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Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 16, 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 - May 08, 2024Hindi
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I have 25 lcs EPF, 10 LC PPF, 35 k pm SIP with a CORPUS of 11 lcs, 10 lcs in FD and 4.5 lcs in NPS with 10k pm . 5 lcs in ULIP. MY take home salary is 1.75 lcs pm. I am 50 and will retire in 10 years. How will I get 1 lcs pm at 60 years.

Ans: Planning for Retirement Income of ?1 Lakh per Month at 60

As you approach retirement in 10 years, it's crucial to strategize your existing investments to ensure a comfortable income stream of ?1 lakh per month. Let's evaluate your current financial assets and formulate a plan to achieve your retirement income goal.

Current Financial Assets:

EPF (Employee Provident Fund): ?25 Lakhs
PPF (Public Provident Fund): ?10 Lakhs
SIP (Systematic Investment Plan): ?35,000 per month with a corpus of ?11 Lakhs
FD (Fixed Deposits): ?10 Lakhs
NPS (National Pension System): ?4.5 Lakhs with ?10,000 per month contribution
ULIP (Unit Linked Insurance Plan): ?5 Lakhs
Total Monthly Contributions:

SIP: ?35,000
NPS: ?10,000
Assessment and Strategy:

Increase Monthly Contributions:

Since your take-home salary is ?1.75 Lakhs per month, consider increasing your monthly SIP contribution. Aim to allocate a higher portion of your income towards investments to accelerate wealth accumulation.
Asset Allocation Review:

Evaluate the asset allocation of your existing investments to ensure they align with your retirement goals and risk tolerance. Consider shifting towards more conservative options as you approach retirement to protect your capital.
Maximize NPS Contributions:

Continue contributing ?10,000 per month to NPS, as it offers tax benefits and provides a structured retirement savings platform. Monitor the performance of your NPS investments and adjust your asset allocation if needed.
Optimize ULIP Investment:

Review the performance and charges associated with your ULIP investment. Consider whether it aligns with your retirement goals and explore options to maximize returns or switch to more suitable investment vehicles if necessary.

Insurance-cum-investment schemes
Insurance-cum-investment schemes (ULIPs, endowment plans) offer a one-stop solution for insurance and investment needs. However, they might not be the best choice for pure investment due to:
• Lower Potential Returns: Guaranteed returns are usually lower than what MFs can offer through market exposure.
• Higher Costs: Multiple fees in insurance plans (allocation charges, admin fees) can reduce returns compared to the expense ratio of MFs.
• Limited Flexibility: Lock-in periods restrict access to your money, whereas MFs provide more flexibility.
MFs, on the other hand, focus solely on investment and offer:
• Potentially Higher Returns: Investments in stocks and bonds can lead to higher growth compared to guaranteed returns.
• Lower Costs: Expense ratios in MFs are generally lower than the multiple fees in insurance plans.
• Greater Control: You have a wider range of investment options and control over asset allocation to suit your risk appetite.
Consider your goals!
• Need life insurance? Term Insurance plans might be suitable.
• Focus on growing wealth? MFs might be a better option due to their flexibility and return potential.

Utilize Retirement Corpus:

The combined corpus of EPF, PPF, FD, and existing investments can be strategically utilized to generate regular income during retirement. Explore options such as systematic withdrawal plans (SWPs) from mutual funds, annuities, or dividend-paying investments to supplement your monthly income.
Seek Professional Advice:

Consult with a Certified Financial Planner to develop a comprehensive retirement income plan tailored to your specific needs and objectives. They can provide personalized guidance and recommendations based on your financial situation.
Conclusion:

By optimizing your existing investments, increasing savings contributions, and implementing a strategic withdrawal strategy during retirement, you can work towards achieving a monthly income of ?1 lakh at the age of 60. Regular monitoring and adjustments to your financial plan will be essential to stay on track towards your retirement goals.

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  |6861 Answers  |Ask -

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

Asked by Anonymous - May 07, 2024Hindi
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Hi I am 34 years old and earning 3 lacs per month. Currently I have a corpus of about 75 lacs in MF. And I have been doing SIP from last 7 years. Now my month SIP is about 1.8 lacs per month. I want to retire by 45. How much corpus would I have if I continue to save the same amount for next 10 - 11 yrs. Also, please help me to understand that how much corpus do I need to make. For monthly income of 2 lacs from my corpus or saving
Ans: Assessing Retirement Corpus Growth
Current Investment Scenario
Your disciplined approach to SIP investments has contributed to building a substantial corpus over the past seven years.

Projecting Future Corpus Growth
Continuing your monthly SIP of 1.8 lakhs for the next 10-11 years can potentially result in significant wealth accumulation due to the power of compounding.

Estimating Future Corpus
By projecting the expected returns based on historical performance and assuming a conservative growth rate, we can estimate the potential corpus you may accumulate by the time you retire at 45.

Understanding Retirement Income Needs
To determine the corpus needed for generating a monthly income of 2 lakhs post-retirement, we must consider factors such as inflation, lifestyle preferences, and other financial obligations.

Calculating Required Corpus
Using conservative estimates for inflation and investment returns, we can calculate the corpus required to generate a monthly income of 2 lakhs, ensuring financial security and maintaining your desired lifestyle.

Conducting Retirement Gap Analysis
Comparing the projected corpus from your SIP investments with the required corpus for generating the desired monthly income will help identify any potential shortfall and enable strategic planning to bridge the gap.

Recommendations for Retirement Planning
Optimize Investment Strategy: Consider diversifying your investment portfolio to mitigate risk and maximize returns, ensuring sustainable wealth accumulation over the long term.

Increase SIP Contributions: Evaluate the possibility of gradually increasing your SIP contributions to accelerate corpus growth and achieve your retirement goals more efficiently.

Review Retirement Goals: Regularly review your retirement goals and adjust your investment strategy as needed to align with evolving financial objectives and life circumstances.

Explore Supplementary Income Sources: Explore additional avenues for passive income generation, such as rental properties, dividend-paying stocks, or alternative investment options, to supplement your retirement corpus and enhance financial security.

Conclusion
By maintaining a disciplined approach to savings and investments and periodically reassessing your retirement goals and investment strategy, you can maximize the potential of achieving financial independence and securing a comfortable retirement lifestyle. It's essential to seek professional guidance and stay committed to your long-term financial objectives to ensure a smooth transition into retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2024

Asked by Anonymous - May 25, 2024Hindi
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I m 31 years now, having 1.8L P.M, want a corpus of 20Cr after 30 years, currently having 21L in PPF plan to continue till 60 with 1.5L PA, Have LIC which will give me 5Cr at 60 years, having NPS for last 3 years at 1L pm contribution, having PPF as per company norns. Also Mediclaim of 40L Please let me know what to be do to attain the objective
Ans: It's great to see your clear vision for the future and your diligent saving efforts. Your goal of a Rs 20 crore corpus after 30 years is ambitious but achievable with the right strategy. Let’s analyze and outline a comprehensive plan.

Assessing the Current Situation
You're 31, earning Rs 1.8 lakh monthly, with various investments:

Rs 21 lakh in PPF with Rs 1.5 lakh annual contributions.
LIC policy for Rs 5 crore at age 60.
NPS with Rs 1 lakh monthly contributions.
Employer-provided PPF.
Mediclaim policy with Rs 40 lakh coverage.
The Role of LIC Policy
While your LIC policy promises a substantial payout at 60, it ties up a significant portion of your funds with limited flexibility. Surrendering it can free up resources for potentially higher-yielding investments.

Surrendering LIC Policy
Surrendering the LIC policy involves discontinuing premium payments and receiving the surrender value. This value is lower than the policy's maturity value due to deductions. Before surrendering, assess the surrender value and consider any penalties.

Reinvesting in Mutual Funds
Reinvesting the surrender value into mutual funds offers several advantages:

Higher Potential Returns: Mutual funds, especially equity funds, historically offer higher returns over the long term compared to traditional insurance policies like LIC.

Flexibility: Mutual funds provide flexibility in investment amounts, redemption, and fund choices, allowing you to adapt to changing financial needs and market conditions.

Diversification: Mutual funds allow you to diversify across asset classes and fund types, reducing risk compared to a single insurance policy.

Importance of Professional Guidance
Consulting with a Certified Financial Planner (CFP) is crucial before surrendering the LIC policy. A CFP can assess your financial situation, evaluate the surrender value, and recommend suitable mutual fund investments aligned with your goals and risk tolerance.

Considerations Before Surrendering
Before making a decision, consider the following:

Surrender Charges: Assess any surrender charges or penalties associated with discontinuing the LIC policy. Calculate the net surrender value after deductions.

Tax Implications: Understand the tax implications of surrendering the LIC policy and reinvesting the proceeds into mutual funds. Consult with a tax advisor to optimize tax efficiency.

Risk Tolerance: Evaluate your risk tolerance and investment horizon. Mutual funds, especially equity funds, carry higher market risk compared to insurance policies. Ensure your investment strategy aligns with your risk profile.

Financial Goals: Review your long-term financial goals and assess whether reinvesting in mutual funds supports these objectives better than maintaining the LIC policy.

Rebalancing Your Portfolio
After reinvesting the surrender value into mutual funds, rebalance your portfolio to ensure optimal asset allocation. Consider factors such as age, risk tolerance, and investment horizon when reallocating assets across different fund categories.

Regular Monitoring and Adjustments
Regularly monitor the performance of your mutual fund investments and make adjustments as needed. Market conditions and your financial goals may change over time, requiring periodic portfolio reviews and rebalancing.

Conclusion
Surrendering your LIC policy and reinvesting the proceeds into mutual funds can potentially enhance your long-term wealth accumulation and financial flexibility. However, it's essential to carefully evaluate the surrender value, tax implications, and investment strategy before making a decision. Seeking guidance from a Certified Financial Planner ensures that your investment decisions align with your financial goals and risk tolerance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 2024

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Hello Sir , I am 40 years of age with liabilities of 2 cr. . I have my own home and shop . I have invested 80lacs in PPF , 10 lacs in MFI have a monthly expenditure of 2.5 lacs approx . I can save around 2 lacs per month . I want to retire by 50 . How much corpus should I make ?
Ans: Determining the Required Retirement Corpus

1. Assess Current Financial Situation:

Liabilities: You have liabilities of Rs. 2 crores.
Current Investments: Rs. 80 lakhs in PPF, Rs. 10 lakhs in MFI.
Monthly Expenditure: Rs. 2.5 lakhs.
Monthly Savings: Rs. 2 lakhs.
2. Estimate Retirement Corpus:

Future Monthly Expenses:

You need to estimate future monthly expenses considering inflation. Given the current expenditure of Rs. 2.5 lakhs, this amount will likely increase over time.
Income Replacement:

To retire comfortably, you should aim to replace your current monthly expenses with investment income.
Investment Growth:

Factor in the expected growth of your investments. Consider a mix of equity, debt, and other assets for a balanced portfolio.
3. Consider Inflation Impact:

Inflation Adjustment:
Inflation will erode the purchasing power of your savings. Regularly review and adjust your savings and investments to counter inflation.
4. Investment Strategy:

Diversify Investments:

Continue investing in diversified mutual funds. Actively managed funds can offer better returns compared to index funds.
Increase Savings:

With Rs. 2 lakhs in monthly savings, continue to invest wisely. Increase your savings as your financial situation improves.
Regular Review:

Regularly review your investment portfolio. Make adjustments based on performance and changing financial needs.
5. Estimate Retirement Corpus:

Retirement Savings Goal:

Based on your monthly expenditure and inflation, estimate the required retirement corpus. A general rule is to have 15-20 times your annual expenses as the retirement corpus.
Emergency Fund:

Maintain an emergency fund to cover unforeseen expenses. This should be separate from your retirement corpus.
6. Seek Professional Advice:

Consult a Certified Financial Planner:
Consider consulting a Certified Financial Planner for a personalized retirement plan. They can provide detailed calculations and tailored advice.
Final Insights

To retire by 50 with your current lifestyle, aim for a substantial retirement corpus. With Rs. 2 lakhs in monthly savings and investments, focus on building a diversified portfolio. Regularly review and adjust your investments to meet your future needs. Consult a Certified Financial Planner to ensure your retirement plan is robust and achievable.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 07, 2024

Money
sir i am 37 years old i have my savings till date of 600000 inr....i am doing sip of 5k every month just started in october......i want a corpus of 1 cr at the age of 53 years old
Ans: 1. Goal Setting for Corpus Building

You have set a goal to accumulate Rs 1 crore by the age of 53, which gives you a 16-year investment horizon. Having started your SIP in October, you're already on the right path. Consistent investments over the long term can lead to significant wealth creation.

However, accumulating Rs 1 crore requires a well-planned strategy. Let’s break down how you can approach this goal in a systematic way.

2. Current Savings and SIP Contribution

You currently have Rs 6 lakh in savings and are contributing Rs 5,000 per month towards your SIP. While this is a good start, it may not be enough to reach your goal of Rs 1 crore in 16 years. You may need to increase your SIP contributions over time or look into additional options that fit your risk tolerance and time horizon.

3. Incremental SIP Growth

To build a Rs 1 crore corpus, increasing your SIP contribution over time will be important. Consider stepping up your SIP amount annually by a small percentage (e.g., 10%). This allows your investments to grow in line with inflation and your income, giving your corpus a significant boost. By increasing your SIP every year, you can leverage the power of compounding more effectively.

4. Choosing the Right Type of Mutual Funds

Instead of focusing on index funds, which offer lower potential returns, actively managed funds may suit your goal better. Actively managed funds are handled by experienced fund managers who aim to outperform the market. These funds have the potential to generate higher returns compared to passively managed index funds.

In your case, focusing on mid-cap and small-cap funds could provide higher returns over a long-term horizon. These funds tend to be more volatile but have historically outperformed large-cap funds over extended periods. Balanced funds can also help manage risk while providing reasonable returns.

5. SIP through Regular Funds with a Certified Financial Planner (CFP)

It is advisable to invest in regular funds rather than direct funds. Direct funds require you to actively track and manage your portfolio, which may be time-consuming and difficult without expert guidance. By going through regular funds with a Certified Financial Planner, you receive expert advice, periodic portfolio reviews, and better fund management. The small additional cost of regular funds is justified by the value a CFP brings in terms of fund selection and ongoing support.

6. Tax Efficiency of Mutual Funds

It’s crucial to consider the tax implications of your mutual fund investments. For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh per year are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%. This means that holding your investments for more than one year not only gives you the benefit of compounding but also reduces your tax liability.

Debt mutual funds, on the other hand, are taxed according to your income tax slab. Since your goal is long-term wealth creation, equity mutual funds should form a larger part of your portfolio, as they offer better tax efficiency.

7. Emergency Fund

While building your corpus is a priority, don’t forget to maintain an emergency fund. This should be at least six months’ worth of your expenses. Your current savings of Rs 6 lakh can partially serve as this buffer. Having an emergency fund ensures that you won’t have to dip into your investments during unforeseen circumstances.

8. Avoid Investment-cum-Insurance Policies

If you hold LIC, ULIP, or other investment-cum-insurance policies, you may want to reconsider these investments. These products often come with high charges and lower returns compared to mutual funds. It is more beneficial to separate insurance and investments. You can surrender such policies and reinvest the amount in mutual funds, which are likely to give you better long-term returns.

9. Focus on Equity Exposure

Equity investments tend to outperform other asset classes over the long term. To build a Rs 1 crore corpus, your portfolio should have a substantial equity exposure, especially in the early years. As you get closer to your goal, you can gradually shift a portion of your portfolio to safer debt instruments to protect your accumulated wealth.

A diversified portfolio that includes a mix of large-cap, mid-cap, and small-cap funds would help balance risk and reward. Since you are in the accumulation phase, consider having a higher allocation to mid-cap and small-cap funds, as they have the potential to provide higher returns over the long term.

10. Review Your Portfolio Regularly

A critical part of building your Rs 1 crore corpus is to review your portfolio regularly. This does not mean you need to check your portfolio daily or weekly. A quarterly or half-yearly review with your Certified Financial Planner is ideal. This will help you ensure that your portfolio is on track, and any underperforming funds can be replaced or adjusted accordingly.

Regular reviews will also help you stay updated on changes in market conditions, tax regulations, and your personal financial situation. You can rebalance your portfolio as needed to maintain the right asset allocation and risk profile.

11. Consider Additional Investments

Apart from SIPs, you can consider making lump sum investments whenever you have extra funds available. If you receive a bonus, tax refund, or any other windfall income, investing it in your mutual funds can significantly boost your corpus. Since you’re still early in your investment journey, making lump sum contributions can take advantage of market fluctuations, enhancing your returns over time.

12. Keep Your Investment Horizon in Mind

While the goal is to accumulate Rs 1 crore by age 53, it’s essential to remember that markets can be volatile in the short term. Don’t get discouraged by short-term fluctuations. The longer you stay invested, the more you benefit from compounding. Stay focused on your long-term goal, and avoid reacting to market volatility by making premature withdrawals or stopping your SIPs.

13. Importance of Financial Discipline

Achieving your financial goals requires discipline and commitment. Continue your SIPs consistently, even during periods of market downturns. This ensures you are buying more units when prices are low, which can boost your returns when markets recover. Your goal of Rs 1 crore is attainable with disciplined investing and by periodically increasing your SIP contributions.

14. Protect Your Investments with Insurance

While building your investment corpus, don’t forget about protecting your family and your investments. Ensure you have adequate life insurance and health insurance. A term insurance policy is a good way to provide financial security to your family. Avoid mixing insurance with investments, as it dilutes the benefits of both.

Having sufficient health insurance will also ensure that medical emergencies do not force you to dip into your savings or investments.

15. Final Insights

You are on the right track by starting your SIPs early and having a clear financial goal. With consistent investing, proper fund selection, and incremental SIP growth, achieving your Rs 1 crore target by 53 is possible. Focus on increasing your SIP contributions over time, review your portfolio regularly, and maintain financial discipline.

Always remember the importance of equity exposure for long-term goals, and avoid investment products that mix insurance with returns. Protect your investments by having adequate life and health insurance.

Stay committed to your goal, and consult with a Certified Financial Planner to ensure you are on the right path at every stage of your financial journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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Milind

Milind Vadjikar  |542 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 31, 2024

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Sir My Age is 38 Now. Running Business In Pune city. Below are the My Assets & Liabilities. Current Values - Assets. Own Industrial Plot - Rs. 2.0 Cr Business Income Yearly Rs. 24.00 Lack Own Company Investment ( Machinery, Debtors Etc ) - Rs 2.40 Cr Mutual Fund & Share Market Investment Rs. 2.10 Cr Bank FD - Rs. 50.00 Lack Own 3 Flats in Pune - Rs. 75 lack, 50 Lack & 35 Lack ( Current Values ) Golds - Rs. 25.00 Lack Land - Agriculture - Rs. 50.00 Lack Term Insurances - Rs. 20.00 Lack ( Till Date Premium Paid ) Labilities. House Loan - Rs. 30.00 Lack ( EMI 26500.00 PM ) Loan will close after 17 years. Car Loan - Rs. 6.35 lack ( EMI 12500.00 PM ) Loan will close after 5 years. This Assets & investment sufficient for maintain 7 family members Expenses after retirement ? ( 4 Adult + 3 Children (Below 5 Years) ). I will retire at the age of 45.
Ans: Hello;

What is the expected monthly rental from industrial plot and machinery?

Are you currently occupying one of the flats mentioned here or are all of them given on rent?

Also your term life insurance is very low. You should have minimum term insurance cover of 2.4 Cr.

You have good assets in agri land, industrial land, gold, real estate but they are relatively illiquid when need arises hence term insurance cover with riders for critical care and accident benefit are an absolute must!

Considering the home loan tenure of 17 years and 3 small kids in the family to be supported for education and decent lifestyle, I am not sure if you can retire in 7 years timeframe from now.

However I would appreciate your reply to my queries above, before I give my firm view about your retirement in 7 years timeframe.

Best wishes;

...Read more

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Asked by Anonymous - Oct 30, 2024Hindi
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I have around 1 crore to invest. I am 61 years old retired defence officer and pension amounting to around ?1,50,000/- per month and medically covered. Need some sound investment plan for 1 crore. Don't have any liabilities?
Ans: Hello;

You may invest your corpus into following two funds in proportion of 50:50,

1. Kotak Arbitrage fund (low risk)
You may consider modest return of 6% from this scheme.

2. ICICI Pru equity savings fund (low to moderate risk). You may consider modest return of 8% from this scheme.

Theses investments will retain purchasing power of your corpus aginst inflation and deliver some real returns too with low to moderate risk.

This is in accordance with your age and commensurate risk appetite.

Happy Investing;

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

...Read more

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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