Hello Sir,
I am 40 years old. I have take home salary as 1 lakh and a cool job. Incentives and interests will come anually around 1.5 to 2 lakhs. Wife is a housewife and have one baby girl blessed recently. Maximum of Rs 25,000 for family expenses, housing loan is there @Rs 33,200 per month as EMI. No other debts or EMIs.
I have 5.5 lakhs invested for interests, 1 lakh in equity mutual funds, and 13 lakhs worth of gold biscuits. I did not invest in EPF, PPF, NPS or anything else. I wanted now a steady income for my baby girl and for our family till my retirement.
Please suggest me the best investment ideas in MFs or anything else which will have stable and steady income. Please suggest for guaranteed returns including the principal.
Thank you!
Ans: You are 40, with a stable job, take?home of Rs 1 lakh, occasional annual incentives of Rs 1.5–2 lakh, a newborn daughter and a homemaker wife. Your fixed family expenses are Rs 25,000 monthly. EMI on home loan is Rs 33,200 per month. You hold:
Rs 5.5 lakh in fixed income instruments (generating interest)
Rs 1 lakh in equity mutual funds
Rs 13 lakh in gold biscuits
No EPF, PPF, NPS or other long?term plans
Your objective is to secure stable income for your daughter and family, while preserving principal. You want guaranteed or stable returns via investment. This calls for a well?structured, 360° wealth plan.
1. Understanding Your Income and Expense Flow
To craft a solid plan, we start with your cash flow:
Income: Rs 1 lakh monthly take?home + Rs ~15,000 monthly equivalent from incentives
Expenses: Rs 25,000 fixed family expenses + Rs 33,200 EMI = Rs 58,200/month
Surplus: About Rs 56,800 per month before existing investments’ interest
You have a comfortable surplus. But your current holdings are skewed:
Fixed income instruments but no pension-oriented funds
Limited exposure to equity (just Rs 1 lakh)
Gold is an asset but not income-generating
No formal retirement or child-fund planning done
2. Clarify Your Financial Goals
Before recommending investments, let us define specific goals:
Child Education & Marriage Fund: Corpus needed in 18–22 years
Income for Family: Passive income in case of job loss
Retirement Savings: Income after age 60–65
Emergency Fund: Cover 6–12 months of expenses (~Rs 4–5 lakh equivalent)
We will build the investment plan to meet these targets conservatively.
3. Strengthen the Emergency Fund
First, ensure financial safety:
You have no visible emergency fund; use part of the Rs 5.5 lakh income instruments
Keep at least Rs 3 lakh liquid in short-term debt or liquid funds
Helps during financial shocks or job instability
This is non-negotiable before shifting to other instruments.
4. Insurance Protection for Dependents
With a newborn and wife as homemaker, you need to secure protection.
Term Life Insurance:
Ideal cover is 10–15 times annual income.
That means Rs 1.5–2 crore cover minimum
Ensure nominee is your wife and daughter
Family Health Insurance:
Ensure you and dependents share a floater policy of at least Rs 5 lakh
Helps avoid medical emergencies dipping into savings
This ensures family stays secure even if something unexpectedly happens.
5. Asset Reallocation for Wealth Stability
Let’s look at your current holdings:
Fixed?income instruments (Rs 5.5 lakh): Good for stability.
Equity MF (Rs 1 lakh): Need more diversification.
Gold (Rs 13 lakh): It’s a store of value but gives no income.
No EPF/PPF/NPS: You have no steady retirement income.
We will rebalance assets into long?term stable income vehicles and future growth.
6. Structuring the Corpus for Stable Income
Your aim is daily income and guaranteed principal. We’ll build this using debt/hybrid funds.
a. Short?Term Debt Funds – Rs 10–15 lakh
Offers stable returns and high liquidity
Protects capital with minimal market risk
Use for child’s near-term needs and emergencies
b. Conservative Hybrid Funds – Rs 15–20 lakh
Invest 65–75% in bonds, 25–35% in equities
Provides stability and modest regular income
Distribute as monthly or quarterly income (SWP)
c. Active Equity Funds – Rs 10–15 lakh
Invest for long?term goals (child education, growth)
Avoid index funds—they mirror market completely
No downside buffer, no active risk management
Active funds selected by MFD?CFP can balance equity risk
Use regular plans, not direct funds
Direct funds lack advisor support; wrong choices hurt more than fee savings
d. Gold Wealth Fund or Digital Gold – Replace Gold Biscuits
Physical gold held in home is illiquid and has storage risk
Consider liquidating biscuits and migrating into digital gold or gold funds
It provides easy redemption, small ticket access, and transparency
e. PPF / NPS / EPF – Introduce Fixed Long?Term Plans
Begin a PPF account for guaranteed tax?free returns
Consider NPS for retirement, partially allocated to equity
EPF via employer not applicable; encourage spouse or child’s future fund
These tools provide guaranteed and inflation?linked growth for long?term security.
7. Monthly Investment Strategy
Step 1: Set Up SIPs for Active Equity
Start with Rs 10,000/month in 2–3 active equity funds
Choose large?cap, multi?cap, and balanced equity themes
Invest via regular plans guided by MFD?CFP
Step 2: Put Money into Hybrid & Debt Funds
Use SWPs for stable, monthly income distribution
For Rs 15–20 lakh fund, monthly SWP can provide Rs 10,000–15,000
Step 3: Grow PPF Over Time
Invest Rs 50,000 in PPF per year
It gives tax?free guaranteed returns and builds a corpus
8. Systematic Withdrawal for Guaranteed Income
You asked for steady income. SWP from hybrid/debt can provide this:
Example: Rs 20 lakh in hybrid yields Rs 10,000–15,000 monthly
Debt/savings instruments cover emergencies and short?term needs
Active equity growth creates wealth and inflation buffer
Over time, you can gradually increase SWP as your corpus grows.
9. Taxation of Mutual Fund Withdrawals
Be mindful of new tax rules:
Equity mutual funds:
LTCG above Rs 1.25 lakh taxed at 12.5%
STCG taxed at 20%
Debt & hybrid funds:
Gains taxed at your income tax slab
Plan withdrawals to manage LTCG limit each financial year. SWP is taxed per month as per rule.
10. Gold Allocation and Future Security
Your gold biscuits are long-term store of value. Convert wisely:
Sell part of the holdings gradually
Hold proceeds in gold funds/digital gold – no storage risk
Any returns in gold funds are taxable as per ETFs
Continue holding some gold as diversification, but get rid of physical storage margins
11. Planning for Your Baby’s Future
Your baby is newborn—time horizon is long (around 18 years):
Use equity funds for long-term growth
Active funds give better protection and growth potential than index funds
Start Rs 5,000–10,000 SIP monthly toward education goal
Over 18 years this will build a solid education corpus
Move to conservative hybrid funds when goals near
12. Retirement Fund Planning
You have no formal pension plan yet. We must start:
Invest in PPF annually
Use NPS for retirement, shift toward equity when young
After home loan ends, redirect EMI savings toward retirement fund
Gradually build a separate retirement corpus apart from child or family income needs
13. Monitoring and Portfolio Rebalancing
Your plan needs regular health checks:
Quarterly review of asset allocation
Rebalance hybrid/equity/debt mix annually
Update insurance and health policies yearly
Adjust SWP amount based on inflation and corpus size
Increase monthly SIPs in line with salary increments
This keeps your finances on track and flexible.
14. Avoiding Pitfalls
Don’t choose index funds; they offer no downside buffer
Don’t use direct mutual funds; you lose CFP support
Keep away from real estate for income planning
Don’t tie up liquidity in gold biscuits
Avoid annuities; they take flexibility and tax benefits away
Stay focused on the plan for stability and growth.
15. Action Plan Summary
Task Timeline
Build emergency fund in liquid/debt 1–2 months
Secure term and health insurance 1 month
Open PPF account and start SIPs within current financial year
Allocate funds into hybrid/debt/active equity 2–3 months
Initiate SWP withdrawals monthly after fund accumulation
Sell part of gold biscuits to digital gold 6 months
Monitor and rebalance regularly quarterly / annual
Finally
You have a strong base with a stable job and surplus income.
The next steps include setting up emergency safety, shifting gold to digital, and building a solid MF-based income system through hybrid and active equity funds.
This plan offers stability, growth, capital preservation, and income for your daughter’s future and your family’s security.
With careful implementation and annual review, you can achieve steady returns and principal protection.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Sajidasabrin on Aug 18, 2024Hindi
