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Ramalingam Kalirajan |8098 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 04, 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 - Jul 04, 2024Hindi

I am 38 year old single female. My per month earning is 1 Lakh 78thnd. I have not done any investment till date but also I have no savings due to some unfortunate circumstances. But now I have space to do investment. I need a guidance. I have done the investment in LIC life insurance of 1 Lakh Pension plan amount is minimum 450 rs monthly Can you suggest what investment i can do so it can help me after 20 years.

Ans: It's great to see your interest in securing your financial future. With a structured plan, you can turn things around and build a strong financial foundation over the next 20 years. Let's dive into how you can strategically invest your money.

Assessing Your Current Situation
At 38, with a monthly income of Rs 1.78 lakh, you have a good base to start investing. It's commendable that you have a pension plan through LIC, though it's a small contribution. Let's explore how to optimize your investments.

Evaluating Your Existing Investment
Your current LIC pension plan contributes Rs 450 monthly. While it's a start, this alone won't be sufficient for your long-term financial goals. Consider diversifying and increasing your investments for better returns.

Benefits of Diversified Investments
Diversification spreads your risk and can enhance returns. Let's look at the types of investments you can consider:

Equity Mutual Funds
These funds invest in stocks and have the potential for high returns. They're ideal for long-term investments as they can outperform inflation and grow significantly over time.

Debt Mutual Funds
These funds invest in bonds and other fixed-income securities. They provide regular income and are less risky compared to equity funds.

Hybrid Funds
Hybrid funds invest in both equities and debt, offering a balanced approach. They provide growth potential while mitigating risk.

Why Not Real Estate?
Real estate requires a large capital outlay and can be illiquid. It also involves maintenance and other costs. Given these factors, it's better to focus on more liquid and manageable investment options.

Drawbacks of Direct Funds
Direct funds might seem appealing due to lower expense ratios. However, they require active management and expertise. Without professional guidance, you might miss out on market opportunities or make suboptimal decisions.

Benefits of Regular Funds through a CFP
Investing through a CFP offers several advantages:

Expert Guidance: A CFP can help select the best funds based on your risk profile and goals.
Ongoing Monitoring: Continuous tracking and adjustments ensure your investments remain aligned with your objectives.
Better Returns: Professional management can lead to better returns through strategic adjustments.
The Power of SIPs (Systematic Investment Plans)
SIPs allow you to invest a fixed amount regularly, making it a disciplined and systematic approach to investing. This also helps in averaging out market volatility, ensuring better returns over time.

Suggested Investment Strategy
Given your current financial situation and long-term goals, here's a suggested strategy:

Emergency Fund
First, establish an emergency fund covering 6-12 months of expenses. This should be kept in a liquid fund or savings account for easy access.

Monthly SIPs
Consider allocating a significant portion of your monthly income to SIPs in diversified mutual funds. Here's a suggested allocation:

Equity Mutual Funds: 60-70% of your SIPs should go here for high growth potential.
Debt Mutual Funds: 20-30% for stability and regular returns.
Hybrid Funds: 10-20% for a balanced approach.
One-Time Investments
If you have any lump sum amounts in the future, invest them in diversified equity and debt funds. This helps in maintaining a balanced portfolio.

Benefits of Compounding
Investing for 20 years allows you to benefit from compounding, where your returns generate further returns. This can lead to exponential growth in your investments.

Regular Monitoring and Rebalancing
Regularly review and rebalance your portfolio to ensure it remains aligned with your goals. Market conditions change, and so should your investment strategy. A CFP can help with this.

Final Insights
Starting your investment journey now is a wise decision. With a structured plan and disciplined approach, you can build a substantial corpus over the next 20 years.

Diversify your investments across equity, debt, and hybrid funds to spread risk and enhance returns. Engage with a CFP for professional guidance, ensuring your investments are managed effectively. Establish an emergency fund and invest regularly through SIPs to benefit from the power of compounding.

Remember, consistency and regular monitoring are key to successful investing. By staying committed and making informed decisions, you can secure a strong financial future.

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.