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Sunil

Sunil Lala  |203 Answers  |Ask -

Financial Planner - Answered on Feb 11, 2024

Sunil Lala founded SL Wealth, a company that offers life and non-life insurance, mutual fund and asset allocation advice, in 2005. A certified financial planner, he has three decades of domain experience. His expertise includes designing goal-specific financial plans and creating investment awareness. He has been a registered member of the Financial Planning Standards Board since 2009.... more
Asked by Anonymous - Jan 29, 2024Hindi
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I am 38 and my wife is 36, we have a child and live in Mumbai with my parents.I have started the following 4 SIPs 4 months back 1. PPFAS Flexicap- 15k 2. Nippon Small Cap- 15k 3. SBI Magnum Midcap-15k 4. Kotak Emerging Equities-15k Apart from that me and wife have around 80-82 lakhs in equity and around 7-8 lakhs in PPF and EPFO. Our goal is to have enough funds for our sons education and retirement by 50. Our monthly expenses right now are around 1.5 Lakhs. Are the above funds good enough to achieve these goals and would you recommend any other fund intead of the ones listed above. My aim is to generate maximum returns.

Ans: Your fund selection is good
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  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 04, 2024

Asked by Anonymous - Nov 04, 2024Hindi
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I am 44 years old and will retire at age of 58 yrs. Have 2 children of 14 and 7 yrs.Pllaning to get around 50 lakhs fund for their higher education and would require 5 Cr corpus by my retirement.inesting in PPF yrly 150,000. Current balance is 20lakhs. Own house no loan. currently I have monthly SIPs of 30K with current valuation 20lakhs. SBI Magnum gilt fund direct growth (5000),SBI equity hybrid fund regular growth (10000),SBI blue chip fund (2500),SBI Nifty index fund regular plan(5000),ICICI PRUDENTIAL focussed equity fund direct plan growth (5000), ICICI PRUDENTIAL BALANCED adv fund direct plan growth (5000).Kindly let me know if these funds are good and it these help in gaining my goals.plz suggest in case of any changes required
Ans: Let's dive into your investment strategy for building the targeted Rs. 5 crore retirement corpus and Rs. 50 lakh education fund. You are already taking commendable steps, such as investing consistently in mutual funds and PPF, holding an equity-heavy portfolio, and managing with zero debt. Let's assess and optimize your current plan for maximum impact.

 

Current Investment Review
Your SIP portfolio is well-diversified with a mix of equity, hybrid, and debt-oriented funds. Here’s a quick assessment of the types of funds you hold and some pointers to optimize them further:

Equity and Focused Funds
These funds offer growth potential, which aligns well with your long-term goals. Equity funds generally have higher returns over time, making them essential for building wealth. However, focusing more on actively managed funds could bring in a higher return than index funds over the long term. This would support your goals more robustly than passive funds like index funds.

Hybrid Funds
Hybrid funds provide a balance between growth and stability, which helps reduce volatility. Including them in your portfolio is beneficial as it helps diversify across asset classes. However, actively managed equity or hybrid funds could be more advantageous over passively managed options.

Debt and Gilt Funds
While gilt funds can provide stability, they’re not always optimal for long-term goals due to their lower returns compared to equity. If your risk tolerance allows, consider re-allocating part of this investment to high-growth funds to support your corpus goals.

 

Suggested Adjustments to Your Portfolio
To maximize your chances of reaching your goals, a few changes are recommended:

Shift to More Active Funds
Actively managed funds are designed to outperform their benchmarks, unlike index funds. By investing through a Certified Financial Planner, you can benefit from personalized fund management, allowing for better potential growth aligned with market conditions.

Reallocate from Gilt to Equity-Based Funds
Since your retirement horizon is 14 years, a higher equity allocation may suit your portfolio better. Consider moving a portion from gilt to diversified equity funds for greater growth.

Increase Monthly SIPs Gradually
To build the Rs. 5 crore corpus and fund your children’s education, increasing your monthly SIP contributions with an annual increment (say 5-10%) will boost your corpus significantly.

 

Education Fund Planning
Your goal of Rs. 50 lakh for children’s education in 4-8 years is achievable by focusing on medium-term investments. Here’s a suggested approach:

Equity Funds with a Defensive Mix
A combination of large-cap and balanced funds would suit this goal, providing both growth and some stability. These funds are resilient during market downturns and typically perform well in medium to long term, helping achieve your educational goal.

Hybrid or Dynamic Asset Allocation Funds
Hybrid funds can automatically adjust equity-debt allocation based on market conditions, offering a balance between risk and return. This strategy aligns well with your shorter horizon for education funding needs.

Consider Lump Sum Investments
If you have any spare cash flow or bonuses, consider making lump-sum contributions into education-specific funds. This can give a boost to your target corpus for educational needs.

 

Long-Term Retirement Planning for Rs. 5 Crore
Building Rs. 5 crore in 14 years requires consistent investments and an increased focus on equity. Here’s how to further align your portfolio:

Increase Equity Exposure Gradually
To achieve high growth, increasing your equity allocation is essential. Equity-oriented funds have historically shown robust performance over 10-15 years, aligning well with your retirement timeline. These funds offer a balanced risk-reward approach and should be prioritized in your SIP contributions.

Systematic Transfer Plan (STP)
In the final 3-4 years before retirement, consider moving investments systematically from equity to safer debt funds. This STP will help safeguard your accumulated corpus against market volatility.

Avoid Over-Reliance on PPF
While your PPF contributions add safety, their returns may be limited compared to equity funds. A balanced approach with equity SIPs as a major component can yield better results.

 

Understanding the Impact of Direct vs. Regular Funds
Although direct funds have lower expense ratios, working through a Certified Financial Planner (CFP) using regular plans can add significant value to your portfolio. Here’s why:

Customized Strategy and Guidance
A CFP provides tailored advice on fund selection, asset allocation, and market timing. Regular plans enable access to this professional support, often translating to better overall performance.

Ease of Management and Rebalancing
With regular plans, your CFP can help rebalance your portfolio based on market conditions, aligning it with your goals without additional effort on your part.

 

Addressing Index Funds in Your Portfolio
Index funds may be low-cost, but they are also passively managed, limiting their ability to respond to changing market trends. For long-term goals like retirement, actively managed funds could be more effective due to their potential to generate alpha.

Growth Potential of Actively Managed Funds
Actively managed funds can yield higher returns as fund managers actively select high-potential stocks. This is especially beneficial for aggressive goals like building a Rs. 5 crore retirement corpus.
 

Tax Implications of Mutual Fund Investments
It’s important to understand the taxation on mutual fund gains to make informed decisions.

Equity Mutual Funds
Long-term capital gains (LTCG) over Rs. 1.25 lakh are taxed at 12.5%. Short-term gains (within 1 year) are taxed at 20%. For your long-term goals, LTCG taxation may be more favorable as your SIPs will benefit from long-term growth.

Debt Mutual Funds
Both LTCG and STCG on debt funds are taxed based on your tax slab. For high-income individuals, debt funds might incur a higher tax, so equity-heavy SIPs are generally more tax-efficient over time.

 

Emergency Fund and Risk Management
Your existing investments are growth-oriented, but maintaining liquidity for emergencies is crucial.

Emergency Fund
Ensure you have at least 6-12 months of expenses in a high-liquidity instrument like a savings account or liquid fund. This way, you’re covered for unexpected needs without disrupting your long-term plans.

Insurance Cover
Ensure adequate health and life insurance coverage to protect your family’s future. This acts as a safety net, ensuring your retirement and education funds remain untouched even in emergencies.

 

Final Insights
Your investment portfolio and approach are well-aligned with your goals. By making minor tweaks, such as increasing equity exposure, transitioning to actively managed funds, and incrementing SIP contributions annually, you can achieve both the Rs. 50 lakh education fund and the Rs. 5 crore retirement corpus comfortably.

These adjustments, along with strategic planning for taxation and risk, can bring you closer to your financial goals. Continue investing consistently, stay disciplined, and reassess your portfolio every 1-2 years for optimal growth.

 

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

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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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