I am 34 years old with no current loan. I am doing 20,000 monthly SIP in 4 MFs since 2018 and 25 lakh lumpsum in 5 MFs in 2021 wherein total value of the combined investement in MFs as of today is worth Rs 58L. I have invested in 10 stocks during COVID worth 97,000 which is now worth 1,98,000. Also i am investing in NPS at 20k per month and getting XIRR of 8% and current value is 13L. Other than this investing 1.5L per annum in PPF and 50,560 per annum in LIC jeevan anand 815. What else do i need to do to get 1 lakh per month at current value after 20 years keeping in mind the inflation for my retirement. I am married with no kids, but planning on having one. Have no loan, 1 vehicle and purchased land for house.

Ans: You're on a great track! Your disciplined SIPs, lumpsum investments, NPS contributions, and PPF investments show a strong foundation for your future. Let's discuss your plan and how to potentially reach your retirement goal:

1. Strong Start, Ambitious Goal!

Disciplined Investor! Regular SIPs, NPS contributions, PPF, and smart use of windfalls (lumpsum investment) show discipline.

Considering Inflation: Targeting an inflation-adjusted Rs. 1 lakh monthly income in 20 years requires a significant corpus due to inflation.

2. Understanding Your Investments:

Diversified Portfolio: Having MFs, stocks, NPS, PPF, and LIC shows some diversification, but the weightage needs review.

Actively Managed Funds: Your MFs are likely actively managed, where fund managers pick stocks to outperform the market. This approach can be beneficial but also carries risk.

3. Projecting the Future (Hypothetically):

Hypothetical Example: Assuming an average return of 12% (past performance is not a guarantee of future results) on your existing investments, you might not reach a corpus that provides an inflation-adjusted Rs. 1 lakh monthly income in 20 years.

Potential Shortfall: There might be a gap between your desired corpus and the potential accumulation. Consider these options:

Increase SIP amounts: If possible, consider increasing your SIP amounts across your Equity Funds to grow the corpus faster.
Extend Investment Horizon: If increasing SIPs is difficult, consider extending your retirement timeline (if possible) to allow more time for compounding.
Review Asset Allocation: A CFP can review your asset allocation (mix of investments) and suggest adjustments to potentially maximize returns.
4. Planning for the Future:

Factor in Child's Education: Having a child will add to your expenses. Plan for education costs alongside your retirement needs.

Review Life Insurance: Review your life insurance coverage (LIC Jeevan Anand) to ensure it meets your family's needs in case of an unfortunate event.
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.


5. Consulting a CFP:

Personalized Roadmap: A Certified Financial Planner (CFP) can consider your risk tolerance, financial goals, and future expenses to create a personalized roadmap for your retirement.
Here's the key takeaway: You're making smart moves! Consider increasing SIPs, potentially extending your retirement timeline, consulting a CFP for asset allocation review, and planning for your child's education. A CFP can help you bridge the potential gap and create a roadmap to a secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in