Home > Career > Question
Need Expert Advice?Our Gurus Can Help
Nitin

Nitin Sathe  | Answer  |Ask -

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
Listen
Career

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!
Career

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |8324 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
Samraat

Samraat Jadhav  |2272 Answers  |Ask -

Stock Market Expert - Answered on May 07, 2025

Dr Nagarajan J S K

Dr Nagarajan J S K   |373 Answers  |Ask -

NEET, Medical, Pharmacy Careers - Answered on May 07, 2025

Ramalingam

Ramalingam Kalirajan  |8324 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 07, 2025

Asked by Anonymous - May 07, 2025
Money
Sir, I wqnted your advise, regarding an investment. My building is going for re-development, there is a additional flat sale for about 1cr, which will be ready in about 3 years. Please can you advise is it worth to invest 1cr in additional flat, i have savings of about 1cr, or should i keep the 1cr as Fixed Deposit. I do not have knowledge about investment in mutual funds or SIP. Thanks to advise.
Ans: It's commendable that you're considering the best investment route for your Rs. 1 crore savings. Let's evaluate the options you've mentioned and explore a comprehensive approach to wealth creation.

Understanding Your Investment Options
1. Investing in the Additional Flat

Illiquidity Concerns: Real estate investments are typically illiquid. Selling a property can take time and may not fetch the expected price.

Maintenance and Other Costs: Owning an additional flat comes with recurring expenses like maintenance charges, property taxes, and potential renovation costs.

Market Volatility: Property prices can fluctuate based on various factors, including economic conditions and government policies.

Rental Income Uncertainty: If you're considering renting out the flat, rental yields in many Indian cities are relatively low compared to the property's value.

2. Keeping the Amount in Fixed Deposits (FDs)

Low Returns: FDs offer fixed returns, but these may not outpace inflation, leading to a decrease in real purchasing power over time.

Tax Implications: Interest earned from FDs is taxable as per your income slab, which can further reduce the net returns.

Lack of Flexibility: Premature withdrawal from FDs can attract penalties, limiting liquidity.

Exploring Mutual Funds as an Alternative
Given that you're new to mutual funds and SIPs, it's essential to understand their potential benefits:

Professional Management: Mutual funds are managed by experienced fund managers who make investment decisions based on thorough research.

Diversification: By investing in a mutual fund, your money is spread across various assets, reducing risk.

Liquidity: Most mutual funds offer high liquidity, allowing you to redeem your investment when needed.

Potential for Higher Returns: Historically, mutual funds, especially equity-oriented ones, have offered higher returns over the long term compared to traditional instruments like FDs.

Tax Efficiency: Mutual funds can be more tax-efficient, especially with the benefits available under certain sections of the Income Tax Act.

Recommended Approach
Considering your current situation and the pros and cons of each investment option:

Avoid Investing in the Additional Flat: Given the illiquidity, associated costs, and potential market volatility, investing in another property may not be the most efficient use of your funds.

Limit Exposure to FDs: While FDs offer safety, the returns may not be sufficient to meet long-term financial goals, especially after accounting for inflation and taxes.

Consider Mutual Funds for Wealth Creation:

Start with a Lump Sum Investment: Allocate a portion of your Rs. 1 crore savings into mutual funds, focusing on a mix of equity and debt funds based on your risk appetite.

Initiate SIPs: Set up Systematic Investment Plans to invest a fixed amount regularly, benefiting from rupee cost averaging and disciplined investing.

Consult a Certified Financial Planner: Given your unfamiliarity with mutual funds, seeking guidance from a certified professional can help tailor an investment strategy aligned with your financial goals.

Final Insights
Your initiative to seek advice before making a significant investment decision is commendable. By steering clear of additional real estate investments and limiting exposure to low-yield instruments like FDs, you can explore avenues like mutual funds that offer the potential for higher returns and greater flexibility. Engaging with a certified financial planner can further ensure that your investment strategy is well-aligned with your long-term financial objectives.

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x