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Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 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
Karthik Question by Karthik on May 20, 2024Hindi
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Sir i am 27 yrs old unmarried .i have 35L in FD 10L in ppf 15L in mutual fund 20L in stocks 5L in SGB . I have an annually income of 30L i want to retire by 40 i have brought a term insurance and health insurer. Can help me plan how to invest further and achieve my goal .Karthik banglore

Ans: Hello Karthik,

Firstly, congratulations on being proactive about planning for your retirement at such a young age. Let's delve into crafting a strategic financial plan to help you achieve your goal of retiring by the age of 40, with a focus on mutual funds (MFs) as a key component of your investment strategy.

Current Financial Position
Your current financial standing reflects a commendable level of savings and investments, providing a solid foundation for your retirement aspirations. Let's review your existing assets:

FDs, PPF, and SGB: These traditional investment avenues offer stability and security, but they might not maximize long-term growth potential.

Mutual Funds and Stocks: Investing in equities and mutual funds demonstrates your willingness to explore avenues with higher growth potential, albeit with associated market risks.

Retirement Planning Strategy
Given your ambitious retirement goal, here's a tailored approach to further optimize your investments, focusing more on mutual funds:

Asset Allocation Review:

Evaluate your current asset allocation to ensure alignment with your retirement timeline and risk tolerance. Consider reallocating a portion of your conservative investments (FDs, PPF) towards equity mutual funds for higher growth potential over the long term.
Diversification with Mutual Funds:

Explore a diversified portfolio of mutual funds across different categories:
Large-Cap Funds: These funds invest in large, well-established companies with stable performance. They offer relatively lower risk compared to mid-cap and small-cap funds.
Mid-Cap and Small-Cap Funds: These funds focus on mid-sized and small-sized companies with higher growth potential but also higher volatility. Allocate a portion of your portfolio to these funds for capital appreciation.
Flexi Cap Funds: These funds provide flexibility to invest across market capitalizations based on prevailing market conditions. They offer a balanced approach between growth and stability.
ELSS Funds: Consider investing in Equity Linked Savings Schemes (ELSS) to avail tax benefits under Section 80C of the Income Tax Act, while also benefiting from potential capital appreciation.
Regular Portfolio Monitoring:

Implement a disciplined approach to monitor and rebalance your MF portfolio periodically. Review fund performance, expense ratios, and fund manager track records to ensure they align with your investment objectives.
Systematic Investment Plan (SIP):

Utilize SIPs to invest systematically in mutual funds, enabling rupee-cost averaging and mitigating the impact of market volatility over time. Allocate your monthly investment amount across various MF categories based on your risk profile and investment horizon.
Tax Planning:

Optimize your tax efficiency by leveraging tax-saving mutual fund options such as ELSS funds. Maximize contributions to tax-deferred accounts like ELSS to reduce your taxable income and enhance overall savings.
Conclusion
In conclusion, by adopting a proactive and strategic approach to your financial planning, with a focus on mutual funds, you're well-positioned to achieve your goal of retiring by the age of 40. Continuously assess and adjust your MF portfolio to align with evolving market conditions and personal financial objectives. Remember, early retirement requires diligent planning and disciplined execution, but with careful guidance and prudent decision-making, you're on the right track to realizing your retirement dreams.

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  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 28, 2024

Asked by Anonymous - May 28, 2024Hindi
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Hi..My name is Shiva and i am 49 years old..i have 35 lakhs in FD's which become 50 lakhs in 2028 and owning a 2bhk flat worth 30 lakh and some funds are invested in open plots which currently worth around 30 lakhs and nearly 16 lakhs are invested in insurance policies which would mature in 3 years from now..and has debt of 7.5 lakh of personal loan and i get 65 thousand as monthly salary with 10 lakhs in PF account. I am blessed with two sons..elder one completed graduation and is ready to do job now..and 2nd one is pursuing graduation 2nd year. I live in my own house and i get 10 thousand as rent monthly and i want to retire by taking health insurance worth 20/30 lakh per annum.please suggest...
Ans: Planning for Retirement at 49: A Comprehensive Guide
Shiva, your dedication to planning for a secure retirement is admirable. Let's develop a comprehensive plan that aligns with your financial goals and ensures a comfortable future for you and your family.

Current Financial Situation
Fixed Deposits: Rs 35 lakhs, maturing to Rs 50 lakhs by 2028
Property: 2BHK flat worth Rs 30 lakhs, generating Rs 10,000 monthly rent
Open Plots: Rs 30 lakhs
Insurance Policies: Rs 16 lakhs, maturing in 3 years
Debt: Rs 7.5 lakhs personal loan
Salary: Rs 65,000 per month
Provident Fund: Rs 10 lakhs
Financial Goals
Retirement at 60
Health Insurance Coverage: Rs 20-30 lakhs per annum
Managing Debts
Investment Growth
Investment Strategy
Surrendering Insurance Policies
Insurance policies often offer lower returns compared to other investment options. Consider surrendering them and reinvesting the proceeds in higher-yield investments.

Fixed Deposits (FDs)
FDs are safe but offer moderate returns. As your Rs 35 lakhs will become Rs 50 lakhs by 2028, consider diversifying some of this amount into other investment avenues.

Mutual Fund Investments
Benefits of Actively Managed Funds
Actively managed funds offer professional management, flexibility, and the potential for higher returns. They adapt to market conditions and aim to outperform benchmarks.

Diversifying Across Funds
Consider a mix of large-cap, mid-cap, and small-cap funds. This diversifies risk and enhances growth potential. Regular funds, managed by a Certified Financial Planner, provide personalized guidance and regular portfolio reviews.

Health Insurance
Securing a robust health insurance plan is crucial. A coverage of Rs 20-30 lakhs per annum ensures protection against unforeseen medical expenses. Evaluate different plans based on coverage, premiums, and network hospitals.

Debt Management
Paying off your Rs 7.5 lakh personal loan should be a priority. Consider using part of your insurance policy proceeds or fixed deposits to clear this debt. Reducing liabilities enhances financial security.

Emergency Fund
Maintain an emergency fund equivalent to six months of expenses. This ensures liquidity for unexpected financial needs. Utilize your fixed deposits and provident fund for this purpose.

Estate Planning
Ensure proper estate planning. Create a will and consider setting up a trust. This ensures smooth asset transfer and management in the future.

Children's Education and Career
With your elder son ready to start working and the younger one in graduation, their financial independence will soon reduce your financial burden. Encourage them to start investing early for their financial security.

Regular Reviews and Adjustments
Regularly review your investment portfolio and financial plan. Adjustments based on market conditions and life changes ensure you stay on track towards your goals. Consulting a Certified Financial Planner can provide valuable insights and guidance.

Conclusion
With strategic planning and disciplined investments, you can achieve your retirement goals. Diversify your investments, secure comprehensive health insurance, manage your debts, and regularly review your financial plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 23, 2024

Asked by Anonymous - Jun 22, 2024Hindi
Money
Hi sir I am 32 years old, me and my wife earning 2.5 lakhs monthly, our son is 5 month old, Currently I have TATA AIA term insurance(90 lakhs), Star health family floater insurance(20 lakhs ), our investments are as follows 1) Mirre Asset Mutual fund (ELSS) monthly 5k started May 2022 , 2) Icici prudential insurance monthly 10k started Jan 2020 , 3) UTI Nifty 50 Index fund monthly 5k started Sep 2023 , 4) Stocks 4.47 lakhs , 5) Gold bond + physical gold 10lakhs, 6) 2 Sites advance paid 8.6lakhs (sites worth 30 lakhs) , 7) PF 5 lakhs , 8) PPF 50K started April 2024, 9) NPS 50k stared April 2024, 10) ICICI prudential mutual fund ELSS 5K per month started June 2022, 11) Parag Parikh flexi cap fund 5k per month started April 2024, 12) FD 4 lakhs , 13) SBI LIFE smart elite 4 lakhs invested May 2024, We want retire by 45 with corpus of 15 crores please suggest us how much we need to increase our investments to reach our goal. Thanks in advance
Ans: You've made significant strides in your financial journey. Your goals are ambitious yet achievable with the right strategies. Let’s dive into your current financial status and map out a plan to help you retire by 45 with a corpus of Rs 15 crores.

Analyzing Your Current Financial Situation
1. Income and Insurance:

You and your wife have a combined monthly income of Rs 2.5 lakhs. You have a TATA AIA term insurance of Rs 90 lakhs and a Star health family floater insurance of Rs 20 lakhs. This is excellent for providing financial security to your family.

2. Investments:

Mirre Asset Mutual Fund (ELSS): Rs 5,000/month since May 2022.
ICICI Prudential Insurance: Rs 10,000/month since Jan 2020.
UTI Nifty 50 Index Fund: Rs 5,000/month since Sep 2023.
Stocks: Rs 4.47 lakhs.
Gold Bonds + Physical Gold: Rs 10 lakhs.
Sites Advance Paid: Rs 8.6 lakhs for sites worth Rs 30 lakhs.
Provident Fund (PF): Rs 5 lakhs.
Public Provident Fund (PPF): Rs 50,000 since April 2024.
National Pension System (NPS): Rs 50,000 since April 2024.
ICICI Prudential Mutual Fund (ELSS): Rs 5,000/month since June 2022.
Parag Parikh Flexi Cap Fund: Rs 5,000/month since April 2024.
Fixed Deposit (FD): Rs 4 lakhs.
SBI Life Smart Elite: Rs 4 lakhs invested in May 2024.
Evaluating Your Investments
Mutual Funds and ELSS:

You are investing in multiple mutual funds, including ELSS, which offers tax benefits. This is a smart move for long-term growth and tax savings. However, ensure you periodically review their performance.

Insurance Policies:

Your ICICI Prudential insurance and SBI Life Smart Elite appear to be investment-cum-insurance plans. These often come with higher costs and lower returns compared to pure term insurance and mutual funds. It might be beneficial to reconsider these policies.

Index Funds:

Index funds like UTI Nifty 50 are good for passive investing but have certain disadvantages, such as lower returns compared to actively managed funds, especially in volatile markets.

Direct Stocks:

Investing in stocks is a great way to potentially earn higher returns, but it requires careful monitoring and expertise.

Gold Investments:

Gold is a good hedge against inflation but typically offers lower returns compared to equities over the long term.

Real Estate:

You've invested in sites, which is a substantial amount. Real estate can be a good investment but isn't always liquid and can be challenging to manage.

Provident Fund and NPS:

These are solid options for retirement savings, offering decent returns with tax benefits.

Fixed Deposits:

FDs provide safety but lower returns. Consider if they align with your long-term growth goals.

Enhancing Your Investment Strategy
1. Increase Your SIP Contributions:

Given your goal to accumulate Rs 15 crores, you need to increase your SIP contributions. Assuming a reasonable return on mutual funds, you may need to invest more aggressively. Consider increasing your contributions to high-performing mutual funds, focusing on those managed by experienced fund managers.

2. Review and Reallocate Insurance-cum-Investment Policies:

The ICICI Prudential insurance and SBI Life Smart Elite plans could be reconsidered. You might want to surrender these policies and redirect the funds into high-growth mutual funds. Pure term insurance paired with mutual funds often yields better returns.

3. Focus on Actively Managed Funds:

Actively managed funds can outperform index funds due to the expertise of fund managers. Although they come with higher fees, the potential for higher returns can justify the costs.

4. Maintain Adequate Emergency Fund:

Ensure your FD or other liquid investments are sufficient to cover at least six months of expenses. This is crucial for financial security.

5. Maximize Tax-Advantaged Investments:

Max out contributions to PPF and NPS for tax benefits and steady returns. These are excellent for long-term savings with added tax incentives.

6. Monitor and Review Investments Regularly:

Regularly reviewing your portfolio is essential. Adjust your investments based on market conditions and personal goals.

Strategic Investment Recommendations
1. Diversify Across Asset Classes:

While you have a good mix of equities, gold, and real estate, consider more diversification within equities through different sectors and market caps.

2. Enhance Your Equity Exposure:

Given your long-term horizon, increase your equity exposure. Equities generally offer the highest returns over long periods.

3. Consolidate Your Portfolio:

Avoid over-diversification. Focus on a few high-performing funds rather than spreading investments too thin. This can simplify management and improve returns.

4. Professional Guidance:

Consult a Certified Financial Planner for personalized advice. They can help tailor a plan specific to your financial goals and risk appetite.

Building a Robust Financial Plan
1. Set Clear Milestones:

Break down your Rs 15 crore goal into smaller milestones. Track your progress and adjust your strategy as needed.

2. Budget and Save Aggressively:

Ensure a disciplined approach to saving. Allocate a significant portion of your income towards investments.

3. Education and Awareness:

Stay informed about market trends and financial products. Financial literacy is crucial for making informed decisions.

4. Plan for Inflation:

Account for inflation in your planning. Ensure your investments grow at a rate higher than inflation to preserve purchasing power.

Final Insights
You’ve laid a strong foundation for your financial future. With disciplined investing and strategic planning, reaching your goal of Rs 15 crores by 45 is within reach. Prioritize increasing your SIP contributions, reconsidering high-cost insurance plans, and focusing on high-growth investment options. Regular reviews and professional guidance will keep you on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 04, 2024

Asked by Anonymous - Nov 03, 2024Hindi
Money
Sir, i am 43 year old working in a private company in Dubai. I have wife and 9 yr old son in family. I earn 50 L per year, out which 20 lacs goes as rent of apartment+ Car emi. My other expenses are 6 lacs a year. I do not have any other source of income. On the saving side, i have 50 lcs in FDs, 30 lac in Equity market, 40 lcs land, 15 lacs in gold, 10 lcs in mutual funds , 20 lcs cash in bank, 25 lcs in post office deposits. I still have to built a house in my native place in India. I want retire at the age of 50. I have employer sponsered medical insurance and no term insurance.Advise me if funds allocation needs to be altered and your view on term insurance
Ans: Below is a structured approach to optimize your funds and secure a balanced allocation. This review considers your retirement goals, family needs, and an effective risk management strategy.

Assessing Your Current Asset Allocation
Fixed Deposits (FDs): Rs 50 lakhs
FDs are secure but have limited growth due to lower interest rates and higher taxes on gains. This allocation is beneficial as an emergency fund but might not serve long-term goals efficiently due to inflation.

Equity Investments: Rs 30 lakhs
Equities offer growth potential, yet they can fluctuate. As you plan to retire in seven years, you may want to rebalance for reduced risk over time. This approach ensures that market volatility does not compromise your retirement corpus.

Land Investment: Rs 40 lakhs
Real estate investment often lacks liquidity, and returns may vary based on market conditions. Since you need to build a house in India, retaining this land may be practical for your personal plans rather than as an investment vehicle.

Gold Investment: Rs 15 lakhs
Gold is a good hedge against inflation and economic uncertainties. However, it should not constitute a large portion of your portfolio as it has limited growth potential compared to other assets. Keeping some gold is reasonable, but avoid further investment here.

Mutual Funds: Rs 10 lakhs
Mutual funds offer professional management and diversified exposure. Increasing this allocation with a focus on actively managed funds could enhance long-term growth. Actively managed funds, guided by Certified Financial Planners, often outperform index funds and provide strategic adjustments based on market conditions.

Bank Savings: Rs 20 lakhs
Cash in the bank is useful for liquidity, but this large sum may lose value over time due to inflation. Consider reducing this amount and reallocating to growth-oriented funds for better returns.

Post Office Deposits: Rs 25 lakhs
These deposits provide stability and fixed returns. They are suitable for risk-averse portions of your portfolio, but diversifying to include other stable options with higher growth potential could be beneficial.

Evaluating Income and Expense Strategy
Annual Income: Rs 50 lakhs
After rent and car EMI (Rs 20 lakhs) and other expenses (Rs 6 lakhs), your effective savings rate remains high. This savings capacity provides flexibility to boost your retirement portfolio and achieve your housing goal in India without straining current finances.

Retirement Goal
Planning to retire by 50, you have seven years to build an income-generating corpus. This timeline requires a balanced mix of growth and conservative funds for capital protection in the final years.

Recommendations for Strategic Allocation
Increased Mutual Fund Allocation
Reallocate a portion from FDs and Bank Savings to Mutual Funds
Shifting Rs 20-30 lakhs from your FDs and bank savings into mutual funds with a balanced strategy could improve growth prospects while maintaining some stability. Actively managed mutual funds, guided by Certified Financial Planners, can help achieve long-term growth by adjusting to market dynamics.

Advantages of Regular Mutual Fund Plans over Direct
Regular mutual fund plans offer a professional layer of guidance from Certified Financial Planners, allowing tailored fund choices aligned with your financial goals. In contrast, direct funds lack this support, making it challenging to adjust and monitor your portfolio efficiently.

Strengthening Equity Portfolio with Balanced Funds
Reduce Pure Equity Exposure Gradually
Your current Rs 30 lakhs in equity offers growth but exposes you to volatility. Consider reallocating a portion of your equity investment into balanced or hybrid mutual funds over the next few years. These funds reduce market risk by diversifying between equity and debt.

Move Towards Actively Managed Funds for Better Returns
Index funds often underperform in Indian markets due to limited flexibility. Actively managed funds, in comparison, can adjust to market changes, enhancing growth and capital protection as you approach retirement.

Optimising Post Office Deposits and Gold
Shift Partial Amounts to Debt-Oriented Mutual Funds
Part of your post office deposits could be reallocated to debt-oriented mutual funds, which provide more tax efficiency and generally offer higher returns than fixed deposits. This also diversifies your conservative investments.

Retain Limited Gold Allocation
Gold is a defensive asset but should not dominate your portfolio. Keeping Rs 10 lakhs in gold and reallocating Rs 5 lakhs to mutual funds could balance growth and stability.

Insurance and Risk Management
Importance of Term Insurance
Protection for Your Family’s Future
Term insurance is essential, especially for securing your family’s future. As you have a non-earning spouse and a young son, term insurance will act as a financial safety net in your absence.

Affordable and Efficient Coverage
Term insurance offers high coverage at a low premium compared to investment-linked policies. A cover of Rs 1 crore or more would provide sufficient protection and ensure that your family’s financial needs are met without impacting your savings.

Employer-Sponsored Health Insurance
Assessing Additional Health Coverage
While employer-provided health insurance is beneficial, it may not be available post-retirement. Consider an individual health policy to continue coverage after employment ends. This ensures medical protection for you and your family during retirement years.
Future Planning for House Construction
Strategic Use of Liquid Assets for House Construction
Use your FDs, bank savings, and post office deposits towards building your house in India. Retain emergency funds but utilise these resources to avoid affecting long-term investments earmarked for retirement.
Tax Considerations and New Rules
Understanding Mutual Fund Taxation
With recent tax changes, long-term capital gains (LTCG) from equity mutual funds above Rs 1.25 lakh are taxed at 12.5%, while short-term gains are taxed at 20%. Debt mutual funds are taxed according to your income slab. This taxation makes mutual funds, especially debt-oriented ones, more efficient compared to FDs and bank savings.

Leverage Tax-Advantaged Investment Options
Strategically managing withdrawals and aligning with tax-advantaged investments like certain mutual funds could improve post-tax returns.

Structuring Your Portfolio for Early Retirement
Focus on Capital Preservation with Growth
As you near retirement, a combination of balanced and debt-oriented funds would suit your portfolio well. Gradually shifting from high-risk equity to moderate-risk balanced funds can help preserve capital while allowing modest growth.

Creating a Regular Income Stream
For retirement income, Systematic Withdrawal Plans (SWPs) from mutual funds can offer monthly payouts. This structure allows tax-efficient income and potential capital growth compared to bank deposits or FDs.

Adjusting Portfolio Based on Market Conditions
Regular reviews with a Certified Financial Planner will help keep your investments aligned with market trends and your financial goals. This approach allows timely reallocation, ensuring you remain on track for early retirement.

Final Insights
Sir, your current portfolio is well-diversified across assets, but reallocating certain portions can enhance returns, liquidity, and tax efficiency. Balancing growth with stability will serve your retirement target while protecting your family’s financial security. Term insurance will further safeguard your family’s future.

With these adjustments, you can confidently work towards retiring at 50, secure in the knowledge that your wealth will support both your lifestyle and legacy.

Best Regards,

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

..Read more

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Prof Suvasish

Prof Suvasish Mukhopadhyay  |227 Answers  |Ask -

Career Counsellor - Answered on Dec 04, 2024

Asked by Anonymous - Nov 24, 2024Hindi
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Career
My daughter Passed out 9.5gpa and was offered job with TCS and Tech Mahindra almost few weeks apart from each other in the month of July end 2024 and offer was given for TCS in July first week and Tch Mahendra in end July,but tech Mahindra followed up with Joining letter immediately,but my daughter choosed TCS it has been three months since but no Joining letter received,2weeks back was asked to attend an exam which she undertook ,why so much delay by TCS? Was it a wrong decision to let go off Tech Mahindra?Pls reply also suggest what to do now? should we wait or look out elsewhere?
Ans: Yes. Certainly it was a wrong decision. A bird in hand is worth than two birds in bush. She must have accepted the offer of Tech Mahindra, After selection why TCS is again taking test? This is not ethical. But now if she approaches Tech Mahindra probably she won't get a response. So try elsewhere. Mind that DECISION DECIDES DESTINY. If your decision is wrong you are bound to fail. So no more lamenting over the spilt milk. In future take correct decision. Secondly her GPA is too high. Many times organizations don't select very high GPA candidates, because their stability becomes a question mark. Due to very high GPA they never become satisfied with any job. They always think they are underpaid and deserve more. Please keep one thing in mind once you join a job your GPA becomes dead, then your performance will decide your future prospects. Just follow me. Best of luck to her. GOD BLESS HER. Professor................:)

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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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