Hi Sir, I am a 32 year old (Private sector employee) with annual earning of 1.1 lakhs per month living with my wife in Hyderabad. I have a corpus of Rs. 6,00,000 through mutual funds, wherein I invest Rs. 25,000/month (divided in large-cap, small-cap, mid-cap and flexi-cap), Voluntary PF savings account in which I have started saving 10,000/month from January , 2024. I also have Home loan, personal loan for which I pay EMIs of Rs. 43,000 on monthly basis. My long-term target is to accumulate Rs. 15 crore by the age of 48-50 years. Please guide on the correct pathway to reach tht goal.
Ans: Current Financial Status
At 32, you have a good income and investment habit. Your annual earning is Rs 1.1 lakhs per month. Your investments and savings include:
Mutual Funds: Rs 6,00,000 corpus with Rs 25,000/month investment.
Voluntary PF: Rs 10,000/month started from January 2024.
EMIs: Rs 43,000/month for home loan and personal loan.
You aim to accumulate Rs 15 crores by 48-50 years.
Evaluating Investments
Your current investments are a good mix. Here’s an evaluation:
Mutual Funds: Investing in large-cap, small-cap, mid-cap, and flexi-cap funds is wise. This provides diversification and growth potential.
Voluntary PF: This is a good addition for long-term stability and tax benefits.
Loan Repayment Strategy
Your EMIs are Rs 43,000/month. Paying off loans early can free up more funds for investment.
Prioritize High-Interest Loans: Pay off personal loans first if they have higher interest rates.
Consider Prepayments: Use bonuses or windfall gains to make prepayments on your home loan.
Increasing Investments
To reach your goal of Rs 15 crores, you need to increase your investments. Consider the following:
Increase SIP Amount: Gradually increase your SIP in mutual funds. Aim to invest a higher percentage of your income.
Additional Investments: Consider other growth-oriented options like equity mutual funds. Avoid direct funds; regular funds through an MFD with CFP credentials offer better management.
Tax Efficiency
Utilize Tax Benefits: Maximize tax-saving investments under Section 80C, 80D, and 80CCD.
Review Tax Plans: Regularly review your tax-saving instruments to ensure efficiency.
Emergency Fund
An emergency fund is crucial. Aim to save at least 6-12 months of expenses in a liquid fund. This provides a safety net for unexpected events.
Insurance Coverage
Health Insurance: Ensure you have adequate health coverage for you and your family.
Life Insurance: Opt for a term insurance plan. This secures your family's future in case of any unforeseen event.
Retirement Planning
Set Clear Goals: Define your retirement lifestyle and expenses.
Regular Contributions: Continue regular contributions to your retirement funds like PF and mutual funds.
Regular Review and Adjustment
Monitor Investments: Regularly review your portfolio’s performance. Adjust based on market conditions and life changes.
Certified Financial Planner: Consult a Certified Financial Planner for personalized advice. They can help you stay on track with your goals.
Disadvantages of Direct and Index Funds
Direct funds might seem cost-effective but can be time-consuming and require expertise. Index funds lack flexibility and may underperform actively managed funds. Regular funds through an MFD with CFP credentials provide better professional management.
Final Insights
You have a strong foundation with your current investments and savings. To reach Rs 15 crores by 48-50 years, increase your investments, manage loans efficiently, and ensure tax efficiency. Regularly review your financial plan and consult a Certified Financial Planner for tailored advice. This will help you achieve your financial goals and secure your future.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in