Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 21, 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

Asked by Anonymous - Jun 01, 2025Hindi

I have 15 lakhs in cash and 20 in PPF , 10 in NPS and around MF of 5 Lacs and house worth 1.6 cr, how to build a retirement fund of 5 cr in next 5-7 yrs, what should I do

Ans: You are clearly thinking ahead and showing strong intent. You have Rs 15 lakhs in cash, Rs 20 lakhs in PPF, Rs 10 lakhs in NPS, Rs 5 lakhs in mutual funds, and a house worth Rs 1.6 crore. You now want to build a retirement fund of Rs 5 crore in the next 5–7 years.

That goal is ambitious. But not impossible.

Let’s now design a practical 360-degree plan to move forward.

Current Financial Snapshot

Before creating the strategy, let us assess your financial position.

Rs 15 lakhs in cash (probably in savings or FD)

Rs 20 lakhs in PPF (locked, safe, but low-return)

Rs 10 lakhs in NPS (locked till 60, some equity exposure)

Rs 5 lakhs in mutual funds (can grow well if used properly)

House worth Rs 1.6 crore (not to be counted for retirement corpus)

Your total assets: Rs 50 lakhs (excluding house).

Your liquid or near-liquid assets: Rs 35 lakhs (cash + MF + part of PPF).

You now want to grow this to Rs 5 crore in 5–7 years.

That needs structured growth, discipline, and right allocation.

Cash Holding – Needs Immediate Optimisation

Holding Rs 15 lakhs in cash brings no growth.

Even fixed deposit gives only 6–7% return.

Post-tax, the return is even lower.

Inflation eats away real value.

So, do not keep more than Rs 2–3 lakhs in savings or FD.

That should act as emergency buffer.

Rest of the cash—nearly Rs 12–13 lakhs—must be deployed.

Idle cash is a lost opportunity.

Let’s redirect this smartly into mutual funds and short-duration investments.

PPF – Safe but Not Growth-Oriented

Your PPF is already at Rs 20 lakhs.

This will grow slowly at around 7–7.5% yearly.

It is safe but not enough for retirement.

It is also illiquid till 15 years.

So do not depend heavily on PPF for reaching Rs 5 crore goal.

Let it continue as safety capital.

But growth must come from elsewhere.

NPS – Locked and Less Flexible

NPS of Rs 10 lakhs will help after age 60.

You cannot withdraw fully at retirement.

Only 60% can be withdrawn; 40% goes to annuity.

So this cannot fully support retirement planning.

Also, NPS has equity capping limits.

It will never grow like mutual funds.

Treat it like secondary retirement support.

Not your main retirement asset.

Mutual Fund Corpus – Needs Serious Expansion

Currently, you have Rs 5 lakhs in mutual funds.

This is your only flexible and high-growth tool.

To build Rs 5 crore in 5–7 years, you must:

Grow this corpus

Add monthly SIPs

Reinvest surplus into mutual funds

Equity mutual funds give inflation-beating returns.

You can expect better growth compared to FD, PPF, or NPS.

But do not choose direct plans or index funds.

Avoid Direct Plans – Choose Regular Plans with CFP Support

Direct plans may seem cheaper.

But they offer no human support or guidance.

No one will tell you when to rebalance or switch.

If markets fall, you may panic and exit.

Wrong timing can wipe out gains.

With regular plans via MFD with CFP, you get:

Personalised portfolio

Review every 6 months

Goal alignment

Behavioural guidance in volatile times

That matters more than small cost difference.

Index Funds Are Not Suitable for You

You are chasing a Rs 5 crore goal.

That needs better-than-average growth.

Index funds only copy the market.

They give average returns.

No flexibility, no downside protection.

If market falls 30%, index fund also falls 30%.

At your stage, you cannot afford full risk exposure.

Actively managed funds can:

Exit weak stocks early

Move into strong sectors

Give better risk-adjusted returns

So avoid index funds completely.

They don’t suit aggressive goal planning like yours.

Your House – Emotional Value, Not Retirement Tool

You own a house worth Rs 1.6 crore.

But don’t count this for your retirement target.

This is a lifestyle asset.

It gives no income unless sold or rented.

And you do not want to sell your house in retirement.

So let it remain outside the plan.

Do not plan retirement based on real estate returns.

Roadmap to Reach Rs 5 Crore in 5–7 Years

You want to grow Rs 50 lakhs to Rs 5 crore.

That is 10 times growth.

It is possible, but only with:

Monthly investments

Active portfolio management

Risk-calibrated asset allocation

Here’s what to do:

Deploy Rs 12 lakhs cash into equity mutual funds immediately

Start monthly SIP of at least Rs 75,000

Every year, increase SIP by 10–15%

Avoid long lock-ins and tax-inefficient plans

Do annual rebalancing with Certified Financial Planner help

If your income supports it, even Rs 1 lakh SIP is suitable.

High savings rate in early years builds strong base.

The magic of compounding works only if you stay invested.

Create Three Investment Buckets

To reduce risk and increase control, divide money into three parts:

1. Short-Term (0–2 years):

Goal: Emergency, liquidity

Use: Liquid or ultra-short-term debt mutual funds

Don’t use FD, it locks your money

2. Medium-Term (3–5 years):

Goal: Child education, big expenses

Use: Balanced advantage or hybrid equity funds

Offers stability with moderate equity exposure

3. Long-Term (5–7 years and beyond):

Goal: Retirement corpus

Use: Flexi-cap and large-cap equity mutual funds

These will build your Rs 5 crore target

Stay invested throughout this phase.

Withdraw only after retirement.

Avoid High-Lock Products Like ULIP, Insurance Plans

Avoid any plan which mixes insurance and investment.

Such products include:

ULIP

Money-back plans

Endowment plans

They give low return and long lock-in.

They eat up your liquidity and flexibility.

If you hold any such policy now, review the surrender option.

If eligible, surrender it and redirect to mutual funds.

Buy a separate term insurance for protection.

It gives high cover at low cost.

Investments should only be for growth, not insurance.

Tax Planning Must Support Growth

Use tax benefits smartly:

PPF already covers Sec 80C

ELSS mutual fund can be used for additional 80C benefit

NPS covers extra Rs 50,000 under Sec 80CCD

Medical insurance gives 80D benefit

Use tax-saving investments that also grow well.

ELSS mutual funds are flexible and high-growth.

Avoid locking too much in PPF or NPS beyond what’s needed.

What to Review Every Year

Set a yearly review date.

Check the following:

Portfolio growth – Are funds growing as per goal?

SIP increase – Can you increase contribution?

Fund performance – Any fund lagging behind?

Goal alignment – Still on track for Rs 5 crore?

Asset allocation – Any rebalancing needed?

Reviewing gives control and peace.

Do this with your Certified Financial Planner every year.

Avoid Mistakes That Can Delay Growth

To stay on track, avoid these:

Investing only in FD and PPF

Trusting random advice or YouTube tips

Using direct mutual funds without review

Falling for index fund hype

Mixing insurance and investment

Using child education policies with low returns

Skipping portfolio reviews

One mistake now can set you back 2 years.

So stay alert and disciplined.

How to Get Started Immediately

Here's a 30-day checklist:

Deploy Rs 12 lakhs idle cash into mutual funds

Split across equity and hybrid funds smartly

Start monthly SIP of Rs 75,000 or more

Buy a term insurance of Rs 1 crore cover

Create Rs 2 lakh emergency fund in liquid fund

Set up a portfolio review calendar with your CFP

Exit low-return, high-lock products if any

Avoid distractions or “get rich quick” advice

This keeps your momentum strong.

Finally

You are already ahead of many people at 35–40 age.

You have cash. You are not stuck in debt. You are future focused.

Now just use your money wisely.

Make equity mutual funds your growth engine.

Use regular plans through a CFP-guided MFD.

Avoid wrong products. Avoid passive funds.

Build your Rs 5 crore corpus with strategy, not luck.

You have 7 years. That’s enough.

If your savings and plan stay disciplined, your goal is very possible.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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.