Dear Team,
I have been investing for my 2 child's education, marriage and my retirement.
My age: 41 years
Please suggest if any changes required in below portfolio and if I could meet my goals.
1st Child education: 8 years
Present cost: 30 Lakh
1st Child marriage: 15 years
Present cost: 20 lakh
2nd Child education: 18 years
Present cost: 30 Lakh
2nd Child marriage: 27 years
Present cost: 20 lakh
Retirement Income: 14 years
Current Need: 1 Lakh monthly
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Investment value:
NPS: 22 lakh also 17000 rs sip
EPF: 34 lakh also 40000 rs sip
PPF: 10 lakh
Direct Equity: 2 lakh
1.5 Cr life insurance
10+90 lakh health insurance
Need specific advice on how to dump underperforming mutual fund? Need to pay huge taxes on redemption? That's the reason didn't sale those funds.
1. Miare Large&Midcap 35 lakh(12.5 k sip)
2. Mirae Large cap: 30 Lakh 10ksip
3. ICICI bluechip: 46 lakh 20k sip
4. Axis Midcap: 39 lakh 10k sip
5. Nippon Growth: 33 lakh 20ksip
6. Axis25: 22 lakh
7. Nippon multicap: 12 lakh 20ksip
8. SBI focused: 65 lakh 10ksip
9. HSBC Smallcap: 26 lakh 10ksip
10.Nippon smallcap: 52 lakh 30ksip
11. Axis long term equity: 20 lakh
Ans: Your portfolio looks impressive. Let’s break down your goals and assess your investments to see if any changes are needed.
Understanding Your Goals
First Child's Education:
8 years away
Present cost: Rs. 30 lakh
First Child's Marriage:
15 years away
Present cost: Rs. 20 lakh
Second Child's Education:
18 years away
Present cost: Rs. 30 lakh
Second Child's Marriage:
27 years away
Present cost: Rs. 20 lakh
Retirement Income:
14 years away
Current need: Rs. 1 lakh monthly
Current Investment Portfolio
NPS: Rs. 22 lakh + Rs. 17,000 SIP
EPF: Rs. 34 lakh + Rs. 40,000 SIP
PPF: Rs. 10 lakh
Direct Equity: Rs. 2 lakh
Life Insurance: Rs. 1.5 crore
Health Insurance: Rs. 10 + 90 lakh
Mutual Fund Investments
Mirae Large & Midcap: Rs. 35 lakh (Rs. 12,500 SIP)
Mirae Large Cap: Rs. 30 lakh (Rs. 10,000 SIP)
ICICI Bluechip: Rs. 46 lakh (Rs. 20,000 SIP)
Axis Midcap: Rs. 39 lakh (Rs. 10,000 SIP)
Nippon Growth: Rs. 33 lakh (Rs. 20,000 SIP)
Axis 25: Rs. 22 lakh
Nippon Multicap: Rs. 12 lakh (Rs. 20,000 SIP)
SBI Focused: Rs. 65 lakh (Rs. 10,000 SIP)
HSBC Smallcap: Rs. 26 lakh (Rs. 10,000 SIP)
Nippon Smallcap: Rs. 52 lakh (Rs. 30,000 SIP)
Axis Long Term Equity: Rs. 20 lakh
Evaluating Your Portfolio
Your portfolio is well-diversified. However, there are a few areas to focus on.
Dumping Underperforming Mutual Funds
It’s essential to evaluate the performance of each fund.
If a fund consistently underperforms, it might be time to switch.
Consider the following points:
Look at the fund’s performance over a 3-5 year period.
Compare it with its benchmark and peers.
Check the fund manager’s track record.
Tax Implications on Redemption
Selling mutual funds can incur taxes. Here’s what you need to know:
Short-term Capital Gains (STCG): If held for less than 1 year, taxed at 15%.
Long-term Capital Gains (LTCG): If held for more than 1 year, taxed at 10% on gains above Rs. 1 lakh.
To manage taxes, consider the following strategies:
Spread redemptions over multiple financial years.
Use losses from other investments to offset gains.
Investment Strategy for Goals
First Child’s Education (8 years away)
For goals 7-10 years away, a mix of equity and debt is ideal.
Consider these steps:
Continue with your current SIPs in equity funds.
Add some debt funds to reduce risk.
First Child’s Marriage (15 years away)
This goal is medium-term.
Focus on:
Increasing SIPs in large and midcap funds.
Adding some balanced advantage funds for stability.
Second Child’s Education (18 years away)
This goal is long-term.
Stick with:
Equity mutual funds for high growth.
Increase SIPs in midcap and smallcap funds.
Second Child’s Marriage (27 years away)
This goal is very long-term.
Invest in:
Equity funds, especially smallcap and midcap.
Increase SIPs in growth-oriented funds.
Retirement Income (14 years away)
For retirement, focus on a balanced portfolio.
Consider:
Increasing investments in NPS and PPF for stability.
Continuing SIPs in large cap and bluechip funds for growth.
Mutual Funds: Categories and Benefits
Equity Mutual Funds
These invest in stocks and aim for high returns.
Ideal for long-term goals due to their growth potential.
Debt Mutual Funds
Invest in fixed-income instruments like bonds.
Offer stable returns with lower risk.
Good for short to medium-term goals.
Hybrid Mutual Funds
Mix of equity and debt investments.
Balance risk and return, suitable for medium-term goals.
Actively Managed Funds vs. Index Funds
Actively Managed Funds
Fund managers make investment decisions to outperform the market.
Higher fees but potential for better returns.
Index Funds
Track a market index, have lower fees.
May not always outperform the market.
Given your goals, actively managed funds might be better.
They offer higher potential returns to meet your future needs.
Direct Equity vs. Mutual Funds
Direct Equity
Investing directly in stocks can be rewarding but risky.
Requires time and expertise to pick the right stocks.
Mutual Funds
Professionally managed, diversified, and less risky.
Regular funds through a CFP provide guidance and reduce risk.
Power of Compounding
The earlier you start, the more you benefit from compounding.
Even small investments grow significantly over time.
Start SIPs early and increase them gradually.
Insurance and Investments
Your life and health insurance coverage is good.
Focus on pure investment options for wealth growth.
Avoid mixing insurance with investment.
Tax Planning
Tax-Saving Mutual Funds (ELSS)
ELSS funds offer tax benefits under Section 80C.
They have a lock-in period of 3 years and provide good returns.
Diversifying for Tax Efficiency
Diversify your investments to optimize tax benefits.
Consult a Certified Financial Planner for personalized tax planning.
Monitoring and Rebalancing
Regularly review your investment portfolio.
Rebalance it based on market conditions and your goals.
This ensures your investments stay aligned with your objectives.
Final Insights
Your portfolio is strong and well-diversified.
Evaluate and possibly switch underperforming mutual funds.
Manage tax implications carefully during redemptions.
Continue investing in mutual funds for different goals.
Diversify across equity, debt, and hybrid funds.
Leverage the power of compounding by starting early and increasing investments over time.
Monitor and rebalance your portfolio regularly.
With consistent effort and smart planning, you’ll achieve your financial goals.
Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in