-12 years.



College education in India or abroad can cost Rs. 30–60 lakhs or more.



Instead of ULIPs, invest in diversified mutual funds. This will give better inflation-adjusted returns.



Use a mix of large cap, flexi cap and small cap mutual funds.



Start SIPs in these funds with a long-term horizon of 10-12 years.



You may also consider goal-based child education funds that are actively managed.



Don't invest in direct funds. They look cheaper, but don’t offer guidance.



Always invest through a Certified Financial Planner via a regular plan.



Your investment will stay aligned with your goal as the planner will guide with rebalancing.



Use a dedicated SIP only for child’s education goal. Don’t merge it with retirement planning.



Suggested Action Plan for Child’s Education

Shift future contributions from ULIP to SIPs in active funds.



Start with Rs. 20,000 per month SIP only for education.



Review this SIP every year and increase it by 10%-15% annually.



Add lump sums like bonuses or yearly increments into the same goal fund.



In the last 2 years before the education goal, shift to debt funds slowly.



This will protect your accumulated amount from equity volatility.



Investment Plan for Your Wife (Age 38)

She has a long horizon. She can invest for both retirement and her independent needs.



Open a separate mutual fund folio in her name.



Start SIPs in flexi cap, large & midcap, and hybrid funds in regular plans.



You can start with Rs. 10,000 per month and increase gradually.



You may also use her PPF account for additional tax-free corpus.



Avoid investing in gold, insurance policies, or real estate for her.



Ensure she has her own health insurance and a term insurance if she’s working.



If she’s not working, then create an emergency fund in her name.



That gives her independence and safety if she needs cash.



Family Protection with Insurance

You did not mention your term cover. You must have it if not already.



Ideal cover should be 15–20 times your yearly income.



ULIPs or LIC endowment policies should not be considered for protection.



Avoid investment-linked insurance plans. Keep insurance and investment separate.



Review your existing insurance covers. Add riders like critical illness and accident if needed.



Tax Efficient Planning

Use Section 80C wisely. Don’t just rely on ULIP or LIC plans.



Max out PPF, ELSS mutual funds, and children tuition for tax saving.



Invest in actively managed ELSS funds for better returns than ULIPs.



Avoid index funds for tax planning. They may underperform in volatile markets.



Debt funds are taxed as per slab now. Use carefully if short horizon.



Track capital gains if you sell mutual funds. Use new tax rules for equity funds:



  - LTCG above Rs. 1.25 lakh taxed at 12.5%

  

  - STCG taxed at 20%



Plan redemptions well in advance to manage taxes efficiently.



Retirement Planning (For You and Wife)

Start a separate SIP for your retirement corpus. Do not merge with other goals.



You have 17 years for retirement. That’s good for wealth accumulation.



Invest in a mix of actively managed flexi-cap and large-cap funds.



Add hybrid funds to reduce volatility as you near retirement.



Continue EPF, and increase VPF if possible. It is tax-free and safe.



Don't consider NPS if liquidity is important. Maturity rules are rigid.



Use mutual funds with regular advice to stay on track till age 60.



Exit ULIPs and Poor Insurance Products

You mentioned TATA AIA ULIP. Continue for 5 years to avoid penalty.



After that, exit and move funds to SIP in mutual funds.



If you or wife have LIC endowment, Jeevan Saral, or ULIPs, surrender them.



Reinvest maturity amount into SIPs in regular mutual fund plans.



Do not fall for insurance agents who pitch plans as tax saving or guaranteed.



Emergency Fund and Liquidity

Keep at least 6 months of family expenses in a liquid mutual fund.



Don’t use your SIP or education fund as emergency source.



You may open a separate savings bank linked sweep account for this.



This fund will help if there is any job loss, health issue, or urgent need.



What Not to Do

Don’t invest in new ULIPs or insurance-linked plans.



Avoid direct mutual fund investments. You won’t get guided rebalancing.



Do not use your child’s education fund for house down payment.



Don’t pick index funds. They underperform in sideways or bear markets.



Don’t buy land or gold as an investment for your goals.



Final Insights

You are at a very strategic life stage. You have time and income strength.



ULIPs will not help you grow wealth. Shift to goal-based mutual fund SIPs.



Separate goals: child education, your retirement, wife’s security, and emergencies.



Invest only through a Certified Financial Planner for customised long-term support.



Review all goals every year. Increase SIPs with income.



Protect family with pure term insurance and health insurance.



Focus on building wealth in regular mutual funds, not through insurance products.



Real financial freedom comes when goals are funded without stress.



You have a clear head start. Use it with discipline and right guidance.



Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...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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