Hello Sir,
I amd my wife both are earning members and will have combined savings of 70-80k per month from next month. I am planning to invest the same for ling term basis for about 25-30 years so that we can retire at 55-60 years of age. Our current expense is around 1lpm. I have list down few mf in my mind and wanted to invest in those. Can you please have alook on the bifurcation and mf selected as to get me the retirement corpus.
ICICI Prudential Bluechip/ Nippon india large cap ~30% (will split into 2 i.e 15% each)
Parag Parikh Flexi Cap /hdfc flexi cap~25% (will split into 2 i.e 12.5% each)
HDFC nifty 50 index fund~10%
Motilal Oswal Midcap Fund/ HDFC midcap fund/Edelweiss Midcap Fund ~25% (will split into 2 i.e 12.5% each)
Quant Small Cap~10%
Any extra money if left will be for gold as debt fund
As of now no child but planning to invest 5-10k for their education and same for marriage.
I am on the right track considering inflation as well(approx 6%. Currently i am 30 years old.
Ans: You have done excellent groundwork. You are young, disciplined, and planning for long term. This is a very powerful combination. With Rs.70,000 to Rs.80,000 monthly savings for 25–30 years, retirement at 55–60 can be secured if you structure things wisely.
Let me give you a 360-degree review of your plan in detail.
» Current Financial Strength
– Both of you are earning, which creates stability.
– You can save Rs.70,000–80,000 monthly. This is a strong savings ratio.
– Your expenses are Rs.1 lakh per month, which is reasonable compared to your income.
– You are starting early at age 30. Time is your strongest ally.
» Importance of Early Start
– Saving for 25–30 years multiplies wealth faster.
– Compounding will work best when money stays invested for long.
– Even moderate return investments can create a large retirement pool.
– The discipline of continuous investing will help you stay consistent.
» Review of Fund Selection
You have shortlisted a mix of large-cap, flexi-cap, mid-cap, small-cap, and index funds. Let us analyse each part.
– Large cap choice is fine. You plan 30% here. It gives stability. But instead of splitting too much, stick with one strong large cap. Splitting reduces focus.
– Flexi cap choice at 25% is fine. They give balance of large, mid, and global exposure. Again, prefer one, not two.
– Index fund chosen is 10%. But index funds have disadvantages. They only mirror the market. They do not beat the market. There is no active management. They cannot adjust in crashes. They carry concentration risk in top few stocks. Actively managed funds are better because a professional manager adjusts portfolio. Over long term, well managed active funds outperform. Hence, avoid index funds and replace with another actively managed diversified fund.
– Midcap allocation at 25% is fine. Midcaps create growth, but they are volatile. Keep only one.
– Small cap allocation at 10% is also okay, but small caps are very risky. They can go up fast but fall sharply. For 25–30 years horizon, this risk is tolerable but must be limited to 5–8%. You are slightly overweight here.
» Suggested Allocation
Instead of splitting into many funds, keep fewer. It improves tracking. Suggested mix:
– 35% large cap
– 25% flexi cap
– 25% midcap
– 5–8% small cap
– Balance 5–10% in gold or debt
This creates stability with growth.
» Why Not Too Many Funds
– More funds create overlap of same stocks.
– Monitoring becomes difficult.
– Rebalancing is confusing.
– Fewer but high-quality funds give better focus.
» Gold and Debt Allocation
– Gold is good for safety but do not invest more than 5–10%.
– Debt funds are low return and taxed as per slab. They can be used only for short-term goals or emergency. Not useful for 25–30 years horizon.
– For long term, equity portion should be higher.
» Importance of Reviewing Every 2–3 Years
– Funds need review as performance changes.
– Markets evolve. Some categories may perform better later.
– Rebalancing every few years keeps portfolio aligned with goals.
– Without review, even good portfolios may lose edge.
» Inflation Concern
– You assumed 6% inflation. This is reasonable.
– But some expenses like education or healthcare may rise faster.
– So, target higher corpus than calculated.
– Saving Rs.70,000–80,000 monthly for 25–30 years at moderate return should create Rs.10–12 crore or more. This will beat inflation if managed well.
» Child Education and Marriage Planning
– You plan to invest Rs.5,000–10,000 monthly each for education and marriage. This is a good thought.
– Start with separate SIPs for these goals.
– Education goal may be in 18–20 years. Use balanced mix of large and flexi cap.
– Marriage goal may be in 25–28 years. Use more equity allocation.
– Keep these goals in separate folios. This avoids mixing with retirement corpus.
» Insurance Protection
– Before investing, ensure proper insurance cover.
– Buy term insurance at least 12–15 times of annual income.
– Have health insurance for both. Employer cover is not enough.
– Without insurance, savings can get disturbed in emergency.
» Emergency Fund
– Keep at least 6 months of expenses in liquid fund or savings.
– This avoids breaking your investments.
– It also gives peace of mind during uncertain times.
» Disadvantages of Index Funds
You included an index fund. Let me explain why it is not suitable for you.
– Index funds cannot beat the index. They just copy it.
– They carry high concentration in top few companies.
– No active decision making is possible.
– During market crash, they fall as much as index. No protection.
– Actively managed funds with skilled fund managers can protect downside and capture upside.
– For long-term wealth creation, active funds have better record in Indian markets.
So, better to avoid index funds and replace with a strong actively managed flexi or large cap.
» Role of Regular Funds Over Direct Funds
– Many investors think direct funds save cost. But cost saving is small.
– Direct funds do not give guidance. No one helps with rebalancing.
– You may exit at wrong time or select poor performing fund.
– Regular funds through a Certified Financial Planner or MFD come with guidance.
– Proper review, asset allocation, and timely advice saves much more than expense ratio.
– For 25–30 years journey, professional handholding matters more than small cost.
» Taxation Aspect
– When you redeem equity mutual funds, long term gains above Rs.1.25 lakh are taxed at 12.5%.
– Short term gains are taxed at 20%.
– Debt fund gains are taxed as per slab.
– For retirement corpus, most of your gains will be long term, so taxation is manageable.
– Keep this in mind for planning withdrawals after 55–60.
» Rebalancing for Retirement
– In your 30s and 40s, keep equity allocation high.
– In your 50s, slowly shift some portion to safer funds.
– By retirement, 60–70% should be equity, rest in debt or hybrid.
– This ensures growth and stability together.
» Behavioural Discipline
– Do not stop SIPs during market falls.
– Crashes are best time to accumulate units.
– Avoid checking NAV daily.
– Long term investors win by patience.
» Extra Surplus Management
– If you get bonuses or salary hikes, increase SIPs by 10% yearly.
– Step-up SIPs create huge wealth.
– This ensures corpus grows faster than inflation.
» Finally
You are on the right track. With strong savings, long time horizon, and discipline, your retirement at 55–60 is very much possible. Just refine your fund mix, avoid index funds, limit small cap exposure, and keep fewer funds. Also, focus on insurance, emergency fund, and separate goal-based investing for children. With reviews every few years and step-up SIPs, you can build more than enough corpus for retirement and family goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
