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Ramalingam Kalirajan |10894 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 23, 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

Question by Indoo on Sep 23, 2025Hindi

Hi, I am 38 years old, sole earner in the family. My savings are as follows: 10 lakh of PPF, 25 Lakh of PF, 32 Lakhs of LIC Sum Assured Endowment plan and one 1 crore term insurance. How can I give security and sustainability to my family. And further how can I plan my salary to be financially strong as I am drawing salary 1.2 lac/month.

Ans: You are doing really well by saving and protecting your family. Your commitment is visible. You already have PPF, PF, LIC, and term insurance. This shows that you are disciplined and care for family safety. Let us now look at the gaps and the way forward for long-term financial strength.

» Family Protection and Risk Coverage
– Your term insurance of Rs 1 crore is good.
– But as you are the only earner, you may need more cover.
– Ideally, life cover should be at least 12 to 15 times annual income.
– Your income is Rs 1.2 lakh per month, so yearly income is Rs 14.4 lakh.
– Based on this, life cover can be Rs 1.8 to 2 crore.
– You may increase the term insurance gradually.
– This will ensure full security if something unexpected happens.
– Health insurance for the whole family is also important.
– Medical costs rise faster than income.
– A good family health plan with Rs 10 to 15 lakh cover is useful.
– Personal accident insurance is also important.

» Reviewing Existing Savings and Investments
– You have Rs 10 lakh in PPF.
– You also have Rs 25 lakh in PF.
– Both are safe but returns are limited.
– They give around 7 to 8 percent per year.
– This will not beat inflation over the long term.
– LIC endowment policy gives you Rs 32 lakh sum assured.
– Such policies usually give only 4 to 5 percent returns.
– This return is very low compared to other options.
– Since you already have term insurance, you don’t need LIC endowment.
– You can surrender the endowment plan.
– The money can be reinvested in mutual funds with the guidance of a Certified Financial Planner.
– This way, you can target higher long-term growth.

» Building an Emergency Fund
– Financial security starts with an emergency fund.
– Keep at least 6 to 12 months’ expenses in liquid form.
– For you, monthly expenses may be around Rs 70,000 to 80,000.
– So, keep Rs 8 to 10 lakh as emergency fund.
– This can be parked in liquid mutual funds or bank deposits.
– This money is not for investment goals.
– It is only to handle medical or job loss situations.

» Systematic Wealth Creation with Mutual Funds
– Mutual funds help you build wealth better than PPF or LIC.
– Equity mutual funds are best for long-term wealth creation.
– Your age is 38, so you still have 20 years before retirement.
– This is good time for equity exposure.
– You can start SIP of Rs 40,000 to 50,000 every month.
– Mix across large-cap, flexi-cap, mid-cap, and small-cap funds.
– Actively managed funds are better than index funds.
– Index funds only follow the market.
– They cannot beat the market returns.
– They give average performance.
– Also, index funds don’t protect well in volatile markets.
– Actively managed funds give better chances of higher returns.
– Fund managers adjust portfolio as per market.
– This flexibility helps to capture opportunities.
– You can go with regular funds through a Mutual Fund Distributor with CFP credential.
– This will give you professional handholding.
– Direct funds may look cheaper, but they give no guidance.
– Many investors in direct plans make mistakes.
– Regular plans with guidance help avoid costly errors.

» Retirement Planning and Future Security
– Your PF and PPF will create a base for retirement.
– But these alone may not be enough.
– Inflation will reduce their real value over 20 years.
– Mutual funds can help create a much larger corpus.
– For example, Rs 40,000 monthly SIP for 20 years can grow big.
– This gives better retirement comfort than PF and PPF.
– Also plan to step up SIP every year by 5 to 10 percent.
– This will match your future income growth.
– Retirement planning should target at least 20 times annual expenses.
– That way, you can live comfortably without stress.

» Child Education and Family Goals
– Education costs are rising fast in India.
– If you have children, plan early.
– Keep a separate SIP for education fund.
– Choose diversified equity funds for long-term goals.
– For short-term goals, use debt mutual funds.
– Never mix education fund with retirement fund.
– Keep them separate to avoid future problems.

» Tax Efficiency in Investments
– PF and PPF already give tax-free returns.
– Equity mutual funds have new tax rules.
– Long-term gains above Rs 1.25 lakh are taxed at 12.5 percent.
– Short-term gains are taxed at 20 percent.
– Debt funds are taxed as per your slab.
– Even with tax, equity mutual funds are efficient.
– Because long-term wealth growth is much higher.

» Improving Cash Flow Management
– Your monthly income is Rs 1.2 lakh.
– First, keep 30 percent for EMIs and essential costs.
– Next, save at least 30 to 40 percent for investments.
– Keep 10 percent for insurance and protection.
– The rest can be used for lifestyle and family.
– Follow this system every month.
– Always pay yourself first by investing before spending.
– This builds discipline and financial strength.

» Insurance and Investment Separation
– Never mix insurance and investment.
– Insurance is for protection.
– Investments are for growth.
– LIC endowment mixes both and gives poor results.
– You already have a term plan.
– So pure investment through mutual funds is better.
– This separation keeps your plan clear.

» Financial Discipline and Behaviour
– Wealth creation is not just about choosing funds.
– It is also about discipline and patience.
– Don’t stop SIPs in market down years.
– Volatility is normal and temporary.
– Long-term investors always benefit.
– Review your portfolio once a year with a Certified Financial Planner.
– Avoid frequent switching or chasing past performance.
– Stick to your plan with consistency.

» Estate Planning and Family Safety
– Write a clear Will for your assets.
– Nominate family members in PF, PPF, LIC, and mutual funds.
– Keep all documents in one place.
– Inform your spouse or trusted member about them.
– This gives peace of mind and avoids future confusion.

» Finally
– You are already saving and protecting well.
– Increase your term insurance to cover income fully.
– Keep a proper emergency fund.
– Surrender endowment plan and invest in mutual funds.
– Start SIP for retirement and children goals.
– Use regular funds with CFP guidance for discipline.
– Separate insurance from investment.
– Focus on long-term patience and consistency.
– With this, your family will have security and sustainability.
– And you will build strong financial strength over time.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

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