i am 37 yrs old married with 5 yrs boy.i earned around 70 k per month.i hv ppf of 30 lac,epf 40 lac.i hv 6 lac fd.lic 24k and 29 k premium paid per year,postal life insurance 36 k per year premium paid . lump sum 50 k investment in icici preduantial small cap 2 yrs ago(still holding),lumpsum 70 k in axis bluechipfund 2 yrs ago(still holding),lumpsum 50k sbi balance advance fund(still holding),3.69 lac in sbi blue chip fund from 2014 which is now 5 lac my present sips are on 1) 1000 sbi bluechipfund(running from 1.5 yrs) 2)2000 sbi contra fund(fresh adding) 3)2500 sbi kotak small cap(running from 2 yrs) 4)2500 parag parekh flexicap(running from 2 yrs) 5)2500 nippon small cap(fresh adding) 6)2500 axis quant fund(fresh adding) should i stop lic..and invest more in sips ?i want some 50 lac in 7-8 yrs in returns which mutual fund would be better pls suggest me?

Ans: It's great to see that you've started investing in mutual funds through SIPs. Here are some suggestions regarding your current mutual fund investments:

• Diversification: You have a good mix of funds across various categories, which is essential for diversification. It's important to spread your investments across different sectors and market capitalizations to reduce risk.

• Review Performance: Periodically review the performance of your funds to ensure they are meeting your expectations and performing in line with their peers and benchmarks.

• Consider Your Goals: Reflect on your financial goals, risk tolerance, and investment horizon to determine if your current funds align with your objectives. If you have specific goals such as retirement planning or wealth accumulation, consider adjusting your portfolio accordingly.

• Evaluate Fund Managers: Assess the track record and expertise of the fund managers managing your investments. Look for consistency in performance and a clear investment strategy aligned with your goals.

• Stay Informed: Keep yourself updated with market trends, economic developments, and changes in regulations that may impact your investments. Stay connected with your financial advisor or conduct your research to make informed decisions.

• Seek Professional Advice: Consider consulting with a Certified Financial Planner (CFP) or a qualified financial advisor to get personalized advice based on your financial situation and goals. They can provide valuable insights and recommendations tailored to your needs.

Overall, while your current mutual fund portfolio appears well-diversified, it's essential to periodically review and adjust your investments based on changes in your financial situation and market conditions. By staying disciplined and informed, you can work towards achieving your financial goals effectively.

Ans: At 37 years old, you are married with a 5-year-old child and earn around Rs. 70,000 per month. Your current investments include:

PPF: Rs. 30 lakh
EPF: Rs. 40 lakh
FD: Rs. 6 lakh
LIC premiums: Rs. 24,000 and Rs. 29,000 annually
Postal life insurance: Rs. 36,000 annually
Mutual funds: Various lump sum investments and SIPs
Evaluating Your Current Investments
Public Provident Fund (PPF):

You have Rs. 30 lakh in PPF, which provides stable and tax-free returns. This is a good foundation for your long-term financial goals.

Employee Provident Fund (EPF):

With Rs. 40 lakh in EPF, you have another solid, low-risk investment for retirement.

Fixed Deposit (FD):

Your Rs. 6 lakh in FDs offers safety but lower returns compared to other investments.

Life Insurance Policies:

Your LIC and postal life insurance policies provide life cover but might not be the most efficient investment vehicles in terms of returns.

Mutual Funds:

You have diversified mutual fund investments, including lump sums and SIPs. These funds can potentially offer higher returns over the long term.

Financial Goals
Your goal is to accumulate Rs. 50 lakh in the next 7-8 years. Let's analyze how to optimize your investments to achieve this target.

Strategic Investment Plan
Reviewing Life Insurance Policies:

Life insurance is crucial, but high premiums can limit investment potential. Consider term insurance for adequate life cover at lower costs. You can then redirect savings into high-return investments like mutual funds.

Mutual Fund Investments:

Mutual funds are a powerful tool for wealth creation. Your current SIPs are well-diversified across different fund categories. To reach Rs. 50 lakh, let's focus on optimizing these investments.

Optimizing SIPs
Current SIPs:

SBI Bluechip Fund: Rs. 1,000
SBI Contra Fund: Rs. 2,000
Kotak Small Cap Fund: Rs. 2,500
Parag Parikh Flexi Cap Fund: Rs. 2,500
Nippon Small Cap Fund: Rs. 2,500
Axis Quant Fund: Rs. 2,500
Suggested Adjustments:

Increase your SIP amounts in funds with strong performance histories and potential for high returns. Consider the following:

SBI Bluechip Fund: Increase to Rs. 3,000
SBI Contra Fund: Maintain Rs. 2,000
Kotak Small Cap Fund: Increase to Rs. 5,000
Parag Parikh Flexi Cap Fund: Increase to Rs. 5,000
Nippon Small Cap Fund: Maintain Rs. 2,500
Axis Quant Fund: Maintain Rs. 2,500
Lump Sum Investments
Existing Lump Sums:

ICICI Prudential Small Cap: Rs. 50,000
Axis Bluechip Fund: Rs. 70,000
SBI Balance Advantage Fund: Rs. 50,000
SBI Bluechip Fund: Rs. 3.69 lakh (now Rs. 5 lakh)
These lump sums have been performing well. Continue holding them for potential growth.

Future Lump Sum Investments:

Redirect your FD amount into mutual funds. FDs offer lower returns, and shifting this amount can boost your investment growth. Consider splitting Rs. 6 lakh into these funds:

Large Cap Fund: Rs. 2 lakh
Mid Cap Fund: Rs. 2 lakh
Small Cap Fund: Rs. 2 lakh
Investing the Savings from Insurance Premiums
LIC and Postal Life Insurance:

If you choose to surrender or reduce these policies, you can redirect the premium amounts into SIPs or mutual funds. For example:

Rs. 24,000 (LIC) + Rs. 29,000 (LIC) + Rs. 36,000 (Postal) = Rs. 89,000 annually
This amount can be added to your SIPs for higher returns.

Calculating the Future Value
Using a conservative return rate of 12% per annum for mutual funds, let's estimate the future value of your investments.

PPF and EPF:

Continue to grow steadily. Let's assume no additional contributions.

Mutual Funds:

With increased SIPs and redirected lump sums, your portfolio can grow significantly. For example:

Monthly SIPs: Rs. 20,000
Lump Sums: Rs. 6 lakh (initial) + growth
Over 7-8 years, these investments can potentially exceed Rs. 50 lakh, considering compounding returns.

Contingency and Emergency Funds
Maintain an emergency fund equivalent to 6 months of expenses. This ensures financial security in case of unexpected events.

Regular Review and Adjustment
Regularly review your investment portfolio. Adjust your SIPs and investments based on performance and market conditions. Annual rebalancing can help maintain your desired asset allocation.

Conclusion
By optimizing your current investments and increasing your SIP contributions, you can achieve your goal of Rs. 50 lakh in 7-8 years. Here’s a summary of the action plan:

Review and potentially surrender LIC policies.
Increase SIP contributions in high-performing funds.
Redirect FD amounts into mutual funds.
Maintain an emergency fund.
Regularly review and adjust your investments.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Financial Overview and Current Investments

You have a solid financial foundation with multiple investments. Your earnings are Rs 70,000 per month, and you have substantial savings and investments.

You have Rs 30 lakhs in PPF, Rs 40 lakhs in EPF, and Rs 6 lakhs in fixed deposits.

Your insurance premiums include Rs 24,000 and Rs 29,000 for LIC and Rs 36,000 for Postal Life Insurance.

You have invested Rs 50,000 in ICICI Prudential Small Cap, Rs 70,000 in Axis Bluechip Fund, and Rs 50,000 in SBI Balance Advantage Fund.

Your investment in SBI Bluechip Fund from 2014 has grown from Rs 3.69 lakhs to Rs 5 lakhs.

Your current SIPs are:

Rs 1,000 in SBI Bluechip Fund (running for 1.5 years)
Rs 2,000 in SBI Contra Fund (freshly added)
Rs 2,500 in Kotak Small Cap Fund (running for 2 years)
Rs 2,500 in Parag Parikh Flexi Cap Fund (running for 2 years)
Rs 2,500 in Nippon Small Cap Fund (freshly added)
Rs 2,500 in Axis Quant Fund (freshly added)
Evaluating Insurance vs. SIP Investments

Your LIC policies require a significant annual premium. Considering your goal of achieving Rs 50 lakhs in 7-8 years, it might be more efficient to reallocate these funds.

Insurance policies often offer lower returns compared to mutual funds. Thus, shifting your premiums to SIPs could potentially yield higher returns.

Advantages of SIPs in Mutual Funds

SIPs provide disciplined investing and benefit from rupee cost averaging. They also offer higher potential returns compared to traditional insurance policies.

You are already investing in a diverse range of funds, which is commendable. Diversification reduces risk and increases potential returns.

Assessing Your Current Mutual Fund Portfolio

Your mutual fund investments are well-diversified across large-cap, small-cap, and flexi-cap funds. This diversification balances risk and growth potential.

However, consider reviewing the performance of your funds periodically. Some funds may underperform, and it is wise to switch to better-performing ones if needed.

Achieving Your Goal of Rs 50 Lakhs

To achieve Rs 50 lakhs in 7-8 years, you need to focus on high-growth investments. SIPs in well-performing mutual funds are a great choice.

Based on historical performance, equity mutual funds have delivered substantial returns over the long term. Continue your SIPs and consider increasing the investment amount if possible.

Reallocating Your Investments

Consider stopping your LIC premiums and reallocating these funds to your SIPs. This reallocation can enhance your returns significantly.

For example, if you reallocate the Rs 53,000 (Rs 24,000 + Rs 29,000) annual premium to your SIPs, it could result in higher returns over time.

Reviewing Your Financial Plan Regularly

Regularly review and adjust your financial plan. The market conditions and fund performances change, and your plan should adapt accordingly.

A Certified Financial Planner can help you with these reviews and adjustments, ensuring your investments align with your goals.

Benefits of Actively Managed Funds

Actively managed funds can outperform the market, unlike index funds which merely track the market. These funds have the potential for higher returns due to expert management.

Your current mutual funds are actively managed, which is beneficial for achieving higher growth.

Disadvantages of Index Funds

Index funds only replicate the market index and lack the potential to outperform it. They are passive and do not adapt to market changes actively.

In contrast, actively managed funds are monitored by fund managers who can make strategic decisions to optimize returns.

Importance of Regular Fund Investments

Regular funds, invested through a mutual fund distributor with a CFP credential, offer professional guidance and expertise. This ensures your investments are well-managed and aligned with your financial goals.

Direct funds, although cheaper, lack professional guidance, which can impact the effectiveness of your investment strategy.

Conclusion

You have a strong financial base and a well-diversified investment portfolio. To achieve your goal of Rs 50 lakhs in 7-8 years, focus on reallocating your LIC premiums to SIPs.

Continue investing in your SIPs, review their performance regularly, and make adjustments as needed. Actively managed funds offer higher potential returns compared to index funds.

For optimal results, consider seeking advice from a Certified Financial Planner who can provide professional guidance and ensure your investments align with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have taken commendable steps towards securing your financial future. It’s inspiring to see your commitment to investing for your child's higher education and your daughter's marriage. Financial planning is crucial, and your efforts to build a diversified portfolio are noteworthy.

Current Financial Situation
You are 37 years old, earning Rs. 1.2 lakh per month. You have Rs. 48 lakhs in fixed deposits (FDs) and Rs. 18 lakhs in your Provident Fund (PF) account. Additionally, you will receive Rs. 20 lakhs from LIC in 2027.

Your current investments include:

Rs. 50,000 lump sum in SBI Energy Opportunities Fund
Rs. 50,000 lump sum in SBI Auto Fund
SIPs totaling Rs. 14,500 per month in various funds:
Edelweiss Small Cap Fund: Rs. 3,000
Kotak Emerging Equity Fund: Rs. 4,000
NJ Flexi Cap Fund: Rs. 1,500
HDFC Multicap Fund: Rs. 1,500 (plus Rs. 50,000 lump sum)
ICICI Prudential Value Discovery Fund: Rs. 1,000
You plan to increase your SIP to Rs. 30,000 per month.

Portfolio Analysis
Your current portfolio is diverse, covering small cap, mid cap, and multi-cap funds. However, it's essential to assess if the allocation aligns with your financial goals and risk tolerance.

Financial Goals and Investment Horizon
Child's Higher Education: Assuming your child is currently around 10 years old, you have roughly 8-10 years until higher education expenses begin.
Daughter's Marriage: Assuming your daughter is currently around 5 years old, you have roughly 15-20 years until her marriage expenses.
These timelines give you a medium to long-term investment horizon, allowing for a balanced approach between growth and stability.

Calculating Required Corpus
Child's Higher Education
Assume the cost of higher education today is Rs. 20 lakhs. With an average inflation rate of 6%, the cost after 10 years would be:

Future Cost = Current Cost × (1 + Inflation Rate)^Number of Years
Future Cost = 20,00,000 × (1 + 0.06)^10
Future Cost ≈ 35,80,000

Daughter's Marriage
Assume the cost of marriage today is Rs. 15 lakhs. With an average inflation rate of 6%, the cost after 20 years would be:

Future Cost = Current Cost × (1 + Inflation Rate)^Number of Years
Future Cost = 15,00,000 × (1 + 0.06)^20
Future Cost ≈ 48,10,000

SIP Required for Future Goals
To accumulate Rs. 35.8 lakhs in 10 years and Rs. 48.1 lakhs in 20 years, let’s calculate the SIP amounts needed. Assuming an average annual return of 12%, the monthly SIP required can be calculated using the future value of an SIP formula:

Future Value (FV) = P × [ (1 + r)^n - 1 ] / r × (1 + r)

Where:

P is the monthly investment (SIP amount)
r is the monthly rate of return (annual return / 12)
n is the total number of investments (months)
For a 12% annual return:
r = 12/100 / 12 = 0.01

For Higher Education (10 years):
n = 10 × 12 = 120

35,80,000 = P × [ (1 + 0.01)^120 - 1 ] / 0.01 × (1 + 0.01)
35,80,000 = P × 232.97 × 1.01
35,80,000 = P × 235.30
P ≈ 15,200

For Marriage (20 years):
n = 20 × 12 = 240

48,10,000 = P × [ (1 + 0.01)^240 - 1 ] / 0.01 × (1 + 0.01)
48,10,000 = P × 967.15 × 1.01
48,10,000 = P × 976.82
P ≈ 4,920

Recommended Monthly SIP
To meet both goals, you need to invest approximately Rs. 20,120 per month (Rs. 15,200 for education + Rs. 4,920 for marriage). This is well within your planned SIP increase to Rs. 30,000.

Reviewing and Adjusting Your Portfolio
Given your existing investments, it is essential to ensure they align with your goals and risk profile. Here’s a detailed review:

Existing SIPs
Edelweiss Small Cap Fund: Small-cap funds can provide high growth but come with high volatility. Limit to a smaller portion of your portfolio.
Kotak Emerging Equity Fund: Mid-cap fund, good for growth but also volatile.
NJ Flexi Cap Fund: Diversified across market caps, providing stability and growth.
HDFC Multicap Fund: Balanced approach with exposure to large, mid, and small caps.
ICICI Prudential Value Discovery Fund: Focus on undervalued stocks, adding stability to the portfolio.
Recommended Changes
Reduce Exposure to High-Risk Funds: Limit small-cap funds to 10-15% of your total portfolio to manage risk.
Increase Diversification: Add large-cap funds for stability. Large-cap funds tend to be less volatile and provide steady returns.
Focus on Goal-Based Allocation: Allocate investments specifically for education and marriage goals.
Suggested Allocation for Rs. 30,000 SIP
Large Cap Fund: Rs. 7,500
Multi Cap Fund: Rs. 7,500
Mid Cap Fund: Rs. 5,000
Small Cap Fund: Rs. 3,000
Flexi Cap Fund: Rs. 4,000
Value Fund: Rs. 3,000
Actively Managed Funds vs. Index Funds
While index funds replicate market indices, actively managed funds can outperform due to the expertise of fund managers. Actively managed funds are adaptable and can capitalize on market opportunities, offering potentially higher returns.

Direct vs. Regular Funds
Direct funds have lower expense ratios but require active management and market knowledge. Regular funds, managed through a Certified Financial Planner (CFP) and a Mutual Fund Distributor (MFD), provide professional guidance and can be beneficial for informed decision-making.

Monitoring and Rebalancing
Regularly review and rebalance your portfolio to stay aligned with your goals. Market conditions and personal circumstances change, so periodic reviews ensure your investments remain optimal.

Conclusion
To achieve your financial goals, increase your monthly SIP to Rs. 30,000 with a well-diversified portfolio. Focus on goal-based investments and consider professional guidance for effective fund management.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in