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Ramalingam

Ramalingam Kalirajan  |4803 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 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
Asked by Anonymous - Jun 28, 2024Hindi
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I have 1 Lakh per month salary and I have one daughter. I have saved 10,000 in Sukanya and 8,000 in PF. How can I secure my child's education? My retirement plan is already in PF with 300,000 rupees, PF 1.5 lakh, Sukanya 1.5 Lakh, FD is 15 lakh.

Ans: It’s great to see your commitment to securing your child's future and planning your retirement.

Your monthly salary is Rs 1 lakh, and you are making smart savings moves already.

You have Rs 10,000 in Sukanya Samriddhi Yojana (SSY) and Rs 8,000 in Provident Fund (PF).

You’ve accumulated Rs 3 lakhs in retirement PF, Rs 1.5 lakhs in another PF, Rs 1.5 lakhs in SSY, and Rs 15 lakhs in Fixed Deposits (FDs).

Impressive! You have a solid foundation.

Securing Your Child’s Education
Education costs are rising. Ensuring your daughter’s education requires careful planning and disciplined investments.

Importance of Early Planning
Starting early helps leverage the power of compounding.

Even small amounts can grow significantly over time.

Evaluating Your Current Savings
Your savings in SSY and PF are great for stable, long-term growth.

However, diversifying your investments can help you achieve higher returns.

Sukanya Samriddhi Yojana (SSY)
SSY is excellent for your daughter’s education. It offers good returns and tax benefits.

Provident Fund (PF)
PF is safe and offers steady growth. It's great for retirement.

Fixed Deposits (FDs)
FDs provide safety but offer lower returns. Consider diversifying to potentially higher-yielding investments.

Exploring Additional Investment Options
Diversifying can help balance risk and return.

Mutual Funds
Mutual funds are a powerful tool for wealth creation. They come in various categories, each with its own risk and return profile.

Equity Funds: Invest in stocks, offering high returns but higher risk. Ideal for long-term goals.

Debt Funds: Invest in bonds, providing stable returns with lower risk. Suitable for short- to medium-term goals.

Hybrid Funds: Mix of equity and debt, balancing risk and return. Good for medium-term goals.

Benefits of Mutual Funds
Diversification: Spreads risk across different securities.

Professional Management: Managed by experts, saving you time and effort.

Liquidity: Easy to buy and sell, providing flexibility.

Systematic Investment Plan (SIP): Invest small amounts regularly, promoting disciplined saving.

Assessing Risk and Returns
Understanding the risk-return trade-off is crucial. Higher returns come with higher risks.

Power of Compounding
Compounding is the key to wealth creation. Your returns earn returns, leading to exponential growth.

Start early, stay invested, and let compounding work its magic.

Implementing a Systematic Investment Plan (SIP)
SIPs are a great way to invest regularly and benefit from market fluctuations.

Even small amounts, when invested consistently, can grow significantly over time.

Role of Actively Managed Funds
Actively managed funds have professional managers making investment decisions.

They can potentially outperform the market, offering better returns than index funds.

Disadvantages of Index Funds
Lack of Active Management: No expert managing your investment.

Market Dependent: Reflects market performance, no potential to outperform.

Less Flexibility: Limited to the index components.

Tailoring Your Investment Plan
Based on your goals and risk tolerance, create a balanced portfolio.

Include a mix of equity, debt, and hybrid funds.

Securing Your Retirement
You already have a good start with your PF and FD savings. Let’s build on that.

Diversifying Your Retirement Savings
Relying solely on PF and FDs might not provide sufficient growth.

Consider adding mutual funds to your retirement portfolio.

Evaluating Life Insurance Policies
If you have LIC, ULIP, or other investment-cum-insurance policies, consider surrendering them.

Reinvest the proceeds in mutual funds for potentially higher returns.

Importance of Regular Reviews
Regularly review your investments and financial plan. Make adjustments based on your life changes and market conditions.

Working with a Certified Financial Planner
A CFP can provide personalized advice and help you create a comprehensive financial plan.

They can guide you through asset allocation, risk management, and goal planning.

Final Insights
You’re on the right track with your savings and investments. Keep up the great work!

Focus on diversifying your investments to balance risk and return.

Regular investments through SIPs will help you achieve your financial goals.

Review your portfolio regularly and make adjustments as needed.

Your early start and disciplined approach will pay off big time.

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 Kalirajan  |4803 Answers  |Ask -

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

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Hello i am a homeopathic doctor aged 27 still doing my MD( final year) I have a evening clinic started newly i earn about 45-50k per month and as get stipend i nearly get 40k per month i have a 6 months old daughter and i have 14 lakhs savings of own 10 lakhs in equity 60k gold bonds ,1.2lakhs in US equity and 50k in corporate bonds and 2.5lakhs in savings account apart from this i have 24 lakhs in hybrid mutual fund ( this i got after my fathers death)may be in couple of months i will be getting another 90 lakhs by selling a property my future biggest expense will be my daughters education as i have a desire to send her to abroad for her UG itself my biggest question how to manage 90 lakhs for my secured future
Ans: Strategic Financial Planning for a Secure Future
Congratulations on your career progress and the new addition to your family! At 27, with a good income and a mix of investments, you're in a strong position to plan for a secure financial future and your daughter's education. Let’s delve into how to manage the upcoming Rs. 90 lakhs from the property sale effectively.

Assessing Your Current Financial Position
Existing Investments and Savings
Equity Investments: Rs. 10 lakhs
Gold Bonds: Rs. 60,000
US Equity: Rs. 1.2 lakhs
Corporate Bonds: Rs. 50,000
Savings Account: Rs. 2.5 lakhs
Hybrid Mutual Fund: Rs. 24 lakhs
Monthly Income
Evening Clinic: Rs. 45-50k
Stipend: Rs. 40k
You have a diversified portfolio, which is a good start. Your biggest future expense is your daughter’s education, especially if she studies abroad.

Managing the Rs. 90 Lakhs Property Sale
Prioritizing Financial Goals
Daughter’s Education Fund
Emergency Fund
Retirement Planning
Wealth Growth and Diversification
Detailed Financial Strategy
1. Establish an Emergency Fund
An emergency fund is crucial for unforeseen circumstances. Aim to save 6-12 months of your living expenses in a liquid and safe account.

2. Education Fund for Your Daughter
Given your desire to send your daughter abroad for her UG, start a dedicated investment plan.

Child Education Mutual Funds: These funds are tailored for long-term educational goals. They offer potential for significant growth over time.
SIPs (Systematic Investment Plans): Invest monthly in mutual funds. This will average out market volatility and provide disciplined savings.
Debt Funds: For the portion of funds needed in the short term (next 5-8 years), consider debt funds for lower risk and stable returns.
3. Retirement Planning
It’s never too early to plan for retirement. Diversify your investments to ensure a comfortable retirement.

Equity Mutual Funds: Continue investing in equity mutual funds for long-term growth. Choose funds that suit your risk profile.
PPF (Public Provident Fund): PPF is a safe, tax-saving investment option with a decent interest rate.
NPS (National Pension System): Consider NPS for additional retirement savings with tax benefits.
4. Wealth Growth and Diversification
Diversified Portfolio: Maintain a diversified portfolio across different asset classes – equity, debt, gold, and international funds.
Avoid Over-reliance on One Asset: Avoid putting all your money into one type of investment. Diversification reduces risk.
Monitoring and Adjusting Your Investments
Regular Reviews
Annual Reviews: Review your portfolio annually to ensure it aligns with your goals.
Adjust Allocations: Rebalance your portfolio based on performance and changing goals.
Professional Guidance
Certified Financial Planner (CFP): A CFP can provide personalized advice and help you stay on track with your financial goals.
Regular Consultations: Meet with your CFP regularly to adjust your strategy as needed.
Avoid Common Pitfalls
Over-Reliance on High-Risk Investments
Avoid putting too much money into high-risk investments like stocks or volatile mutual funds. Balance risk with stable options.

Ignoring Inflation
Ensure your investments outpace inflation, especially for long-term goals like education and retirement.

Not Having a Clear Plan
Having a clear, well-structured financial plan is crucial. Stick to your plan and make adjustments as needed.

Conclusion
With a clear financial strategy and disciplined approach, you can secure a prosperous future for yourself and your daughter. Start by setting up an emergency fund, then focus on dedicated investments for education and retirement. Regularly review and adjust your portfolio with the help of a Certified Financial Planner to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4803 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 20, 2024

Asked by Anonymous - Jun 19, 2024Hindi
Money
I earn 75000 cash in hand + 9000 nps monthly deduction monthly i have around 21 lakhs in my nps account I save 12500 each per month in sukanaya Samrudi accoun of my two daughters invest around 15000 monthly in diffrent SIPs since 1 years. Ihave also brought stocks wroth 1 lakhs .i am 40 year old and will retire after 20 years . i own a house and have no loan till date i also have ULIP of hdfc 10000 per month and LiC of 16000 per year. What else should i do to secure my childs future needs
Ans: Firstly, let's appreciate your disciplined approach to savings and investments. You are already investing in various financial instruments like Sukanya Samriddhi Accounts, SIPs, stocks, NPS, and insurance. This diversified approach is a great start. You have no loans, which is commendable and gives you more room to save and invest for future needs.

Evaluating Your Insurance Needs

You mentioned having a ULIP with a premium of Rs 10,000 per month and a LIC policy costing Rs 16,000 per year. While insurance is crucial, combining investment and insurance might not be the best strategy. ULIPs often come with high charges that can eat into your returns. Similarly, traditional LIC policies may offer lower returns compared to other investment options. It might be beneficial to consider surrendering these policies and reinvesting the proceeds into more efficient investment avenues.

Pure term insurance is often recommended. It provides high coverage at a low cost. Consider evaluating your insurance needs based on your current financial responsibilities and future goals. A Certified Financial Planner can help you determine the right amount of coverage required.

Enhancing Your Investment Strategy

You are already investing Rs 12,500 each per month in Sukanya Samriddhi Accounts for your daughters. This is a great choice for securing their education and marriage needs, given its attractive interest rate and tax benefits.

Your Rs 15,000 monthly investment in SIPs is also commendable. SIPs in equity mutual funds can provide good returns over the long term due to the power of compounding and rupee cost averaging. However, ensure you are investing in funds with a strong track record and managed by experienced fund managers.

Considering Education and Marriage Goals

Education and marriage are two significant financial goals for your children. Planning early for these goals can reduce financial stress in the future.

Child Education Plan: Consider investing in child education plans which are specifically designed to cater to future educational expenses. These plans often provide a combination of savings and insurance benefits.

Dedicated Mutual Fund Portfolio: Create a dedicated mutual fund portfolio for your children’s education and marriage. Choose funds that align with the timeline and risk profile of these goals. Equity funds can be considered for long-term goals, while debt funds can be chosen as the time horizon decreases.

Systematic Transfer Plans (STPs): As you approach the goal timelines, systematically transfer your investments from equity to debt to reduce risk. STPs help in gradually moving your money to safer avenues, ensuring capital protection.

Building an Emergency Fund

An emergency fund is crucial to cover unforeseen expenses without disrupting your financial plan. Typically, an emergency fund should cover 6-12 months of living expenses. Since you have no loans and a stable income, this fund can provide additional security.

Liquid Funds or Bank Savings Account: An emergency fund should be easily accessible. Consider keeping it in a high-interest bank savings account or liquid mutual funds.

Replenish Regularly: If you dip into your emergency fund, make it a priority to replenish it as soon as possible.

Tax Planning and Benefits

Maximizing tax benefits can help you save more. Currently, you are utilizing tax-saving instruments like NPS, Sukanya Samriddhi Accounts, and insurance policies.

Section 80C Investments: Continue investing in instruments that qualify for deductions under Section 80C, such as PPF, EPF, ELSS, etc.

National Pension Scheme (NPS): Contributions to NPS are eligible for additional deductions under Section 80CCD(1B). It’s a tax-efficient way to save for retirement.

Retirement Planning

Retirement planning should be a priority. You have Rs 21 lakhs in your NPS account, which is excellent. Ensure you regularly monitor and rebalance your NPS investments to align with your risk appetite and market conditions.

Diversified Portfolio: Maintain a diversified portfolio that includes a mix of equity, debt, and other asset classes. This helps in balancing risk and returns.

Regular Reviews: Periodically review your retirement plan to ensure it’s on track to meet your goals. Adjust your contributions and asset allocation as necessary.

Health Insurance

Adequate health insurance is crucial to protect against medical emergencies. Ensure you have a comprehensive health insurance plan that covers your entire family.

Adequate Coverage: Evaluate your current health insurance to ensure it provides adequate coverage for major illnesses and hospitalization expenses.

Top-Up Plans: Consider top-up or super top-up plans to enhance your existing coverage at a lower cost.

Estate Planning

Estate planning ensures that your assets are distributed according to your wishes and provides financial security for your family.

Writing a Will: Draft a will to clearly outline the distribution of your assets. This helps in avoiding disputes and ensuring your children’s future is secure.

Nomination and Beneficiaries: Ensure all your financial accounts and insurance policies have updated nominations. This ensures a smooth transfer of assets.

Financial Education for Children

Teaching your children about financial literacy can prepare them for managing money responsibly in the future.

Simple Financial Concepts: Start with basic concepts like saving, budgeting, and the importance of investing.

Involve in Financial Planning: Involve your children in family financial discussions to give them practical exposure.

Reviewing and Adjusting the Plan

Financial planning is not a one-time activity. Regularly review your financial plan to ensure it aligns with your changing goals and life circumstances.

Annual Reviews: Conduct a thorough review of your financial plan at least once a year. Assess the performance of your investments and make necessary adjustments.

Life Changes: Adjust your financial plan to accommodate significant life changes such as job changes, additional income sources, or changes in family structure.

Consulting with a Certified Financial Planner

While you have a robust financial plan, consulting with a Certified Financial Planner can provide expert insights and personalized advice. They can help you optimize your investments, ensure adequate insurance coverage, and plan effectively for your children’s future.

Tailored Advice: A Certified Financial Planner can provide advice tailored to your specific financial situation and goals.

Comprehensive Planning: They can help create a comprehensive financial plan that covers all aspects of your financial life, ensuring a secure future for your family.

Final Insights

Your proactive approach to saving and investing is commendable. By fine-tuning your investment strategy, ensuring adequate insurance coverage, and planning for future goals, you can secure your children’s future needs effectively. Regular reviews and adjustments to your financial plan, coupled with expert advice from a Certified Financial Planner, will keep you on track to achieve your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4803 Answers  |Ask -

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

Asked by Anonymous - Jun 25, 2024Hindi
Money
Hello mam... My income per annually 7lakh ...in fd 24lkh .savings.we have 2kids class 1and daughter is 1year .my savings r in lic 61000 per annum jeevan labh and ppf 12k per year and son ppf account and ssy for daughter i dont have any idea about mutal fund r stock.. Star health 5lkh cover paying 26000premium. 54thousand premium in Maxlife term plan cover for 1cr...please help me how to save for children education
Ans: First off, it's great that you are thinking about your children's future education. Your current savings and investments show that you are on the right path. Let's delve deeper into how you can enhance your savings strategy for your children's education.

Current Financial Snapshot
You earn Rs. 7 lakhs per annum. You have Rs. 24 lakhs in fixed deposits, which is a good safety net. Your savings in LIC's Jeevan Labh (Rs. 61,000 per annum) and PPF (Rs. 12,000 per year) are commendable. Additionally, you have a PPF account for your son and an SSY account for your daughter, which are excellent long-term savings plans. You also have adequate insurance coverage with Star Health and a Maxlife term plan.

Evaluating Your Current Investments
Your current investments are safe but may not be sufficient for long-term goals like your children's education. Fixed deposits and LIC plans offer safety but relatively low returns compared to other investment options like mutual funds.

Understanding Mutual Funds
Mutual funds can be a powerful tool for long-term wealth creation. They offer a variety of options catering to different risk appetites and investment horizons. Here's why mutual funds can be beneficial for you:

Diversification: Mutual funds invest in a diversified portfolio of assets, reducing risk.

Professional Management: Experienced fund managers handle your investments, aiming to maximize returns.

Potential for Higher Returns: Over the long term, mutual funds, especially equity funds, can offer higher returns than traditional savings options.

Types of Mutual Funds
Here's a brief overview of the different types of mutual funds you can consider:

Equity Funds: These invest primarily in stocks and have the potential for high returns but come with higher risk.

Debt Funds: These invest in fixed income instruments like bonds and are relatively safer but offer lower returns than equity funds.

Hybrid Funds: These invest in a mix of equity and debt, providing a balance of risk and return.

Power of Compounding
Mutual funds benefit from the power of compounding, where your earnings generate their own earnings. The longer you stay invested, the more your investment grows. This is particularly useful for long-term goals like education.

Systematic Investment Plan (SIP)
SIPs allow you to invest a fixed amount regularly in mutual funds. This helps in averaging the cost of investment and reduces the risk of market volatility. It's also easier on your finances as you can start with a small amount and increase it over time.

Creating an Education Fund for Your Children
Now, let's focus on how you can build an education fund for your children using mutual funds:

Set Clear Goals: Estimate the future cost of education. This includes tuition fees, accommodation, books, etc. Consider inflation in your calculations.

Choose the Right Funds: Based on your risk appetite, choose a mix of equity and hybrid funds. Equity funds can be suitable for long-term goals due to their higher return potential. Hybrid funds can provide stability.

Start Early: The earlier you start, the more you benefit from compounding. Even small regular investments can grow significantly over time.

Review and Adjust: Regularly review your investments to ensure they are on track to meet your goals. Adjust your investment amount and fund choices if necessary.

Analyzing Your Risk Appetite
Your investments should align with your risk tolerance. Since you have young children, a long investment horizon allows you to take moderate to high risks initially and then gradually shift to safer options as the goal approaches.

Regular Funds vs Direct Funds
Investing through a certified mutual fund distributor (MFD) with CFP credentials can offer several advantages over direct funds:

Expert Guidance: MFDs provide professional advice tailored to your financial goals.

Regular Monitoring: They continuously monitor your investments and make necessary adjustments.

Personalized Service: You receive personalized service and support, ensuring you stay on track with your investment plan.

Diversification Beyond Mutual Funds
While mutual funds are excellent for long-term goals, consider other diversification options:

Public Provident Fund (PPF): You already have a PPF account. Continue this as it offers tax benefits and guaranteed returns.

Sukanya Samriddhi Yojana (SSY): Continue investing in SSY for your daughter. It's a great scheme with tax benefits and good returns.

Fixed Deposits and Bonds: Maintain some amount in FDs and bonds for safety and liquidity.

Tax Planning
Your investments should also be tax-efficient. Mutual funds, especially Equity Linked Savings Schemes (ELSS), offer tax benefits under Section 80C. Combining these with your existing PPF and SSY contributions can optimize your tax savings.

Emergency Fund
Ensure you have an emergency fund to cover at least 6-12 months of expenses. This can be in the form of liquid funds or a savings account. It provides a safety net during unforeseen circumstances without disrupting your long-term investments.

Final Insights
Your current savings and investments are commendable. By diversifying into mutual funds and leveraging the power of compounding, you can significantly enhance your children's education fund. Remember, regular monitoring and adjustments are key to staying on track with your financial goals. Consulting a Certified Financial Planner can provide personalized advice and ensure you make informed decisions.

Investing wisely today can secure a bright future for your children. All the best!

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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