Can I build a 5 crore corpus with my income?

Ramalingam Kalirajan |8103 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 12, 2025

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

Question by Prince on Jan 26, 2025Hindi

I'm earning little over to a lakh rupees per month and have been investing 23-25k every month in MF. 25k to my car EMI (which will complete this year by July). I'm 28 years old have dependents at home, maa-paa, wife, and a 6 months old son. I have medical insurance for my family (from my job) and I have two term insurance for myself (1 CR each). Apart from MF I tried LTI in equity but that's around 30 down. What are your suggestions to have 5 CR by the time I turn 50?

Ans: Financial Overview
You earn over Rs 1 lakh per month.
You invest Rs 23,000 to Rs 25,000 in mutual funds.
You pay Rs 25,000 for a car EMI, which ends in July.
You have dependents: parents, wife, and a 6-month-old son.
You have employer-provided health insurance.
You have two term plans of Rs 1 crore each.
Your long-term equity investment is down by 30%.
Your goal is to reach Rs 5 crore by age 50.
Strengths in Your Financial Plan
Disciplined Investing

You consistently invest Rs 23,000 to Rs 25,000 every month.
This is a good habit for wealth creation.
Adequate Life Insurance

Two term insurance policies ensure financial security for your family.
This is an essential step for dependents' protection.
Employer Health Cover

Your job provides health insurance, reducing medical expense risks.
Ensure it covers all family members adequately.
Areas That Need Improvement
Emergency Fund

Keep at least Rs 3 lakh to Rs 5 lakh in a high-interest savings account or FD.
This should cover six months of expenses.
A solid emergency fund prevents withdrawing investments in a crisis.
Additional Health Insurance

Employer health insurance may not be enough.
Get a personal family floater plan of Rs 10 lakh to Rs 20 lakh.
This protects against unexpected medical costs.
Utilising EMI Savings Post-July

Your car loan ends in July, freeing Rs 25,000 per month.
Redirect this amount into investments for wealth creation.
This boosts your investment power significantly.
Investment Strategy to Achieve Rs 5 Crore
Increase SIP Contributions

Currently, you invest around Rs 25,000 per month.
From August, add the Rs 25,000 saved from the EMI.
This will double your SIPs to Rs 50,000 per month.
Over time, increase SIPs with salary hikes.
Mutual Fund Portfolio Strategy

Continue investing in actively managed funds.
Avoid index funds, as they limit returns in a dynamic market.
Diversify across large-cap, mid-cap, and flexi-cap funds.
Review performance every year and switch if needed.
Public Provident Fund (PPF)

Invest Rs 1.5 lakh per year in PPF.
It provides tax-free, stable long-term returns.
It also balances the volatility of equity investments.
National Pension System (NPS)

Consider investing Rs 5,000 per month in NPS.
It gives tax benefits and disciplined retirement savings.
Equity Investments Beyond Mutual Funds

Direct equity investments are highly volatile.
Continue investing only if you understand the risks.
Otherwise, focus on mutual funds for better management.
Tax Planning for Efficient Growth
Maximise Tax Benefits

Invest Rs 1.5 lakh in PPF under Section 80C.
NPS offers additional deductions under 80CCD(1B).
Choose tax-efficient mutual funds for long-term capital gains benefits.
Mutual Fund Capital Gains Taxation

Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.
Short-term capital gains (STCG) are taxed at 20%.
Plan redemptions wisely to minimise tax outgo.
Financial Protection for Dependents
Child’s Future Planning

Open a Sukanya Samriddhi Account if you have a daughter.
Otherwise, start a dedicated mutual fund SIP for your child’s education.
Plan for school, college, and higher studies costs well in advance.
Parents’ Health Cover

Consider separate health insurance for parents.
Senior citizen plans cover higher medical costs.
This prevents sudden financial strain.
Final Insights
Increase SIPs after your car EMI ends in July.
Invest in a mix of mutual funds, PPF, and NPS.
Strengthen health coverage beyond employer insurance.
Build an emergency fund before increasing equity investments.
Keep reviewing your portfolio and rebalance if needed.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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