Mechanical Engineering Student Confused About Career Path

Ans: You are in a stable position with your job, passive income from real estate, and a long-term investment strategy in mutual funds. You have already invested Rs 2 crore in commercial real estate, generating Rs 70,000 per month in passive income, which is a healthy contribution towards your financial stability.

Additionally, you have Rs 60 lakh invested in small-cap mutual funds, which you plan to hold for 20 years. Your medical insurance, emergency fund, and ability to cover family expenses with your salary are strong foundations for wealth creation. However, the question is whether this approach aligns with your long-term goal of “massive wealth creation.” Let's break it down.

Passive Income from Real Estate
Your commercial real estate investment provides a stable passive income. You have no intention to sell this property, which makes it a permanent part of your financial plan.

Advantages:

Provides a consistent income of Rs 70,000 per month.

Offers long-term financial security without needing to liquidate assets.

Income from commercial property tends to appreciate over time.

Points to Consider:

Commercial real estate lacks liquidity. If at any point you need to access the capital, it won’t be easily available.

Income is subject to taxation based on your slab rate, which reduces the net inflow.

While real estate does contribute to a secure financial future, it should not be your sole focus for wealth creation. Diversification in liquid assets is essential.

Mutual Fund Investment in Small Caps
Your investment of Rs 60 lakh in small-cap funds shows that you’re aiming for long-term growth. Small-cap funds have high growth potential but come with high risks as well.

Advantages:

Small caps can generate higher returns in the long term, as you are looking at a 20-year horizon.

Historically, small caps outperform large caps in the long run.

Staying invested for 20 years reduces short-term volatility.

Points to Consider:

Small-cap funds can be volatile, especially during economic downturns.

It’s important to ensure that your portfolio isn't overly concentrated in one asset class. Right now, small caps form a significant portion of your portfolio, and this could expose you to higher risks.

Review and rebalance periodically. Small-cap funds might perform well, but reviewing the performance every few years is important to ensure they align with your goals.

If your objective is wealth creation, small-cap funds are a good vehicle, but you might want to diversify further to reduce risks.

No Additional Investments for Now
You mentioned that you cannot make any more investments currently, which is understandable given your family responsibilities and expenses.

Advantages:

You are financially secure, as your salary covers your day-to-day and family expenses.

Your current investments are already substantial, giving you peace of mind.

Points to Consider:

While it’s good that your salary covers your expenses, future opportunities to invest more should be explored when your financial situation allows. More capital invested earlier could compound significantly over the years.

Consider automated increases in investments. As your salary grows, you can set up an automated increase in SIPs (Systematic Investment Plans) to keep contributing without feeling an immediate financial pinch.

Insurance and Emergency Fund
You have a medical insurance policy and an emergency fund in place, which is essential for financial stability.

Advantages:

This ensures that any medical emergencies or sudden expenses don’t derail your long-term financial plans.

With adequate coverage, your focus on wealth creation remains unaffected by unexpected financial burdens.

Points to Consider:

Ensure that your insurance coverage is adequate for future needs, especially as medical costs rise.

Keep your emergency fund separate and only use it for unforeseen situations. It should ideally cover 6–12 months of living expenses.

Diversification for Long-Term Wealth Creation
Massive wealth creation comes from a balance between high-growth assets like small caps and more stable, diversified investments. Although your current investment strategy has potential, focusing solely on real estate and small caps may not be the best approach for building a massive corpus.

Suggestions:

Increase Diversification: Over time, you might want to add mid-cap and large-cap mutual funds to your portfolio. This will help reduce risk while ensuring reasonable returns.

Tax-Efficient Investments: Consider tax-efficient avenues for investment that can help reduce the tax burden on your passive income and investment returns.

Avoid Over-Concentration: While small caps have the potential for higher returns, avoid putting all your long-term savings into one category. If possible, when your financial situation allows, diversify across other types of funds like balanced funds or even debt funds.

Taxation Considerations
Your commercial real estate income and capital gains from mutual funds are taxable. Keep in mind the taxation on mutual funds:

For equity mutual funds, long-term capital gains (LTCG) over Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

For debt mutual funds, LTCG and STCG are taxed according to your income tax slab.

To maximise your post-tax returns, consider discussing tax-saving strategies with a Certified Financial Planner.

Can You Achieve Massive Wealth Creation?
Based on your current investments, you are on the right path to financial stability, but achieving massive wealth creation will require careful planning and some adjustments in the future.

Your Strengths:

Real estate provides passive income that adds to your financial security.

You have invested in small caps, which have high growth potential over 20 years.

Your income can sustain your current lifestyle and family expenses.

Areas to Improve:

Your investments are currently heavily concentrated in small caps and real estate. Adding mid-cap and large-cap funds will help reduce risk.

You may want to gradually increase your investment amount over time as your financial situation improves.

Keep tax implications in mind to maximise your wealth.

Final Insights
You are on a steady financial path, and your investments have good growth potential. However, massive wealth creation requires a more diversified approach. You have the foundation to build upon, and with some adjustments in your portfolio and future investment strategy, you can aim for significant wealth over time.

When your financial situation allows, consider diversifying across various mutual fund categories and look into tax-efficient investment strategies. Additionally, regular reviews of your portfolio will ensure that you stay on track to meet your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hi Neeraj,

Mutual Funds are a good option for investment. The investment horizon/timeline is very important when you consider equity mutual funds, they need to be invested for the long period (7+ years).

You have only recently started in June 2024, so keeping patience with your investment is important. You can track the progress of your investment but don't get influenced by day to day fluctuation in its NAV. Decisions should be taken based on many factors but do consider 1-2 years duration to see if fund performance is steady, improving or below par compared to your expectation and its peers and the market.

Now coming to the funds you have provided - Quant Large and Midcap and Quant Flexicap are good funds and I think you should be patient. Note - both are actively managed funds and you can expected to see fluctuations in the short term. Stay invested in these 2 funds as they are well diversified and long term prospects look good.
Quant Infrastructure fund is a Sectoral fund and the fluctuations will be high. If your risk profile is very high, then you can continue. There will be a period of time when the sector loses favor in the market and thus the returns will be impacted and during good times it will provide good returns.
Alternately if you decide to exit then include a fund from another fund house which is well diversified and aligns to your risk profile. Some good options to consider - an Index fund based on Nifty 500 (passive) or a multicap fund (active) - to get a a well diversified exposure to Large-Mid-Small cap.
Note- Redemption at this time may attract exit load apart from tax implications for short term.

Regards
Janak Patel
Certified Financial Planner.

Ans: Hello;

Your case is peculiar therefore I recommend you to consult a lawyer specializing in labour/EPF laws for resolution of your issue.

Best wishes;

Ans: Hello;

You may let your apartment on rent to get rental income and avoid reducing the monthly SIPs.

Ensure 6 months worth of regular expense coverage in liquid or arbitrage funds.

Happy Investing!!

Ans: Hello;

First and foremost, investing in direct stocks without proper education, knowledge and with social media tips is like playing with fire.

My suggestion is sell the stocks and invest only through mutual funds.

You should either top-up monthly sip of 10 K by 12% minimum each year upto 15 years to reach your target(1 Cr)

OR

Do a flat monthly sip of 18 K for 15 years to reach target of 1 Cr.

Monthly RD is not part of this calculation.

You just need 1 or 2 funds.

If it is 10 K sip the PPFAS flexicap fund is good enough.

If you want to enhance sip to 18 K you may invest incremental 8K in large and midcap type mutual fund for eg Kotak Emerging Opportunities Fund.

These recommended funds are pure equity hence high risk/high return (not assured).

If you are risk averse then invest only in equity savings type mutual funds (low to moderate risk) for eg Kotak equity savings fund or ICICI Pru equity savings fund.

But in that case you may need to extend your time horizon to 18-20 years.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Hello;

Honestly the insurance company mentioned in your query offered you a reasonable solution.

Because the truth is no health insurer will offer cover for a person of 60 age with angioplasty and diabetes history because from their point of view it's a 99% risk.

Some may accept it with lot of ifs and buts, eventually rejecting any claim at a later date on flimsy grounds.

Recommend you to earmark some corpus for any heart related complication(say @ 10 L) for your father and go ahead with the cover because your Mother will also have waiting period for diabetes.

Check Tata AIG and Niva Bupa also before you sign up.

Best wishes;

Ans: Hello;

You may earmark equity holding, PF, lumpsum investment in hybrid mutual funds and MF corpus accumulated through sip from 2011 for the purpose of kids higher education and marriage.

The new sip(50 K) and FD corpus may grow cumulatively into a sum of 2 Cr in 6 years time frame.(Suitable returns considered for respective instruments)

If you do a 3% SWP, you may expect a monthly income of around 50 K.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Hello Venu.
The path you decided for your daughter is appreciable and you are working on it at the right time. There are a lot of options for higher education in India and abroad. Her career will take a flying start If she completes her M.Sc. & PhD in EMT.
For PG, you may the following options:
(1) Manipal College of Allied Health Sciences, Manipal University
(2) AIIMS, New Delhi
(3) Christian Medical College (CMC), Vellore
(4) SGPGIMS (Sanjay Gandhi Postgraduate Institute of Medical Sciences), Lucknow
(5) Tata Memorial Centre, Mumbai
For PhD, here is the list of Institutions offering PhD programs in Emergency Medicine:
(1) AIIMS, New Delhi
(2) Manipal University
(3) Tata Memorial Centre, Mumbai
(4) Postgraduate Institute of Medical Education and Research (PGIMER), Chandigarh
But before thinking of PG and PhD, ask your daughter about her interest in specialization. She can explore various universities' websites to check eligibility criteria, available research opportunities, and funding options. If she’s open to studying abroad, universities in the USA, UK, or Australia may offer more advanced and specialized research opportunities in EMT.

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If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

Ans: This may be normal in children less than 5 years. A speech therapist will be able to guide you further