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37 and Wanting 1 Crore by 53: How Much More Should I Invest?

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 07, 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
fahad Question by fahad on Oct 07, 2024Hindi
Money

sir i am 37 years old i have my savings till date of 600000 inr....i am doing sip of 5k every month just started in october......i want a corpus of 1 cr at the age of 53 years old

Ans: 1. Goal Setting for Corpus Building

You have set a goal to accumulate Rs 1 crore by the age of 53, which gives you a 16-year investment horizon. Having started your SIP in October, you're already on the right path. Consistent investments over the long term can lead to significant wealth creation.

However, accumulating Rs 1 crore requires a well-planned strategy. Let’s break down how you can approach this goal in a systematic way.

2. Current Savings and SIP Contribution

You currently have Rs 6 lakh in savings and are contributing Rs 5,000 per month towards your SIP. While this is a good start, it may not be enough to reach your goal of Rs 1 crore in 16 years. You may need to increase your SIP contributions over time or look into additional options that fit your risk tolerance and time horizon.

3. Incremental SIP Growth

To build a Rs 1 crore corpus, increasing your SIP contribution over time will be important. Consider stepping up your SIP amount annually by a small percentage (e.g., 10%). This allows your investments to grow in line with inflation and your income, giving your corpus a significant boost. By increasing your SIP every year, you can leverage the power of compounding more effectively.

4. Choosing the Right Type of Mutual Funds

Instead of focusing on index funds, which offer lower potential returns, actively managed funds may suit your goal better. Actively managed funds are handled by experienced fund managers who aim to outperform the market. These funds have the potential to generate higher returns compared to passively managed index funds.

In your case, focusing on mid-cap and small-cap funds could provide higher returns over a long-term horizon. These funds tend to be more volatile but have historically outperformed large-cap funds over extended periods. Balanced funds can also help manage risk while providing reasonable returns.

5. SIP through Regular Funds with a Certified Financial Planner (CFP)

It is advisable to invest in regular funds rather than direct funds. Direct funds require you to actively track and manage your portfolio, which may be time-consuming and difficult without expert guidance. By going through regular funds with a Certified Financial Planner, you receive expert advice, periodic portfolio reviews, and better fund management. The small additional cost of regular funds is justified by the value a CFP brings in terms of fund selection and ongoing support.

6. Tax Efficiency of Mutual Funds

It’s crucial to consider the tax implications of your mutual fund investments. For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh per year are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%. This means that holding your investments for more than one year not only gives you the benefit of compounding but also reduces your tax liability.

Debt mutual funds, on the other hand, are taxed according to your income tax slab. Since your goal is long-term wealth creation, equity mutual funds should form a larger part of your portfolio, as they offer better tax efficiency.

7. Emergency Fund

While building your corpus is a priority, don’t forget to maintain an emergency fund. This should be at least six months’ worth of your expenses. Your current savings of Rs 6 lakh can partially serve as this buffer. Having an emergency fund ensures that you won’t have to dip into your investments during unforeseen circumstances.

8. Avoid Investment-cum-Insurance Policies

If you hold LIC, ULIP, or other investment-cum-insurance policies, you may want to reconsider these investments. These products often come with high charges and lower returns compared to mutual funds. It is more beneficial to separate insurance and investments. You can surrender such policies and reinvest the amount in mutual funds, which are likely to give you better long-term returns.

9. Focus on Equity Exposure

Equity investments tend to outperform other asset classes over the long term. To build a Rs 1 crore corpus, your portfolio should have a substantial equity exposure, especially in the early years. As you get closer to your goal, you can gradually shift a portion of your portfolio to safer debt instruments to protect your accumulated wealth.

A diversified portfolio that includes a mix of large-cap, mid-cap, and small-cap funds would help balance risk and reward. Since you are in the accumulation phase, consider having a higher allocation to mid-cap and small-cap funds, as they have the potential to provide higher returns over the long term.

10. Review Your Portfolio Regularly

A critical part of building your Rs 1 crore corpus is to review your portfolio regularly. This does not mean you need to check your portfolio daily or weekly. A quarterly or half-yearly review with your Certified Financial Planner is ideal. This will help you ensure that your portfolio is on track, and any underperforming funds can be replaced or adjusted accordingly.

Regular reviews will also help you stay updated on changes in market conditions, tax regulations, and your personal financial situation. You can rebalance your portfolio as needed to maintain the right asset allocation and risk profile.

11. Consider Additional Investments

Apart from SIPs, you can consider making lump sum investments whenever you have extra funds available. If you receive a bonus, tax refund, or any other windfall income, investing it in your mutual funds can significantly boost your corpus. Since you’re still early in your investment journey, making lump sum contributions can take advantage of market fluctuations, enhancing your returns over time.

12. Keep Your Investment Horizon in Mind

While the goal is to accumulate Rs 1 crore by age 53, it’s essential to remember that markets can be volatile in the short term. Don’t get discouraged by short-term fluctuations. The longer you stay invested, the more you benefit from compounding. Stay focused on your long-term goal, and avoid reacting to market volatility by making premature withdrawals or stopping your SIPs.

13. Importance of Financial Discipline

Achieving your financial goals requires discipline and commitment. Continue your SIPs consistently, even during periods of market downturns. This ensures you are buying more units when prices are low, which can boost your returns when markets recover. Your goal of Rs 1 crore is attainable with disciplined investing and by periodically increasing your SIP contributions.

14. Protect Your Investments with Insurance

While building your investment corpus, don’t forget about protecting your family and your investments. Ensure you have adequate life insurance and health insurance. A term insurance policy is a good way to provide financial security to your family. Avoid mixing insurance with investments, as it dilutes the benefits of both.

Having sufficient health insurance will also ensure that medical emergencies do not force you to dip into your savings or investments.

15. Final Insights

You are on the right track by starting your SIPs early and having a clear financial goal. With consistent investing, proper fund selection, and incremental SIP growth, achieving your Rs 1 crore target by 53 is possible. Focus on increasing your SIP contributions over time, review your portfolio regularly, and maintain financial discipline.

Always remember the importance of equity exposure for long-term goals, and avoid investment products that mix insurance with returns. Protect your investments by having adequate life and health insurance.

Stay committed to your goal, and consult with a Certified Financial Planner to ensure you are on the right path at every stage of your financial journey.

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.
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Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

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Iam 38 years old i need 5cr corpus in 55 years i have started sip of amount 7500 with 15% returns now value 1 lakh.
Ans: It's excellent that you're planning for your financial future by investing in SIPs. Here's a breakdown of your goal and how you can achieve it:

Goal: You aim to accumulate a corpus of 5 crore by the time you turn 55. This is a significant amount and requires disciplined investing over the years.
Current SIP: You've started with a monthly SIP of 7500 with an assumed return rate of 15%. At present, your SIP value is 1 lakh.
Investment Strategy:
Increase SIP Amount: Consider gradually increasing your SIP amount over time. As your income grows or expenses decrease, channel a higher portion towards your investments.
Diversify Portfolio: While it's great to have high-return expectations, it's crucial to diversify your portfolio to manage risk. Consider investing in a mix of equity, debt, and other asset classes.
Regular Review: Regularly review your investment portfolio and adjust your SIP amount or asset allocation as needed. Market conditions and personal circumstances can change, so it's essential to stay flexible.
Long-Term Perspective: Keep in mind that building a 5 crore corpus over the next 17 years requires patience and discipline. Stick to your investment plan even during market fluctuations, and avoid making impulsive decisions.
Professional Guidance: Consider consulting a Certified Financial Planner (CFP) to fine-tune your investment strategy and ensure it aligns with your financial goals and risk tolerance.
Emergency Fund: While focusing on long-term goals, don't forget to maintain an emergency fund to cover unexpected expenses. Aim for at least 6-12 months' worth of living expenses in a liquid and easily accessible account.
By following a systematic investment approach, staying committed to your financial goals, and seeking professional advice when needed, you can work towards building a substantial corpus for your future.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

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

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Age 34.Am doing sip in. quant elss 9k, tata infra MF 4k, SBI technology fund 7k , quant psu fund 3k , Nasdaq 500 for 2.5k and stocks with 15% returns. I also have efo around 2 lacs. I want to make corpus of 2cr in 10 years. Currently holding around 20laks
Ans: Assessing Your Current Financial Position
You have made an excellent start in building a diversified investment portfolio. Your current investments include mutual funds and stocks, and you have an emergency fund of ?2 lakhs. Your goal to accumulate ?2 crores in 10 years is ambitious but achievable with the right strategy.

Evaluating Your Investments
Mutual Funds
Equity-Linked Savings Scheme (ELSS): Investing ?9,000 in ELSS funds is wise. These funds provide tax benefits under Section 80C and have the potential for high returns due to equity exposure.

Sector Funds: Your investments in infrastructure, technology, and PSU funds indicate a focus on specific sectors. While sector funds can offer high returns, they come with higher risks due to their limited diversification.

International Funds: Investing ?2,500 in the Nasdaq 500 fund adds geographical diversification. International funds can hedge against domestic market risks and offer exposure to global growth.

Stocks
Your stock investments are yielding a 15% return, which is commendable. Stocks can provide significant growth but require regular monitoring and expertise to manage risks effectively.

Emergency Fund
Maintaining an emergency fund of ?2 lakhs is prudent. This ensures financial security during unforeseen events without disrupting your investment strategy.

Recommendations for Portfolio Adjustments
Enhance Diversification
Balanced Allocation: Consider adding more diversified equity funds to balance the high-risk sector funds. Diversified funds reduce risk by spreading investments across various sectors.

Debt Funds: Incorporate some debt funds to provide stability to your portfolio. Debt funds are less volatile and can offer steady returns, balancing the high risk of equity investments.

Increase SIP Contributions
Annual Increase: Gradually increase your SIP contributions annually. This combats inflation and helps you reach your financial goal faster.

Top-Up SIPs: Utilize the top-up SIP option if available. This allows you to increase your SIP amounts periodically with ease.

Focus on High-Growth Assets
Actively Managed Funds: Continue focusing on actively managed funds rather than index funds. Actively managed funds can outperform the market through expert management.

Regular Fund Review: Regularly review the performance of your funds. Replace consistently underperforming funds with better-performing ones to optimize returns.

Tax Efficiency
Tax Planning: Ensure your investments are tax-efficient. ELSS funds are already part of your portfolio, but consider other tax-saving instruments as well.

Tax-Efficient Withdrawals: Plan withdrawals from your investments in a tax-efficient manner to maximize your net returns.

Achieving ?2 Crores in 10 Years
Targeted Growth Rate
Consistent Growth: Aim for a consistent annual growth rate of 12-15%. This is achievable with a well-diversified equity-focused portfolio.

Regular Monitoring: Regularly monitor your portfolio to ensure it stays on track. Adjust allocations based on market conditions and personal goals.

Risk Management
Portfolio Rebalancing: Periodically rebalance your portfolio to maintain the desired asset allocation. This helps in managing risk and optimizing returns.

Emergency and Contingency Planning: Maintain a robust emergency fund. Consider additional health and life insurance coverage as your family grows.

Long-Term Strategy
Financial Freedom
Calculate Future Expenses: Estimate your future monthly expenses considering inflation. This helps in determining the corpus needed for financial freedom.

Determine Retirement Corpus: Calculate the corpus required to generate a monthly income that covers your expenses. Use a conservative withdrawal rate to ensure the longevity of your corpus.

Continuous Learning
Stay Updated: Keep learning about market trends and investment strategies. This enhances your decision-making and helps in optimizing returns.

Professional Guidance: Regularly consult a certified financial planner. They provide expert advice on portfolio management, tax planning, and goal setting.

Conclusion
Your current investment strategy is strong and well-diversified. By continuing to review and adjust your investments, increasing SIP contributions, and focusing on tax efficiency, you are on the right path to achieve your goal of ?2 crores in 10 years. Keep focusing on high-growth assets and maintain a balanced portfolio to achieve financial freedom.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6861 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

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I am a working woman, 36 years old and earning 95000 per month. Investing 30k in RD, 13 k in SIP, 6500 IN EPF every month, 1 lac in Sukanya samridhi every year. I want to achieve 4 cr corpus after 15 years. My monthly expenses are 25k. Please advice
Ans: Financial Health Check-Up
It's great to see your investments. They cover various options, showing financial awareness. Your monthly income is Rs 95,000, and you invest Rs 49,500 in different schemes. Your monthly expenses are Rs 25,000, which leaves you with a surplus of Rs 20,500 each month.

Savings and Investments Overview
Recurring Deposit (RD): Investing Rs 30,000 per month.
Systematic Investment Plan (SIP): Investing Rs 13,000 per month.
Employees' Provident Fund (EPF): Contributing Rs 6,500 per month.
Sukanya Samriddhi Yojana (SSY): Contributing Rs 1,00,000 per year.
Assessment of Current Investments
Recurring Deposit
RDs are safe but offer low returns. They are good for short-term goals but not ideal for long-term wealth creation. Consider reducing RD investments and redirecting them to higher-return avenues.

Systematic Investment Plan
SIPs in mutual funds are excellent for long-term goals. They offer good returns and diversification. Ensure you have a mix of large-cap, mid-cap, and small-cap funds to balance risk and return.

Employees' Provident Fund
EPF is a safe and tax-efficient investment. It provides steady growth over the long term. Continue with this investment for a secure retirement.

Sukanya Samriddhi Yojana
SSY is beneficial for your daughter's future needs. It offers good returns and tax benefits. Continue with this investment for her education and marriage expenses.

Recommendations for Achieving Rs 4 Crore Corpus
Increase SIP Contributions
Increase your SIP contributions. This will help you leverage the power of compounding. Divert some RD funds to SIPs in equity mutual funds for higher returns.

Focus on Equity Mutual Funds
Equity mutual funds tend to give higher returns over the long term. They are suitable for your 15-year goal. Opt for actively managed funds through a Certified Financial Planner for better performance.

Diversify Your Portfolio
Diversification reduces risk. Along with equity funds, consider debt funds for stability. A balanced portfolio will provide growth and safety.

Regular Review and Rebalance
Regularly review your investments. Rebalance your portfolio based on market conditions and your goals. This ensures optimal performance and alignment with your financial plan.

Emergency Fund
Maintain an emergency fund. It should cover 6-12 months of expenses. This fund provides a cushion during unexpected financial needs.

Detailed Action Plan
Reduce RD Investment: Lower your RD contributions. Redirect funds to equity SIPs.
Increase SIP: Increase your SIP amount gradually. Aim to invest at least Rs 25,000 per month in equity funds.
Diversify: Allocate some funds to debt mutual funds. This will balance your portfolio and reduce risk.
Review Regularly: Assess your portfolio every six months. Make adjustments as needed to stay on track.
Maintain Emergency Fund: Ensure you have an emergency fund of Rs 1.5-3 lakhs.
Final Insights
Your current investments are a good start. With some adjustments and disciplined investing, you can achieve your Rs 4 crore goal. Focus on increasing SIPs, diversifying your portfolio, and regular reviews. These steps will ensure you stay on track and meet your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

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Asked by Anonymous - Oct 30, 2024Hindi
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I have around 1 crore to invest. I am 61 years old retired defence officer and pension amounting to around ?1,50,000/- per month and medically covered. Need some sound investment plan for 1 crore. Don't have any liabilities?
Ans: Hello;

You may invest your corpus into following two funds in proportion of 50:50,

1. Kotak Arbitrage fund (low risk)
You may consider modest return of 6% from this scheme.

2. ICICI Pru equity savings fund (low to moderate risk). You may consider modest return of 8% from this scheme.

Theses investments will retain purchasing power of your corpus aginst inflation and deliver some real returns too with low to moderate risk.

This is in accordance with your age and commensurate risk appetite.

Happy Investing;

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

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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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