Hi i am 24 years old... As of now i have invested 2L in mutual funds lumpsum.... And i am also starting a new SIP of 1 lakh rupees per month and also expecting 10percent of step up every year...i want to reach a target of 50cr + before retirement(55)...please suggest

Ans: Funds are good, however too many ELSS funds, it’s nice to see that you have stopped a few. 

Ans: To create a corpus of Rs. 2-3 crs in 30 years the monthly investment required is Rs. 4,500 -Rs 6,500 respectively.

It’s better to have a flexi cap, mid cap and a small cap fund

Ans:

Except for the sectoral fund which is to be avoided at present, rest of the funds are fine; please continue. Both the objectives are in line with the investment and accumulated corpus so far.

Ans: Assessment of Current Financial Situation
You are 53 years old with a plan to retire in 2029. You have a substantial investment portfolio:

Rs. 91 lakhs in mutual funds.

SIP of Rs. 37,000 per month, which you can continue for five more years.

Fixed Deposits (FDs) worth Rs. 35 lakhs.

Public Provident Fund (PPF) with a corpus of Rs. 60 lakhs.

Your target is to have Rs. 1.5 lakhs per month post-retirement. Let’s analyze your situation and how you can achieve this goal.

Continue SIPs Until Retirement
Your SIPs of Rs. 37,000 per month will compound significantly over the next five years. This steady investment is crucial for your retirement corpus.

Stay Invested: Keep your SIPs going until 2029. This will allow your investments to grow and provide a cushion against inflation.

Rebalance Periodically: As you approach retirement, consider gradually shifting some funds from equity to debt to reduce risk.

Fixed Deposits: Reevaluate and Strategize
Your FDs are a safe but low-return investment. With Rs. 35 lakhs in FDs, the interest may not keep up with inflation.

Consider Partial Redeployment: You might consider moving a portion of your FDs into debt mutual funds or hybrid funds. This will potentially give you better returns while keeping risk under control.

Laddering Strategy: If you prefer FDs, consider laddering them to benefit from varying interest rates and liquidity.

Maximizing PPF Returns
Your PPF corpus of Rs. 60 lakhs is a strong pillar of your retirement plan. PPF offers tax-free returns, which is a significant advantage.

Continue Contributing: If possible, continue contributing the maximum limit of Rs. 1.5 lakhs per year until retirement. This will help your corpus grow further.

Avoid Premature Withdrawals: Allow the PPF to compound until maturity. The longer you keep it, the better your tax-free returns.

Diversification and Risk Management
To ensure a balanced portfolio, you need to manage the risk associated with different asset classes.

Debt Funds for Stability: Consider increasing your exposure to debt funds as you near retirement. This will help in preserving your capital.

Equity Exposure: While equity is essential for growth, gradually reducing exposure as you approach retirement will reduce risk.

Hybrid Funds: These funds can offer a balance of equity and debt, providing moderate risk with decent returns. Consider these as you approach retirement.

Income Generation Post-Retirement
To achieve your goal of Rs. 1.5 lakhs per month post-retirement, your corpus needs to be strategically managed.

Systematic Withdrawal Plan (SWP): Post-retirement, you can set up an SWP from your mutual fund investments. This will provide you with regular income while keeping your corpus invested.

Debt Mutual Funds: A portion of your corpus can be invested in debt funds. They are relatively safe and can offer regular returns.

PPF Interest: After retirement, the interest from your PPF can be a tax-free income stream.

Inflation Consideration
Inflation can erode your purchasing power over time. It's crucial to plan for an income that increases to counter inflation.

Equity Component: Continue with a small equity exposure post-retirement to combat inflation. This could be in the form of hybrid funds or a balanced portfolio.

Regular Review: Regularly review your investments to ensure they are performing well and adjust if necessary.

Insurance and Contingency Planning
While your focus is on retirement, it’s important not to neglect risk management.

Health Insurance: Ensure you have adequate health insurance coverage. Medical costs can deplete your retirement corpus quickly.

Emergency Fund: Maintain an emergency fund separate from your retirement corpus. This will help you handle unforeseen expenses without affecting your retirement funds.

Final Insights
You are on the right track with a strong foundation for your retirement. With Rs. 91 lakhs in mutual funds, substantial SIPs, FDs, and PPF, your goal of Rs. 1.5 lakhs per month is achievable. It’s important to stay disciplined, regularly review your portfolio, and adjust your strategy as needed. By diversifying wisely and considering inflation, you can ensure a comfortable and financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in