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Ramalingam Kalirajan |9751 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 13, 2025

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 - Jun 13, 2025

I am 35 with salary of 1.8 per month after deducting taxes. I had FD of 22lacs that i recently got matured, have borrowed 3 lacs from the market and bought a car worth 25lacs. My whole saving is gone. Now I am just left with 1.5lac of FD, 1lac in rd [50k per month] and 2lacs invested in MF since last 1 year where its still in minus [reason why i never again invested in MF]. Funds i have are Parag Parikh Flexi cap fund-growth, quant flexicap fund-growth, ICICI prudential large and midcap fund, ICICI prudential bluchip fund - growth, MIRAI asset bluechip fund growth, icici prudential commodities fund growth, quant momentum fund, sbi psu fund growth, bandhan small cap fund growth. 10-20k invested in all as a lumpsum - total portfolio is 2lacs only, didnt grow in one year. Other expenses are - monthly 50k includes rent and groceries and petrol etc. Yearly [investments in LIC policies] - 2lacs PPF - 50k yearly Loan from friends for car purchase - paid back 2 lacs, 1 lac left. Please suggest the best detailed strategy that will benefit me in next 5-10 years and give stability.

Ans: You are 35 years old. You have Rs 1.8 lakhs monthly income. You had Rs 22 lakhs in FD which got used for a car. You now have Rs 1.5 lakh in FD, Rs 1 lakh in RD, and Rs 2 lakh in mutual funds. Your current monthly expense is Rs 50,000. You are also paying Rs 2 lakhs every year in LIC policies and Rs 50,000 in PPF. You have Rs 1 lakh unpaid loan from friends.

You are doing your best in difficult circumstances. Let us now build a complete 360-degree strategy to help you grow wealth and bring financial stability over the next 5–10 years.

Step 1: Build a Stable Emergency Fund
You have Rs 1.5 lakh in FD. That is your current safety cushion.

Your monthly expenses are Rs 50,000. So, 6 months' emergency fund is Rs 3 lakhs.

Increase this emergency fund to at least Rs 3–4 lakhs.

Use the RD maturing in 2 months to add to this buffer.

Emergency funds give peace and prevent debt in crisis.

Step 2: Pay Off Remaining Car Loan to Friends
You have Rs 1 lakh loan from friends. You have already repaid Rs 2 lakhs.

This is a moral obligation. Clear this fully in 2 months.

Use any upcoming bonus or RD maturity to repay this.

Do not delay this. Relationships are more valuable than any investment.

Step 3: Assess Your Insurance Policies
You are paying Rs 2 lakhs annually for LIC policies.

These are likely traditional or investment-linked insurance plans.

These give poor returns. Real return after inflation is almost zero or negative.

Keep term insurance separately. Insurance should not be mixed with investment.

If these are endowment or ULIP policies:

Stop future premiums immediately, if 3 years are over.

Surrender after 5 years to reduce loss.

Redeploy that amount in better instruments.

Why this is important:

Rs 2 lakhs/year is a large amount.

Better to invest in mutual funds for long-term wealth creation.

Step 4: Cash Flow Discipline and Monthly Surplus Planning
You have Rs 1.8 lakh take-home income. Let’s allocate it wisely:

Fixed Outflows:

Rent, groceries, petrol: Rs 50,000

LIC policies: Rs 16,600/month (yearly Rs 2 lakh)

RD: Rs 50,000

PPF: Rs 4,000/month (Rs 50,000 yearly)

Total committed: Rs 1.20 lakhs approx.

Leftover every month: Rs 60,000

This leftover needs focused use. Avoid luxury spends or unplanned EMIs.

Step 5: Redeem and Restructure Existing Mutual Fund Portfolio
You are disappointed with mutual funds. You invested Rs 2 lakhs across 8 funds. Most are sectoral, thematic, and high-risk categories.

Problems in your current MF portfolio:

Too many funds. Over-diversification leads to low returns.

Very small amount in each fund.

Many are thematic or volatile funds like PSU, Commodities, Smallcap.

All investments are lump sum. SIP brings better rupee cost averaging.

One year is too short to judge equity funds.

Action Plan:

Review all mutual funds.

Exit from PSU, Commodities, and Smallcap funds completely.

Keep only two flexicap or largecap diversified equity funds.

Move all Rs 2 lakh into these two funds.

Start a SIP of Rs 25,000 monthly in these funds.

Why not direct funds:

Direct funds look attractive due to low expense ratios.

But they need continuous review and rebalancing.

Most investors lack the time or knowledge for this.

Regular funds through a MFD with CFP guidance give better hand-holding.

Emotional decisions are avoided with professional help.

Step 6: Create a SIP-Based Wealth Building Plan
Now you have Rs 60,000 surplus monthly. Use it in the following way:

Rs 25,000 SIP in two diversified equity funds.

Rs 10,000 in a hybrid fund (balanced fund with equity and debt).

Rs 5,000 in a gold savings fund for long-term diversification.

Rs 5,000 in a children future fund (if planning family in future).

Keep Rs 15,000 for buffer, travel, or short-term needs.

This plan is simple and steady. It grows money without stress.

Stay invested for 5–10 years. Wealth will grow.

Step 7: Retirement Planning through PPF and Mutual Funds
You are putting Rs 50,000 yearly in PPF. This is good.

But you must also build retirement wealth through equity funds.

PPF is safe but gives low returns. Inflation eats most of it.

Do not increase PPF further. Use mutual funds for higher growth.

Create a retirement SIP of Rs 10,000 separately.

Split it between a flexicap and a hybrid equity fund.

Don’t touch this amount for next 20 years.

Step 8: Keep a Separate Goal-Based Investment System
Identify key life goals:

Retirement

Emergency

Car loan clearance

Possible children’s education

Medical fund for parents

For each goal, use different SIPs or different folios.

Never mix short-term and long-term goals.

This will bring mental clarity and emotional discipline.

Step 9: Understand Taxation on Mutual Funds
New rules from 2024:

Equity MF: LTCG above Rs 1.25 lakh is taxed at 12.5%

STCG is taxed at 20%

Debt funds: Taxed as per income slab

Hold equity mutual funds for long term.

Avoid booking profits within a year.

Use taxation to your benefit by holding patiently.

Step 10: Avoid Index Funds and Direct Stocks
Many suggest index funds. But they come with problems:

No downside protection in falling markets.

Cannot outperform the market.

Miss active risk management by fund managers.

Actively managed funds are better.

They beat benchmarks. They manage risks in volatile markets.

Also, avoid direct stock investment for now.

You don’t have time or skill to track them daily.

MFs are safer, cleaner, and more guided.

Step 11: Don’t Use FDs or RDs as Long-Term Tools
You had Rs 22 lakhs in FD. All got used.

FDs are good for safety. But returns are below inflation.

They don’t grow wealth over 10 years.

Use them only for emergency or short-term needs.

Same applies to RDs.

Switch to SIPs in mutual funds gradually.

Step 12: Improve Personal Financial Habits
Track monthly expenses. Use an app or excel.

Always save before you spend.

Don’t fall for peer pressure buying.

Avoid new loans. Keep a debt-free life.

Increase SIPs by 10% every year.

Discipline gives better results than knowledge.

Step 13: Role of a Certified Financial Planner (CFP)
You need a guide to manage all areas of money.

A CFP with a MFD license helps in:

Selecting the right mutual funds.

Reviewing your portfolio regularly.

Adjusting SIPs as income grows.

Helping avoid emotional decisions.

They charge a small cost but save you from big mistakes.

Online platforms don’t give such personal guidance.

Finally
You are still young. Age is on your side.

You are earning well. You are already saving 30% of income.

You have realised where mistakes happened.

That is the first step to a stronger future.

Now rebuild with a clean, focused plan:

Clear your loan.

Exit poor insurance policies.

Start mutual fund SIPs in few good funds.

Create goal-based investment systems.

Avoid random investments.

In 5 years, you will be stable.

In 10 years, you will be wealthy.

Stay disciplined. Keep your plan simple and consistent.

Avoid shiny distractions and keep your focus.

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

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.