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Should I change my investment strategy for a 10 Cr retirement goal at 45-48?

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 25, 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 - Jul 20, 2024Hindi
Money

Hi, I am 31 years old. I am planning to retire at the age between 45 to 48. I want to generate wealth of at least 10Cr by the time I retire. As of today, I have MF corpus of 28L(17.5L/10.4L) with monthly SIPs of 42500. Current ongoing SIPs in 1. Quant Active Fund - 5k 2. Axis Midcap Fund - 5k 3. Mirae Asset ELSS - 5k 4. SBI Small Cap - 5k 5. Nippon India US Equity Opp. Fund - 2.5k 6. DSP ELSS Tax Saver - 1k 7. Mirae Asset Large & Mid Cap - 5k 8. Nippon India Small Cap - 5k 9. Quant Mid Cap - 3k 10. Quant Small Cap - 3k 11. Quant Flexi Cap - 3k There are 3 Stopped SIPs 1. Axis Bluechip Fund - 1.5L Invested / 2.07L valuation 2. Nippon India ELSS Tax Saver - 94k invested / 2.06L valuation 3. Aditya Birla SL ELSS Tax Saver - 94k invested / 1.64L Valuation Please suggest if I need to change my strategy in investing MF with above ongoing and stopped SIPs. Also, on top of MF investment, I have, PF corpus 11.5L with expected 8% YoY contribution. NPS corpus 11L with expected 8% YoY contribution. 30L in FDs with 9% compounding interest rate and treating same as emergency fund. 6.25L in stocks. Investing in individual stocks and via smallcase baskets(Enery, Banking and Metal Tracker) with 20-25k on quartely basis. PPF corpus of approx. 5L with 5k per month contribution with 9 years remaining. HDFC SL ProGrowth Plus with Sum Assured 12L with pending 8 premius of 60k per year. Me and my wife don't have any term or health insurance. Both of us are relying on corporate health insurance for family. I have home loan of 1.2Cr with EMI of 80k which is a biggest chunk of in hand salary. Household and personal expenses are around 20k per month. So, looking at above details how should I plan my financials for kid's(no kid yet) education/marriage and post retirement life ?

Ans: Your Current Financial Situation
Let’s review your current situation. You have a diverse portfolio with SIPs, mutual funds, stocks, FDs, and more.

Investments
Mutual Fund Corpus: Rs 28 lakhs
Monthly SIPs: Rs 42,500
Provident Fund: Rs 11.5 lakhs
NPS: Rs 11 lakhs
Fixed Deposits: Rs 30 lakhs
Stocks: Rs 6.25 lakhs
PPF: Rs 5 lakhs
HDFC SL ProGrowth Plus: Sum Assured Rs 12 lakhs
Liabilities
Home Loan: Rs 1.2 crores with an EMI of Rs 80,000 per month
Expenses: Rs 20,000 per month
Insurance
Corporate Health Insurance: Only relying on this for health coverage
Investment Strategy Evaluation
You have a robust and diversified investment strategy. Let’s refine it further.

Mutual Funds
You have a wide variety of mutual funds, including equity, ELSS, and international funds.

Active vs. Stopped SIPs
Active SIPs: Quant Active Fund, Axis Midcap Fund, Mirae Asset ELSS, SBI Small Cap, Nippon India US Equity Opp. Fund, DSP ELSS Tax Saver, Mirae Asset Large & Mid Cap, Nippon India Small Cap, Quant Mid Cap, Quant Small Cap, Quant Flexi Cap

Stopped SIPs: Axis Bluechip Fund, Nippon India ELSS Tax Saver, Aditya Birla SL ELSS Tax Saver

Recommendations for Mutual Funds
Consolidation: Reduce the number of funds. This simplifies management and avoids overlap.

Focus on Performance: Keep funds with consistent performance.

Direct vs. Regular Funds
Disadvantages of Direct Funds: Lack professional guidance. Regular funds offer better management through a Certified Financial Planner (CFP).
Additional Investment Suggestions
Debt Instruments
PPF and NPS: Continue contributions. They offer stability and tax benefits.
Stocks and Smallcases
Stock Investments: Keep investing quarterly. Diversify across sectors for balanced growth.
Fixed Deposits
Emergency Fund: Maintain Rs 30 lakhs in FDs. Ensure easy access for emergencies.
Insurance Needs
Health Insurance
Individual Health Insurance: Get a separate health insurance plan. Corporate plans may not be sufficient.
Term Insurance
Life Cover: Get a term insurance plan for adequate life cover. This secures your family’s future.
Loan Management
Home Loan
Prepayment: Consider prepaying the home loan with surplus funds. This reduces interest burden and tenure.
Child’s Education and Marriage Planning
Systematic Investments
SIPs for Education: Start SIPs dedicated to your future child's education. Aim for growth-oriented funds.

Marriage Fund: Similarly, allocate funds for marriage expenses.

Sukanya Samriddhi Yojana
For Girl Child: If you have a girl child, consider investing in Sukanya Samriddhi Yojana for her future.
Retirement Planning
Retirement Corpus
Target: Aim for a retirement corpus of Rs 10 crores by age 45-48.
Strategy
Increase SIPs Annually: Increase your SIPs by 15% every year. This leverages compounding effectively.

Balanced Portfolio: Maintain a balanced portfolio with equity, debt, and other instruments.

Professional Management
Certified Financial Planner: Work with a CFP for personalized advice. They help manage and optimize your investments.
Final Insights
You have a strong investment base. Simplify your mutual fund portfolio and focus on high-performing funds. Get adequate health and life insurance. Prepay your home loan to reduce the burden. Plan systematically for your child's education and marriage. Work with a Certified Financial Planner to achieve your retirement goal of Rs 10 crores.

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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I am 50 working professional. Below is my MF portfolio . 1. Parag Parikh Flexi Cap Fund 2.6 lakhs + 10K SIP 2. PGIM India Midcap Opportunities Fund 1.85 L Value + 5K SIP 3. Quant ELSS Tax Saver Fund 80K 4. Axis Small Cap Fund 1.85 Lakhs Value + 5K SIP 5. Axis Gold Fund 75K Value + 5K SIP 6. Canara Robeco Bluechip Equity Fund 70K 7. Quant Multi Asset Fund 50K 8. SBI Magnum Income Fund 50K 9. ICICI Prudential Equity & Debt Fund 50K 10. Quant Active Fund 50K 11. ICICI Prudential Bluechip Fund 25K I want to build a retirement corpus of 2 crore in 10 years. I am planning to invest around 50K every month. Plus i have. surplus of 4Lakks which i want to invest in few of the MFs above. Planning to exit Canara Robeco bluechip and Axis Small cap soon. Please suggest if any changes you want me to do.
Ans: Given your goal of building a retirement corpus of 2 crores in 10 years and your current portfolio, here are some suggestions:

Increase SIP Contributions: Consider increasing your SIP amounts in high-performing funds like Parag Parikh Flexi Cap and PGIM India Midcap Opportunities Fund, which have shown good potential for long-term growth.

Review and Consolidate: Evaluate the performance of all your funds and consider consolidating your portfolio to fewer, well-performing funds to simplify management and potentially enhance returns.

Focus on Quality: Prioritize funds with strong track records, consistent performance, and experienced fund management teams. Consider adding large-cap and diversified equity funds for stability and balanced growth.

Asset Allocation: Ensure a balanced asset allocation across equity, debt, and gold funds based on your risk tolerance and investment horizon. Reallocate surplus funds strategically to maintain a diversified portfolio.

Regular Review: Monitor your portfolio regularly and make adjustments as needed based on changes in market conditions, fund performance, and your financial goals.

Consider consulting with a financial advisor for personalized advice tailored to your specific circumstances and goals.

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Hi, I am a 35y old single Male. My target is to retire at 50 with a corpus of 25 Crores. Currently, the worth of my portfolio is 1.25 Crore with 75 lakhs in MFs, 25 lakhs in NPS, 10 lakh in PPF, 10 lakh in SGB and about 5 lakhs in Cash and Stocks. My monthly investment is 90k in MFs and annual investment in PPF and SGB is 1.5 lakhs each. I have a 2Bhk house in Pune and my after-tax salary is 2 lakhs/month. My company takes care of my accommodation and my regular monthly expenses are about 50k/month. Do you want to suggest any other plans or am I doing alright keeping my goal in mind? Currently, the MFs are weighted about 50% Small cap, 25% Mid and flexi cap and 25% Large cap.
Ans: Your dedication to financial planning is commendable, especially with a clear retirement goal in mind. Let's delve into your current situation and discuss potential adjustments:

Your current portfolio allocation seems well-diversified, with a significant portion invested in mutual funds, NPS, PPF, SGB, and some cash and stocks. This mix offers a balance of growth and stability.

Your monthly investments and annual contributions to PPF and SGB reflect a disciplined savings approach. It's crucial to maintain this consistency to achieve your retirement target.

Your 2BHK house in Pune is an asset that adds to your net worth and provides security. It's great that your company covers your accommodation expenses, easing your financial burden.

With your after-tax salary and monthly expenses, you have a surplus for investments, which is a positive sign. It's essential to ensure that this surplus is utilized efficiently towards your retirement goal.

Considering your goal of accumulating a corpus of 25 Crores by the age of 50, it might be beneficial to reassess your asset allocation strategy. While your current allocation is diversified, you may want to tilt it slightly towards more conservative options as you approach retirement age.

Given your aggressive investment approach, you might consider gradually shifting towards a more balanced portfolio with a higher allocation to large-cap and balanced funds, which are comparatively less volatile.

Additionally, exploring other investment avenues such as direct equity, debt funds, or alternative investments could further diversify your portfolio and potentially enhance returns.

Regularly reviewing your portfolio's performance and rebalancing it as needed is crucial to stay on track towards your retirement goal.

Overall, you're on the right track with your financial planning efforts. Continue with your disciplined approach, stay informed about market trends, and seek professional advice if needed to optimize your portfolio further.

Keep up the excellent work, and with persistence and smart decision-making, you're well-positioned to achieve your retirement target!

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I am 42 years salaried person investing in MF through SIP from 2014 current corpus is 37 Lakhs in MF. My Current SIP's amount is rs 22000 PM as follows- 1. Nippon Small cap - 2000, 2. Mahindra manulife midcap fund - 7000, Mahindra Manulife Small cap - 4000, PGIM Midcap opportunities Fund - 3000, Quant Flexicap fund - 6000. SIP increasing every year by 5% to 10% No Home loan, term insurance 55 lakhs, medi-claim 10 lakhs, PF & VPF accumulation Rs 16 lakhs. I want to create a good corpus of Rs 6 - 7crore for retirement at 58 years of age. Please suggest if any change required in investment amount or funds.
Ans: It's commendable that you've been consistently investing in mutual funds through SIPs for several years, laying a strong foundation for your retirement. Let's evaluate your current investment strategy and make adjustments to align with your retirement goal.

Your portfolio reflects a diversified mix of small-cap, mid-cap, and flexi-cap funds, which offer growth potential over the long term. However, given your goal of building a substantial corpus for retirement, we may need to reassess your asset allocation and make some adjustments.

Firstly, let's review your SIP amounts and consider increasing them gradually to accelerate wealth accumulation. Since your SIPs increase by 5% to 10% annually, this incremental growth can boost your investment corpus significantly over time.

Consider reallocating some of your SIP amounts to funds with a proven track record of consistent performance and lower volatility. While small-cap and mid-cap funds can offer higher returns, they also come with increased risk. Diversifying across large-cap funds or balanced funds can provide stability to your portfolio.

Moreover, review your overall asset allocation to ensure it remains aligned with your risk tolerance and investment objectives. While equity investments offer growth potential, it's essential to balance them with fixed-income securities like debt funds or PPF to mitigate risk.

Given your age and retirement horizon, periodically reassess your investment strategy and make necessary adjustments to stay on track towards your goal. Consider consulting with a Certified Financial Planner to develop a personalized retirement plan tailored to your needs and aspirations.

In conclusion, by fine-tuning your investment strategy, increasing your SIP amounts, and maintaining a disciplined approach, you can work towards achieving your retirement goal of building a corpus of Rs 6 - 7 crores by the age of 58.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 08, 2024

Asked by Anonymous - Jul 07, 2024Hindi
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Hello sir, I am 43 years old and a Govt. employee. I need to plan for my children's future and my retired life too as I am not under OPS but under NPS. Cash-in-hand salary after all deductions is 40k. Following are my investments: 1) PPF 37 lacs, 1.50lacs yearly contribution. 2) SSA 14 lacs, 1.50lacs yearly contribution. 3) PF 27 lacs, 32K monthly contribution managed by my employer. 4) NPS 26 lacs, 25K monthly contribution both managed by my employer. 5) A house through Home loan which I will repay by 60. 6) MF Portfolio: 26 lacs against investment of 10lacs in following funds: Nippon India Tax Saver, Nippon India Small Cap, HSBC Infrastructure Fund, HDFC Midcap Opportunities, DSP NRNE, HSBC Midcap, ABSL Focused, Mirae Asset Large Cap, SBI Bluechip, SBI Balanced Advantage, Tata Smallcap, Baroda BNP Paribas Smallcap, Quant Active, Axis Smallcap, SBI Contra, SBI Automotive Opportunities I am investing in above 16 funds through 1000 monthly SIP and plan it to continue till 60. Thereafter I am planning to start SWP with the available corpus at that time. Kindly advise especially about my MF portfolio allocation and my planning for retirement whether I am proceeding in the right direction or do I need to make some changes. Your advice would be beneficial to me. Thanks in advance.
Ans: Planning for your children's future and your retirement is wise. With your current investments, you're on the right path but let’s refine your strategy for better results. Here’s a detailed analysis and suggestions.

Current Investments Analysis
Public Provident Fund (PPF)
Your PPF is robust with Rs 37 lacs and an annual contribution of Rs 1.5 lacs. This is a safe and tax-efficient investment, but it’s important to balance safety with growth.

PPF gives guaranteed returns, but they are moderate. It’s a great tool for safety and long-term growth.

Sukanya Samriddhi Account (SSA)
SSA is an excellent choice for your daughter’s future. With Rs 14 lacs and an annual contribution of Rs 1.5 lacs, it’s a solid investment for her education and marriage expenses. Like PPF, it offers safety and decent returns.

Provident Fund (PF)
Your PF balance is Rs 27 lacs with a monthly contribution of Rs 32k. This is a great safety net for retirement. PF offers guaranteed returns and tax benefits.

National Pension System (NPS)
NPS is a good retirement savings tool, providing market-linked returns. Your NPS balance is Rs 26 lacs with a monthly contribution of Rs 25k. It’s flexible and offers better returns over time.

Home Loan
Having a house is a good asset, and repaying your home loan by 60 is a prudent goal. Owning a home gives financial stability in retirement.

Mutual Fund Portfolio
Your mutual fund (MF) portfolio is Rs 26 lacs against an investment of Rs 10 lacs. Investing in 16 different funds through monthly SIPs of Rs 1,000 each is commendable but needs refinement for better performance.

Refining Your Mutual Fund Portfolio
Reduce the Number of Funds
Investing in too many funds dilutes potential gains. Consider consolidating your portfolio. Focus on a balanced mix of large-cap, mid-cap, and small-cap funds.

Active vs. Passive Management
Actively managed funds, like the ones you have, are good as fund managers can adapt to market changes. They aim to outperform the benchmark.

Suggested Fund Categories
Large-Cap Funds
These invest in well-established companies with stable returns. They provide steady growth and lower risk.

Mid-Cap Funds
These invest in medium-sized companies with growth potential. They offer higher returns but with higher risk.

Small-Cap Funds
These target small companies with high growth potential. They are risky but can offer significant returns.

Balanced Advantage Funds
These dynamically manage asset allocation between equity and debt. They provide stability and growth.

Advantages of Mutual Funds
Professional Management
Mutual funds are managed by experts who make informed decisions on your behalf.

Diversification
Investing in mutual funds allows diversification, reducing risk and enhancing potential returns.

Liquidity
Mutual funds are relatively liquid. You can redeem your investment anytime.

Systematic Investment Plan (SIP)
SIPs help in disciplined investing, averaging out costs and reducing market timing risk.

Compounding
Mutual funds benefit from the power of compounding, significantly growing your investment over time.

Disadvantages of Index Funds
Limited Flexibility
Index funds strictly follow the index, offering no flexibility in changing market conditions.

Average Returns
Index funds aim to match the index returns, which are average and not always the best.

Benefits of Actively Managed Funds
Potential to Outperform
Actively managed funds aim to outperform the index, providing higher returns.

Flexibility
Fund managers can make strategic decisions based on market conditions.

Evaluating Your Current Strategy
Monthly Contributions
You’re investing Rs 1000 per month in 16 funds, totaling Rs 16,000 monthly. This is a good strategy but can be optimized by focusing on fewer, high-performing funds.

Systematic Withdrawal Plan (SWP)
Starting an SWP after 60 is a smart move. It provides regular income and keeps your investment growing.

Optimizing Your Investments
Focus on Quality Funds
Choose funds with a consistent track record. Look for those with good ratings and past performance.

Monitor and Review
Regularly review your portfolio. Make changes if necessary to ensure it aligns with your goals.

Risk Management
Ensure your portfolio matches your risk appetite. Diversify to balance risk and returns.

Long-Term Goals
Children's Education and Marriage
Your SSA is a great start. Consider additional investments in mutual funds for higher returns to cover inflation-adjusted expenses.

Retirement Planning
Your PF, NPS, and PPF are solid foundations. Enhance your retirement corpus with balanced mutual funds for growth.

Additional Suggestions
Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses. It ensures financial stability in unforeseen circumstances.

Health Insurance
Ensure adequate health insurance for your family. It prevents dipping into savings during medical emergencies.

Tax Planning
Maximize tax-saving investments under Section 80C and other applicable sections. It optimizes your post-tax returns.

Final Insights
Your current investments show a well-planned approach towards securing your future and your children’s. With a few refinements in your mutual fund portfolio and regular monitoring, you can enhance your returns and achieve your goals more efficiently.

Stay focused on your long-term objectives. Continue your disciplined investment approach, and you will see substantial growth in your wealth over time.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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