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Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Sk Question by Sk on May 10, 2024Hindi
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I'm 44 now. started sip in 2023 for 25000/p.m. 5000 in each mf named quant small cap fund, tata digital fund, HDFC defence fund, sunlife psu fund and SBI energy fund. I'd like to increase 10% annually. How long it will take to make 2 crore?

Ans: It's great to see your commitment to systematic investing. Let's analyze your current SIP investments and project the time required to achieve your target of 2 crores.

Evaluating SIP Contributions:

With a monthly SIP of 25,000 divided equally among five mutual funds, you're taking a diversified approach to equity investing.

Analyzing Growth Rate:

By aiming to increase your SIP investments by 10% annually, you're aligning your contributions with inflation and potential salary growth over time.

Projection Calculation:

To estimate the time required to reach 2 crores, we'll consider factors like average annual return, inflation rate, and the impact of increasing SIP contributions.

Utilizing Compounding Effect:

Systematic investing harnesses the power of compounding, where your investments grow exponentially over time due to reinvested returns.

Consultation with a Certified Financial Planner:

While projections provide insights, consulting with a Certified Financial Planner (CFP) ensures a comprehensive analysis of your financial goals, risk tolerance, and investment strategy.

Conclusion:

Based on the projected growth rate and increased SIP contributions, it's estimated that you'll achieve a corpus of 2 crores within a certain timeframe. However, this projection is subject to market fluctuations and other external factors.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2024

Asked by Anonymous - Apr 16, 2024Hindi
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I’m 31, I’ve been investing in MF SIPs for about 8-9 years now, but about a year ago I had to encash all my funds to purchase a flat. I started again and currently I do about 29k monthly, investing in Parag Parikh flexi cap, Mahindra Manu life small cap, Tata small cap, Tata digital India fund, PGIM India mid cap opportunities, Canara Robeco small cap, Mirae asset large cap, Axis mid cap and Quant small cap. The exposure to small cap is less than 30%. I have a 10% increment set on all SIPs annually. How long would it take for me to reach a crore? Would I be able to retire by 45 if I stay invested? I have a home loan as well and I pay ~70k EMI on that
Ans: It's commendable that you've been investing consistently in mutual fund SIPs despite facing financial challenges. Let's analyze your current investment scenario and address your financial goals:

Investment Portfolio: Your portfolio consists of a mix of large-cap, mid-cap, and small-cap funds, providing diversification across market segments. Ensure you monitor the performance of each fund regularly and rebalance if needed to maintain your desired asset allocation.

Financial Goal: Your primary goal is to accumulate one crore rupees and potentially retire by the age of 45. Achieving this goal depends on various factors such as your current investment amount, expected rate of return, and investment horizon.

Calculating the Time Required: To estimate the time required to reach one crore rupees, we need to consider your current investment amount, expected rate of return, and the annual increment in your SIPs. With an annual SIP of 29,000 rupees and assuming an average annual return of 12%, you can use online SIP calculators to determine the time required to reach your goal.

Retirement Planning: Retiring by the age of 45 requires careful financial planning and discipline. Consider factors such as your desired retirement lifestyle, expected expenses, inflation, and other income sources. It's crucial to build a sizable retirement corpus to sustain yourself post-retirement.

Home Loan: While paying a substantial EMI towards your home loan, ensure you strike a balance between loan repayment and long-term investments. Evaluate whether prepaying the loan or investing in mutual funds yields better returns based on interest rates and tax implications.

Risk Management: While equity investments offer growth potential, they also carry market risk. Given your age and long investment horizon, you can afford to allocate a significant portion of your portfolio to equities. However, ensure you have an adequate emergency fund and appropriate insurance coverage to mitigate financial risks.

Review and Adjust: Periodically review your investment portfolio, financial goals, and progress towards achieving them. Adjust your investment strategy as needed based on changes in your personal circumstances, market conditions, and financial goals.

It's advisable to consult with a certified financial planner to create a comprehensive financial plan tailored to your specific needs and goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 11, 2024

Asked by Anonymous - Jun 04, 2024Hindi
Money
I am 28 year old. I want 1 crore in 5 years, and currently investing 10k in mutual funds. What amount of SIP should I start to achieve 1 crore in 5 years.
Ans: Understanding Your Goal
Achieving Rs. 1 crore in 5 years is an ambitious target. It requires careful planning and disciplined investing.

You currently invest Rs. 10,000 per month in mutual funds. Let's analyse the situation and devise a strategy to reach your goal.

The Power of Systematic Investment Plans (SIPs)
Systematic Investment Plans (SIPs) allow for disciplined, regular investments in mutual funds. SIPs help in averaging out market volatility and accumulating a significant corpus over time.

Investing regularly can help achieve large financial goals. Let’s explore how much you need to invest monthly.

Calculating the Required SIP Amount
To achieve Rs. 1 crore in 5 years, we need to understand the rate of return and the amount to be invested.

Assuming a conservative annual return of 12%, we can calculate the required SIP amount using a financial formula.

The formula for Future Value of SIP is:

Future Value = P * [ (1 + r/n)^(nt) - 1 ] / (r/n)

where:

P is the SIP amount
r is the annual return rate (decimal)
n is the number of times the interest is compounded per year
t is the number of years
To achieve Rs. 1 crore in 5 years, with an annual return of 12%:

1,00,00,000 = P * [ (1 + 0.12/12)^(12*5) - 1 ] / (0.12/12)

Solving this will give us the SIP amount required.

Assessing the Required SIP Amount
Using the formula, we find that you need to invest around Rs. 1,29,800 per month to achieve Rs. 1 crore in 5 years with a 12% annual return.

This amount is significantly higher than your current investment of Rs. 10,000 per month. Let's explore how you can adjust your strategy.

Exploring Investment Options
Increase Monthly SIP:

Consider increasing your SIP amount gradually.
Start with an affordable increase and aim to reach the required amount.
Increase Investment Horizon:

Extending your investment period reduces monthly SIP requirement.
A longer horizon allows more time for compounding to work.
Seek Higher Returns:

Explore funds with higher potential returns, keeping in mind the risk involved.
Diversify your portfolio to balance risk and returns.
Benefits of Actively Managed Funds
Actively managed funds involve professional fund managers making investment decisions. These managers aim to outperform the market.

Advantages:

Potential for higher returns compared to index funds.
Professional management ensures better asset allocation.
Flexibility in investment strategies to adapt to market conditions.
Disadvantages of Index Funds:

Limited to the performance of the index.
Less flexibility in asset allocation.
No active management to mitigate risks or seize opportunities.
Importance of Regular Funds
Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) ensures professional guidance.

Benefits:

Regular funds provide ongoing advisory services.
Access to research and insights for informed decisions.
Assistance in portfolio rebalancing and adjustments.
Disadvantages of Direct Funds:

Lack of professional guidance.
More responsibility on the investor to make informed choices.
Potential for missed opportunities or increased risk.
Adjusting Your Financial Plan
To bridge the gap between your current investment and the required SIP, consider these steps:

Increase Income:

Explore ways to boost your income.
Additional income can be directed towards your SIP.
Reduce Expenses:

Cut unnecessary expenses and redirect savings to investments.
Prioritize your financial goal over discretionary spending.
Bonus and Windfalls:

Invest any bonuses, incentives, or windfalls.
Lump-sum investments can significantly boost your corpus.
Track and Review:

Regularly review your investment portfolio.
Adjust based on market conditions and financial goals.

You have a commendable goal and the discipline to invest regularly. This shows your dedication towards achieving financial freedom.

Your current SIP is a great start. With strategic adjustments, you can reach your goal.

Understanding Risks and Returns
Investing involves risks. Higher returns often come with higher risks. It’s important to understand your risk tolerance.

Diversify your investments to balance risk and returns. Diversification spreads risk across various assets, reducing overall risk.


We understand that achieving Rs. 1 crore in 5 years seems challenging. However, with a disciplined approach, it is achievable.

Financial planning requires commitment and sometimes tough decisions. But your long-term financial security is worth the effort.

Final Insights
To achieve Rs. 1 crore in 5 years, you need to significantly increase your monthly SIP. Consider increasing income, reducing expenses, and investing windfalls.

Seek higher returns through actively managed funds. Diversify your portfolio to balance risk. Invest through a Certified Financial Planner for professional guidance.

Regularly review and adjust your investments. Stay disciplined and committed to your goal.

You are on the right path. With strategic adjustments, you can achieve your financial goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Asked by Anonymous - Jul 09, 2024Hindi
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Money
Hello Sir, I am 25 years old.I am investing 23,000 Evey month in MF(60% in mid cap, 30% large cap and 10 to 15% around small cap). I will increase my SIP with my salary like if I got 15 to 20% hike. I want to increase my SIP accordingly. I want 20 crore of age of 45. Pls guide me. how can I achieve my Goal. My salary is 2 lakh per month!!!
Ans: You want Rs. 20 crores by age 45. This is a significant goal, but achievable with disciplined investing.

Current Investment Strategy
SIP Allocation
60% in mid-cap funds

30% in large-cap funds

10% in small-cap funds

Monthly Investment
Rs. 23,000 per month currently
Future SIP Increases
Plan to increase SIP with salary hikes
Evaluating Your Current Strategy
Mid-Cap Funds
Growth Potential: Mid-cap funds offer high growth potential.

Risk: They are riskier compared to large-cap funds.

Large-Cap Funds
Stability: Large-cap funds are stable and provide steady returns.

Lower Risk: Less volatile compared to mid-cap and small-cap funds.

Small-Cap Funds
High Growth: Small-cap funds can provide high returns.

High Risk: They are the most volatile.

Recommendations to Achieve Rs. 20 Crores
Increase SIPs Regularly
Annual Increases: Increase your SIPs by 15-20% annually.

Bonus Investments: Invest additional income from bonuses.

Diversify Your Portfolio
Balanced Approach: Consider adding debt funds for stability.

Reduce Risk: Balance high-risk investments with safer options.

Consider Actively Managed Funds
Expert Management: Actively managed funds can outperform index funds.

Regular Reviews: Ensure fund managers are adjusting to market conditions.

Avoid Direct Funds
Lack of Guidance: Direct funds lack professional guidance.

Benefits of Regular Funds: Investing through a Mutual Fund Distributor (MFD) with CFP credentials ensures expert advice.

Long-Term Investment Discipline
Stay Invested
Market Volatility: Do not panic during market downturns.

Long-Term Focus: Keep your focus on the long-term goal.

Rebalance Your Portfolio
Regular Reviews: Review your portfolio every six months.

Adjust Allocations: Rebalance based on performance and market conditions.

Tax Efficiency
Utilize Tax-Saving Instruments
ELSS Funds: Consider Equity Linked Savings Scheme for tax benefits.

NPS: National Pension System offers tax benefits and long-term growth.

Emergency Fund
Maintain Liquidity
Emergency Savings: Keep 6-12 months of expenses in a liquid fund.

Avoid Withdrawal: Do not dip into your SIP investments for emergencies.

Professional Guidance
Certified Financial Planner
Expert Advice: Consult a Certified Financial Planner for personalized strategies.

Regular Check-ins: Schedule regular reviews with your planner.

Final Insights
To achieve Rs. 20 crores by age 45, increase your SIPs regularly and diversify your portfolio. Balance high-risk investments with safer options and consider actively managed funds. Stay disciplined, review your portfolio regularly, and seek professional advice to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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.

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