How to Start Investing with no Savings, a Daughter, and Dreams?

Ans: Hello;

After 36 consecutive months of NO contribution, except interest, the EPF account becomes inoperative.

Once it is inoperative it won't earn interest.

Withdrawals will be tax-free but the account will have to reactivated.

Best wishes;

Ans: Dear Dinesh,
When you say, she has started showing her true colors, what exactly do you mean by that?
And what is making you want to get rid of her? It's necessary to identify if things are actually that bad (you have not shared enough/much information). I can only suggest in this case with lack of information from you that you actually try and work on the marriage and if it still things don't improve, then you always have options to separate.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

Ans: if you want to hold it for 5yrs you can

Ans: Dear Pushpa,
What can you do? Stop giving money to people who can't appreciate that help. What has gone has probably gone. But from now on, please become prudent and say NO.
There will be a few arguments and your in laws and husband's brother maybe angry but you need to secure your financial position, right? You can't stop them from asking, but your husband can stop giving, yeah?
People will take advantage only when you allow them to do that...so, hopefully your husband can also see what's happening.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

Ans: Hello Madhu.
To pursue a degree in Aeronautical Engineering, your daughter will need to qualify through one or more of the following competitive entrance exams:-
(1) JEE Main and JEE Advanced
(2) BITSAT
(3) VITEEE
(4) SRMJEEE
(5) COMEDK UGET (Karnataka)
(6) MHT-CET
(7) IISER Aptitude Test
(8) IIST i.e. Indian Institute of Space Science and Technology Admission Test (ISAT)

Here is the list of some colleges related to Aeronautical Engineering:
(1) IIT Bombay, IIT Kharagpur, and IIT Kanpur
(2) VIT University, Vellore
(3) R.V. College of Engineering and PES University, Karnataka
(4) MIT College of Engineering, Pune
(5) DY Patil College of Engineering, Pune
(6) Anna University (Chennai)
(7) Punjab Engineering College (PEC) (Chandigarh)
(8) Manipal Institute of Technology (Manipal)
(9) Hindustan Institute of Technology and Science (Chennai)
(10) SRM Institute of Science and Technology (Chennai)
(11) Sathyabama University (Chennai)
(12) Amity University (Noida)

For Better Placement, prefer one of the following options if you are getting: IIT Bombay, IIST Thiruvananthapuram, Anna University, Manipal Institute of Technology, and SRM University.

Yet, ask your daughter to focus more on her studies. It would be better to crack Mains and Advanced to get admission to reputed IITs.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

Ans: Your cousin's situation is very stable. At 51, his savings and investments are quite healthy. He owns a house, has no loans or liabilities, and his monthly expenses are only Rs 30,000. This reflects a simple lifestyle, which means he doesn't need a huge monthly income to maintain his standard of living. Additionally, his financial discipline is evident, given his savings and investments.

His financial assets include Rs 1.5 crore in PPF, FD, and EPF, and another Rs 2.5 crore in his savings account. This gives him a total corpus of Rs 4 crore. For someone who has a modest lifestyle and doesn't want to take market risks, this provides a solid foundation.

Assessing Retirement Readiness
Assuming your cousin has to retire soon, his current corpus of Rs 4 crore should easily support his lifestyle. Based on his monthly expenses of Rs 30,000, he would need Rs 3.6 lakh annually to meet his day-to-day expenses. This is a small fraction of his total assets, which can comfortably last for many years without any aggressive investment.

Let’s assess the sustainability of his corpus:

With Rs 4 crore in safe instruments like PPF, FD, and EPF, and assuming a conservative return of around 6% per annum, he would generate approximately Rs 24 lakh annually. This is far more than what he needs for his expenses.
His corpus alone, without considering any investment growth, could last for many decades, given his low monthly needs.
In short, from a retirement-readiness perspective, he is well-prepared financially.

Importance of Healthcare Coverage
While your cousin has Rs 5 lakh in medical insurance, it may be insufficient, especially given his age and the rising cost of healthcare. A comprehensive health insurance plan, with a higher cover, would offer him peace of mind in case of medical emergencies. Medical costs can quickly escalate, especially with an aging parent and other family members.

He should consider enhancing his medical cover by:

Opting for a top-up or super top-up plan to increase his health cover.
Ensuring that the policy covers day-care treatments, pre-existing illnesses, and critical illnesses.
Given the moderate cost of health insurance top-ups, this is an affordable and necessary addition to his financial plan.

Alternatives to Risky Investments
Since your cousin does not want to invest in market-linked products, there are still several low-risk investment options that can improve his financial condition without exposing him to high volatility. The focus here would be to preserve capital while generating steady returns.

Here are some suitable alternatives:

Senior Citizen Savings Scheme (SCSS): After turning 60, your cousin can consider investing in SCSS. It provides a safe and reliable return, higher than regular fixed deposits. This scheme would suit his risk profile and provide regular income.

Post Office Monthly Income Scheme (POMIS): Another safe option for post-retirement income. This scheme offers fixed monthly returns and guarantees the safety of capital.

RBI Floating Rate Savings Bonds: These bonds are low-risk and offer decent returns with interest rates adjusted every six months. They are ideal for those looking to earn interest while keeping capital secure.

Sovereign Gold Bonds (SGB): Though linked to gold prices, this is a government-backed option offering a fixed interest rate. It's a way to diversify his portfolio without taking too much risk.

Inflation Protection and Growth Options
Though your cousin’s current investments can support his lifestyle, he must consider the impact of inflation over the next 20-30 years. Inflation can erode purchasing power, and a Rs 30,000 expense today may rise significantly in the future.

Even though he prefers not to invest in market-linked products, having a small portion of his portfolio in inflation-beating instruments could help maintain his financial health in the long run. To strike a balance between safety and growth, he can:

Invest in debt mutual funds: These funds are safer than equity funds and offer better post-tax returns compared to FDs. They are a good choice for those seeking stable returns with minimal risk. Debt mutual funds will also help in tax-efficiency compared to traditional savings instruments.

Balanced or hybrid funds: If he wants to maintain low risk but is open to some market exposure, hybrid funds (with a mix of debt and equity) could be an option. They are less volatile than pure equity funds and offer reasonable returns.

Regular Plan Mutual Funds: If he ever considers mutual funds, it’s best to invest through a certified financial planner (CFP) via regular plans. The benefit of regular plans is that the fund manager’s advice and oversight can help in balancing risk and returns, unlike direct funds where he has to manage the investments himself.

Emergency Fund and Liquidity
Though your cousin has Rs 2.5 crore in his savings account, it is important not to keep too much money idle. While liquidity is important, holding such a large amount in savings will not generate meaningful returns.

Here’s a better approach:

Maintain 6-12 months’ worth of living expenses (around Rs 4-5 lakh) in the savings account or liquid funds for emergencies.

The rest of the amount in the savings account can be moved to safer and higher-return instruments like FDs or debt mutual funds. This way, his money earns better returns while still being relatively liquid.

Estate Planning and Legacy
It’s also important for your cousin to think about estate planning. He should ensure that his family is financially secure in the long term. Simple steps like:

Creating a will: To ensure his assets are distributed as per his wishes.

Nominations: Ensure that all his investments, insurance policies, and bank accounts have proper nominations in place.

Reviewing insurance needs: Even though he may not need life insurance now, he could consider taking term insurance if he wants to secure his family in case of an unexpected event.

Optimizing Tax Efficiency
Your cousin’s current portfolio in FDs and EPF will likely result in higher tax liability as these instruments are taxed as per his income tax slab. He can explore more tax-efficient options to optimize his returns.

Debt Mutual Funds: As mentioned earlier, they are tax-efficient compared to FDs, as they offer indexation benefits for long-term capital gains.

Tax-efficient Fixed Income Products: He can look into tax-saving fixed deposit schemes or long-term bonds that offer tax-saving benefits under Section 80C.

Avoid Direct Fund Investments: Investing directly in funds might seem like a good idea because of lower fees, but it comes with the burden of managing the portfolio independently. Investing through a certified financial planner ensures professional oversight, better fund selection, and an optimal investment strategy tailored to his goals.

Finally
Your cousin’s financial position is very strong. With a Rs 4 crore corpus and minimal monthly expenses, he is well-prepared to retire without any financial stress. He should focus on maintaining his simple lifestyle while also protecting his wealth from inflation and rising healthcare costs.

His reluctance to invest in high-risk market schemes is understandable. There are plenty of safe options available, such as debt mutual funds, SCSS, and floating rate bonds. These can ensure steady income without exposing him to unnecessary risk.

Additionally, estate planning, tax optimization, and healthcare coverage will further secure his financial future.

By taking these steps, he can retire confidently and maintain financial stability for himself and his family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Hello.
(1) There is no upper age criteria/limit to appear for the NEET Examination. You can appear at any age.
(2) There are several Govt examinations conducted by the respective state public service commission and Union Service Public Commission. Pl check the criteria for the age limit by visiting the official websites.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

Ans: Your son is earning Rs 35,000 per month and investing Rs 5,200 per month in mutual fund SIPs. His investments are split across small-cap and mid-cap funds, with Rs 2,000 in DSP Small Cap, Rs 1,000 in Nippon Small Cap, Rs 1,200 in HDFC Mid Cap, and Rs 1,000 in SBI Small Cap. Additionally, your friend is suggesting an SBI Smart Fortune Builder plan at Rs 2 lakh per annum for achieving a corpus by age 35.

Now, let’s break down and analyse his current portfolio and the suggested plan.

Mutual Fund Investments: Strengths and Improvements
Small-Cap and Mid-Cap Focus
Small-cap funds can deliver strong growth, but they come with higher risks. Your son has allocated 69% of his mutual fund SIPs to small-cap funds (DSP, Nippon, SBI), and 23% in mid-cap (HDFC). While this allocation may provide long-term growth, the concentration in small-cap funds exposes him to volatility.

Considering his young age, this risk is manageable for now, but over time, diversifying into large-cap or balanced funds can help maintain a good risk-return balance. A more diversified approach can help reduce the impact of market downturns on his portfolio.

Consistency in SIPs
Investing Rs 5,200 monthly shows disciplined savings behaviour. The consistency of SIPs allows him to benefit from rupee-cost averaging, which can reduce the risk of investing a lump sum in a volatile market. He should continue this approach, but regular reviews are essential to make sure the funds align with his goals and risk tolerance.

Active vs. Index Funds
If he’s investing through regular plans (not direct), he’s benefiting from expert fund management. Actively managed funds can outperform index funds in certain market conditions, especially for small- and mid-cap funds. However, he should keep an eye on the performance of these funds. Actively managed funds with a certified financial planner’s advice can help him adjust if the funds are not meeting expectations.

SBI Smart Fortune Builder: Is It Suitable?
Product Type: Likely a ULIP or Insurance-Linked Investment
Based on the name “SBI Smart Fortune Builder,” it seems to be an insurance-linked product, such as a Unit Linked Insurance Plan (ULIP). While these products offer the dual benefits of insurance and investment, they are often not as efficient in either area when compared to term insurance and pure mutual fund investments.

ULIPs usually have higher fees, including allocation charges, mortality charges, and fund management charges. This can eat into the returns, especially in the initial years. Furthermore, the investment portion of ULIPs is usually not as flexible or high-performing as dedicated mutual funds.

Lock-in Period
ULIPs often have a lock-in period of five years. While this ensures disciplined saving, it reduces liquidity in case your son needs funds before maturity. This can become a constraint, especially when other investment avenues like mutual funds offer greater liquidity with better flexibility to withdraw when needed.

Comparing with Mutual Funds
When compared to mutual funds, ULIPs tend to underperform due to their high costs and lower flexibility in switching between funds. Mutual funds, especially when invested with the guidance of a certified financial planner, offer more transparency, liquidity, and cost-effectiveness. Instead of ULIPs, he could invest Rs 2 lakh annually in mutual funds, which offer better growth potential, lower costs, and more control.

Investment Strategy to Achieve His Corpus Goal by Age 35
Balanced Asset Allocation
Given that your son has 10 years to achieve his financial goal, the right asset allocation is crucial. Right now, his portfolio is heavily skewed towards small- and mid-cap funds. While these funds offer high returns, they are also highly volatile. Adding some large-cap funds or balanced funds will help him maintain growth while reducing volatility.

Here’s a suggested breakdown for the next 10 years:

60% in Small- and Mid-Cap Funds: Continue SIPs in these funds but monitor their performance regularly. The SIPs in DSP Small Cap, HDFC Mid Cap, and Nippon Small Cap can remain.

20% in Large-Cap Funds: Large-cap funds can provide stability to the portfolio. These funds invest in established companies and are less volatile than small- or mid-cap funds.

20% in Hybrid or Balanced Funds: Hybrid or balanced funds offer exposure to both equity and debt. They help reduce overall portfolio risk and can offer steady growth.

Increase SIP Contributions Gradually
While Rs 5,200 is a great start, as his income grows, he should aim to increase his SIP contributions. Ideally, he should aim to save 20% to 25% of his income. With an income of Rs 35,000 per month, saving Rs 7,000 to Rs 8,000 per month would be optimal. Increasing SIPs by even a small amount every year can have a significant impact over the long term.

Avoid Insurance-Linked Investments
As discussed, insurance-linked products like ULIPs are not the most efficient way to invest. It’s better to keep insurance and investments separate. He should consider a pure term insurance plan for life cover and use mutual funds for investments.

Tax Efficiency of Mutual Funds
Long-Term Capital Gains (LTCG) on Equity Funds
Mutual funds, especially equity funds, provide tax benefits. The long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. This is relatively low compared to other tax brackets. Short-term capital gains (STCG) are taxed at 20%.

Benefits of Hybrid Funds
Hybrid funds can offer a mix of equity and debt investments, which makes them tax-efficient and can help smooth out returns. The returns from debt funds are taxed according to the investor’s income tax slab.

By using tax-efficient investment vehicles and balancing between growth and stability, your son can minimise his tax burden while maximising returns.

Regular Reviews and Adjustments
Monitoring Performance
Your son’s portfolio should be reviewed at least once a year. This is important to ensure that the funds are performing as expected and are aligned with his risk appetite and financial goals. If any fund consistently underperforms its peers, it may be time to switch to a better-performing fund.

Goal-Based Investment Strategy
He should establish clear financial goals for his investments. The primary goal seems to be building a corpus by the age of 35, but he should also consider other goals like buying a home, marriage, or children’s education. Each goal may have a different time frame and risk profile, and his investment strategy should reflect that.

Rebalancing Portfolio
As he gets closer to his goal, say when he reaches age 32 or 33, it’s important to rebalance his portfolio. He should gradually reduce exposure to high-risk small-cap and mid-cap funds and increase exposure to large-cap or hybrid funds. This will help protect his capital as he approaches his target.

Final Insights
Your son is on the right track with his disciplined SIP approach. However, there are a few areas where he can optimise his investments. He should diversify his portfolio by adding large-cap and hybrid funds. ULIPs like SBI Smart Fortune Builder are not the best investment option, as they come with high costs and less flexibility. Mutual funds offer more growth potential, lower costs, and better control over investments.

He should continue to increase his SIP amounts as his income grows and focus on a balanced asset allocation. Finally, regular reviews and adjustments are essential to stay on track towards his financial goals.

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

Ans: You are 50 years old, with a goal to retire at 56. Your monthly expenditure is Rs 40,000, and you have two daughters currently studying in 10th and 11th standards, who will require financial support for their education.

Your current financial assets include:

Rs 1 crore in Bank FD
Rs 12 lakhs in equity (invested Rs 8 lakhs in 2021)
Rs 25 lakhs accumulated in PF
Rs 15 lakhs in SIPs (since 2011)
Rs 50,000 monthly SIP (started from February 2024)
Rs 12 lakhs invested in hybrid mutual funds recently
Medical insurance costing Rs 54,000 PA for your family
Term insurance with an annual premium of Rs 51,000
House loan already cleared
I appreciate the strong foundation you have built with substantial savings and clear financial goals. Let's explore the way forward to optimise your retirement strategy and secure your financial future.

Step 1: Assessing Your Monthly Needs After Retirement
You need Rs 40,000 per month for your current expenses. However, this amount will likely increase due to inflation over the next six years until retirement. Let’s assume an inflation rate of 6%, which is typical in India. This means your monthly expenditure may rise to around Rs 57,000-60,000 by the time you retire.

Since you aim to retire in 6 years, the goal will be to create a financial plan that allows you to cover these rising expenses comfortably after retirement. We also need to consider the potential education expenses for your daughters in the near future, which will add another layer to your financial planning.

Step 2: Evaluating Your Current Investments
Bank FD (Rs 1 crore): While FDs offer safety, they have low returns. In the long run, they barely beat inflation. You should look at moving part of this into more growth-oriented options, like mutual funds, that can give you inflation-beating returns.

Equity Investments (Rs 12 lakhs): The equity market is an essential part of your portfolio, but given that you have invested Rs 8 lakhs in 2021, the returns may be volatile in the short term. However, staying invested in good-quality actively managed mutual funds can yield higher returns over time. Equity exposure is crucial to grow your wealth, especially given the inflationary pressures.

PF (Rs 25 lakhs): Provident Fund is a long-term wealth-building instrument with the benefit of compounding. It provides a decent rate of return and safety. This will form a significant part of your retirement corpus. You should continue contributing to this.

SIPs (Rs 15 lakhs and Rs 50,000/month): Your SIPs are excellent long-term wealth builders. Since you are already committed to Rs 50,000 monthly SIPs, you are on the right path to generating good returns. SIPs in actively managed equity mutual funds will help you stay ahead of inflation over time.

Hybrid Mutual Fund (Rs 12 lakhs): Hybrid funds offer a balanced mix of equity and debt, providing growth and stability. They can be useful as you approach retirement, but their equity exposure should be closely monitored.

Step 3: Optimising Insurance
Medical Insurance (Rs 54,000/year): You have medical insurance in place, which is essential for covering health-related risks. Ensure that the coverage is sufficient for your entire family. Given the rising healthcare costs, consider reviewing the sum assured and increasing it if needed.

Term Insurance (Rs 51,000/year): Term insurance is a cost-effective way to secure your family in case of unforeseen events. It’s good to have this in place. You may not need it post-retirement, so review it closer to retirement age.

Step 4: Prioritising Your Daughters' Education
Your daughters will soon enter college, and their higher education will be a significant financial commitment. It’s wise to set aside a portion of your investments to meet these expenses. Given their ages (10th and 11th standard), you can expect to incur these costs within the next 1-3 years. Consider earmarking part of your Bank FD or hybrid mutual fund investment for their education.

The Rs 1 crore FD could be partially redirected towards a safer option, like debt mutual funds or hybrid funds, to provide liquidity for education expenses without sacrificing growth entirely.

Step 5: Managing Post-Retirement Income
To ensure a steady flow of income post-retirement, let’s look at how your current portfolio can be structured to meet your monthly needs:

Systematic Withdrawal Plan (SWP): Once you retire, you can set up a Systematic Withdrawal Plan (SWP) from your mutual fund investments to provide a regular income. This way, you can withdraw a fixed amount every month, while the remaining capital stays invested and continues to grow.

Balanced Portfolio: As you approach retirement, you should gradually reduce exposure to high-risk equity and shift to a balanced portfolio. A mix of 40% equity and 60% debt will give you stability and growth, ensuring that you meet your monthly expenses while still preserving your capital.

Continue with PF and SIP Contributions: Your Provident Fund and SIPs should remain untouched until retirement. Both provide long-term growth and tax benefits. Continue your SIPs as planned, and consider increasing the amount when possible to accelerate your retirement corpus.

Step 6: Plan for Rising Medical Costs
As you age, healthcare costs will likely increase. Ensure that your medical insurance coverage is adequate. Review the current policy and look for options to increase the coverage if needed. A good health insurance policy will prevent you from dipping into your retirement savings for medical emergencies.

Step 7: Tax-Efficient Withdrawal Strategy
Capital Gains Tax: When you withdraw from mutual funds, remember that equity mutual funds attract capital gains tax. Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%. Plan your withdrawals strategically to minimise tax outgo.

Debt Fund Withdrawals: If you hold any debt funds, remember that both LTCG and STCG are taxed according to your income tax slab. Use these funds carefully to manage your tax liabilities post-retirement.

Step 8: Setting Up an Emergency Fund
It’s essential to keep some money aside as an emergency fund. This should cover at least 6-12 months of your monthly expenses. Since you have substantial assets, you can allocate part of your Bank FD towards this. The emergency fund should be liquid and easily accessible in case of unforeseen expenses.

Step 9: Reassess Your Risk Profile
At 50, your risk tolerance may be lower than when you were younger. However, to maintain your lifestyle after retirement, some equity exposure is necessary to beat inflation. Work on balancing your portfolio so that it reflects your need for both growth and stability. Actively managed funds, as opposed to index funds, will give you more flexibility and potentially higher returns.

Final Insights
You have built a strong financial base and are well on your way to a comfortable retirement. However, a few strategic adjustments will help optimise your portfolio and secure your financial future:

Increase your equity exposure slightly while balancing it with debt to ensure growth and stability.

Plan for your daughters’ education by earmarking some of your FD or hybrid fund investments.

Consider SWP for post-retirement income, and set up a tax-efficient withdrawal strategy.

Review your health insurance coverage to ensure it meets your future needs.

Stay disciplined with your SIPs and continue contributing towards your PF to build a robust retirement corpus.

By carefully managing your existing assets and planning ahead for both education and retirement, you can achieve financial independence and enjoy a secure post-retirement life.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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