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Ramalingam

Ramalingam Kalirajan  |4647 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 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 - Apr 11, 2024Hindi
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I am 37 years old and earning 3 lakhs a month. I have around 30 lakhs investment in mutual fund. I have a 5 year old son. 1.5 crore term plan. 1 lic policy with 40k annual premium maturity date in 2030. I own a flat in Noida worth 60 lakhs. No loans. I have invested around 25 lakhs in shares also. 10 lakhs in epf. 1.6 lakhs in nps.q I am thinking to retire at 40. Any suggestions?

Ans: It's evident you've put considerable thought into your financial future, and you're already on the right track. Your diversified investment portfolio and prudent financial habits reflect your commitment to achieving your retirement goal.

Retiring at 40 is indeed an ambitious aspiration, but with your dedication and strategic planning, it's within reach. It's essential to continue monitoring your expenses and maximizing your savings potential to ensure you're on course to meet your objectives.

As a Certified Financial Planner, I commend your foresight in securing a robust term plan and maintaining a healthy emergency fund. These measures provide a safety net for you and your family, offering peace of mind amidst life's uncertainties.

While real estate can be lucrative, I appreciate your focus on alternative investment avenues, such as mutual funds and shares. Diversification is key to managing risk effectively, and your portfolio reflects a well-balanced approach.

Remember to regularly review and adjust your financial plan as circumstances evolve. Life is dynamic, and flexibility is crucial in adapting to changing needs and market conditions.

Continue staying informed about financial trends and seek guidance from professionals when needed. Your proactive approach to financial management sets a commendable example for others aspiring to achieve financial independence.

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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Ramalingam

Ramalingam Kalirajan  |4647 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Asked by Anonymous - May 16, 2024Hindi
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I am 38 years now. I am earning 1.5 lacs PM. I have around 1.12 crore as MFs, FD, SCSS,EPF, PPF, LIC, SGB and Lent to local village people at 12% roi. Getting Passive income as 8 lacs PA from all above investment. I have physical gold of 15 lacs. I purchase a land of 15 lacs last year. And my father is a pensioner getting 25k PM. Getting 1lacs PA from paddy land and Paddy land value is 50 lacs now. I will never sell this paddy land. My monthly expenses is 50k. I have a personal loan with 9 lacs outstanding. Paying emi 52k PM. I have a daughter of 6 year and planning for one more kid. I am staying at my own native house with parents. I am thinking to retire at 40. Any suggestions?
Ans: Understanding Your Financial Position
First, congratulations on your impressive financial management and planning. You have diversified your investments well across various asset classes. With a good mix of MFs, FD, SCSS, EPF, PPF, LIC, SGB, physical gold, and real estate, you are on a solid financial footing.

Evaluating Your Income and Expenses
Current Income and Passive Earnings
Active Income: Your current salary is ?1.5 lakhs per month.
Passive Income: You earn ?8 lakhs annually from your investments. This shows a well-thought-out strategy for generating passive income.
Monthly Expenses
Monthly Expenses: Your monthly expenses are ?50,000.
Loan EMI: You have an EMI of ?52,000 for a personal loan with an outstanding amount of ?9 lakhs.
Retirement Planning at 40
Financial Independence
Target Age: You plan to retire at 40, which is two years from now.
Passive Income Needs: Your monthly expenses will continue, so you need sufficient passive income to cover these.
Assessing Your Assets
Investments: Your current investments total ?1.12 crore.
Gold and Real Estate: You have ?15 lakhs in physical gold and purchased land worth ?15 lakhs.
Ensuring Sustainable Passive Income
Investment Strategy
Maximize Passive Income: Ensure your investments continue to yield at least the current passive income of ?8 lakhs per annum. This should ideally increase to cover any future inflation and additional expenses.
Diversification: Continue to diversify your investments to manage risks better. Consider consulting a Certified Financial Planner (CFP) for personalized advice.
Debt Management
Loan Repayment: Prioritize paying off your personal loan to reduce your monthly financial obligations. This will free up more of your income for investments or savings.
Emergency Fund: Ensure you maintain an emergency fund equivalent to at least six months of expenses. This provides a safety net for unexpected situations.
Planning for Children's Education
Education Fund
Investment for Education: Start a dedicated investment plan for your daughter's education and future child's education. Education costs will rise, so planning now is crucial.
Education Savings Schemes: Consider investing in child education plans that offer tax benefits and good returns. Mutual funds tailored for long-term growth can be a good option.
Enhancing Retirement Security
Long-Term Investments
Retirement Corpus: Ensure your retirement corpus is sufficient to sustain your lifestyle. You might need to increase your investments in equity funds for long-term growth.
Regular Reviews: Periodically review your investment portfolio to ensure it aligns with your retirement goals and adjust as needed.
Passive Income Strategy
Sustainable Income: Aim for a mix of investments that provide steady passive income. This could include dividend-paying stocks, rental income (if considering in the future), and interest from bonds.
Cost of Living: Account for potential increases in living costs due to inflation and healthcare expenses, especially with aging parents and growing children.
Final Thoughts
Balancing Current and Future Needs
Short-Term vs Long-Term: Balance your current financial needs with future goals. Avoid making impulsive financial decisions that could jeopardize long-term security.
Professional Advice: Regularly consult with a CFP to keep your financial plan on track. Their expertise will help you navigate changes in financial markets and personal circumstances.
Appreciating Your Efforts
Commendable Planning: Your proactive approach to managing your finances is commendable. Few people have such a detailed and diversified portfolio.
Family Security: Your efforts ensure financial security for your family, which is a significant achievement.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4647 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 19, 2024

Asked by Anonymous - Jun 19, 2024Hindi
Money
Hi, I am 34 years old married and have one kid 1 year of age. I have invested about 1.8 lakhs in mutual funds which currently stands at 2.05 lakhs. I have a PPF savings of 10 lakhs and invest full amount of 1.5 lakhs per year. I have invested 2 lakhs in equities. I have FDs worth 30 lakhs and my salary is 1.10 lakhs. I wish to retire by 40 years of age. Kindly me suggest me.
Ans: Firstly, congratulations on having a disciplined approach to your finances. At 34, you are already investing in various avenues, which is commendable. You have a diversified portfolio comprising mutual funds, PPF, equities, and fixed deposits. Let's evaluate your current financial standing and plan for an early retirement by the age of 40.

Mutual Funds Investment
Your mutual funds have grown from Rs 1.8 lakhs to Rs 2.05 lakhs. This indicates a healthy appreciation.

However, to retire early, you need to increase your investment in mutual funds.

Actively managed mutual funds could be a better choice compared to index funds. Actively managed funds often outperform the market due to professional fund management. They can adapt to market changes quickly and optimize your returns.

Consider investing through a certified financial planner who can guide you on the best mutual funds. They can provide personalized advice and help you achieve your retirement goals.

Public Provident Fund (PPF)
Your PPF savings stand at Rs 10 lakhs, and you are investing the full amount of Rs 1.5 lakhs per year.

PPF is a great investment for tax-saving and securing your future. It offers a stable and assured return, which is crucial for your retirement plan.

Continue with your current PPF contributions. This will create a significant corpus by the time you retire. Given the tax benefits and guaranteed returns, PPF is a robust component of your retirement plan.

Equities Investment
Your investment in equities is Rs 2 lakhs. Equities can provide high returns, but they come with higher risks.

For early retirement, you need a balanced approach in your equity investments. Diversify your equity portfolio to mitigate risks. Invest in blue-chip stocks and sectors with strong growth potential.

Regularly review and adjust your equity portfolio with the help of a certified financial planner. This ensures that you are on track with your financial goals and minimizes potential risks.

Fixed Deposits (FDs)
You have FDs worth Rs 30 lakhs, which is substantial. FDs are safe investments but offer lower returns compared to mutual funds and equities.

Since you wish to retire early, it's essential to balance safety and growth. While FDs provide safety, they might not generate the necessary returns for early retirement.

Consider reallocating a portion of your FDs into higher-yield investments like mutual funds and equities. This can enhance your overall returns while maintaining some level of safety in your investments.

Monthly Salary
Your monthly salary is Rs 1.10 lakhs. It is crucial to allocate a portion of your salary towards investments.

Follow the 50-30-20 rule:

50% for necessities
30% for discretionary spending
20% for investments
This ensures a disciplined approach to saving and investing, helping you build a retirement corpus.

Setting a Retirement Corpus
To retire by 40, estimate your retirement corpus based on current expenses, inflation, and lifestyle aspirations. This will give you a clear target to aim for.

Consult a certified financial planner to help you set realistic financial goals and create a roadmap to achieve them. They can provide insights into how much you need to save and where to invest.

Increasing Investments
To achieve early retirement, increase your investments gradually. Allocate more towards high-growth avenues like mutual funds and equities.

Systematic Investment Plans (SIPs) are a great way to invest in mutual funds. They provide the benefit of rupee cost averaging and disciplined investing.

Evaluate and adjust your investments regularly to stay aligned with your goals.

Risk Management
Early retirement requires careful risk management. While investing in high-return avenues, ensure you have adequate insurance coverage.

Life insurance, health insurance, and critical illness cover are essential. They protect your financial plan against unforeseen events.

Review your insurance policies regularly and make adjustments as needed.

Emergency Fund
An emergency fund is crucial for financial security. Aim to have 6-12 months' worth of expenses in a liquid fund.

This provides a safety net for any unexpected expenses and ensures you don’t need to dip into your retirement savings.

Tax Planning
Efficient tax planning can boost your savings. Utilize tax-saving instruments like PPF, EPF, and ELSS.

Maximize your tax deductions under Section 80C, 80D, and other relevant sections. This increases your investable surplus and helps in faster wealth accumulation.

Lifestyle and Spending Habits
Retiring early requires a frugal lifestyle and disciplined spending habits.

Evaluate your discretionary expenses and identify areas where you can save more. Redirect these savings into your investment portfolio.

Small changes in spending habits can have a significant impact on your savings and investments over time.

Regular Financial Review
Regularly review your financial plan and investment portfolio.

Market conditions and personal circumstances change over time. A certified financial planner can help you navigate these changes and keep your plan on track.

Periodic reviews ensure that you are progressing towards your retirement goal and allow for timely adjustments.

Benefits of Professional Guidance
Working with a certified financial planner offers several advantages. They provide personalized advice, keeping your goals and risk tolerance in mind.

They help you create a diversified investment portfolio, optimize tax savings, and manage risks effectively. Their expertise can significantly enhance your chances of achieving early retirement.

Final Insights
Your goal of retiring by 40 is ambitious but achievable with a strategic approach.

Focus on increasing your investments in high-growth avenues like mutual funds and equities. Maintain a balance between safety and growth by reallocating your FDs.

Continue your disciplined approach towards PPF and ensure you have adequate insurance coverage. Build a robust emergency fund and practice efficient tax planning.

Adopt a frugal lifestyle and disciplined spending habits to maximize your savings. Regularly review your financial plan with the help of a certified financial planner.

Your dedication and disciplined approach are commendable. With strategic planning and professional guidance, you can achieve your dream of early retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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