Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |7209 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 24, 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
Arun Question by Arun on Oct 23, 2024Hindi
Money

I am 39 years old and working and taking care of family with present salary and i am selling a land for which i will get 20 lakhs so i want to invest this amount for long term purpose so can you guide me where should i invest and is there tax which i need to pay from this.

Ans: You have a salary-based income and are supporting your family. You are also selling a piece of land for Rs 20 lakhs, and you want to invest this amount for long-term purposes. You also want to understand the tax implications of this sale and ensure the investment aligns with your financial goals.

Let's explore both aspects: where to invest and the tax situation.

Tax Implications on Selling Your Land
From July 23, 2024, the new tax rules for real estate capital gains offer two options for taxation:

12.5% Tax Without Indexation: In this case, your long-term capital gains will be taxed at 12.5%, but you will not be able to adjust the cost of acquisition with inflation.

20% Tax With Indexation: This option allows you to adjust the cost of acquisition of the land with inflation, reducing the taxable gains, but you will pay a 20% tax rate on the adjusted gains.

It is important to decide which option benefits you based on how long you have held the property and the level of inflation over the period. A Certified Financial Planner can assist in calculating which of these options will give you better tax savings.

Long-Term Investment Options for Rs 20 Lakhs
Investing Rs 20 lakhs wisely can help you achieve significant financial growth. Based on your requirement for long-term investment, here are suitable options.

1. Equity Mutual Funds
High Growth Potential: Equity mutual funds have the potential to provide higher returns compared to other investment options. These funds invest primarily in stocks and are suitable for a long-term horizon of 5 to 10 years or more.

Diversification: Equity funds spread investments across various sectors and companies, reducing the risk of investing in individual stocks.

Tax Benefits: Long-term capital gains (LTCG) from equity mutual funds are taxed at 12.5% for gains above Rs 1.25 lakh. Short-term gains are taxed at 20%. Given your long-term perspective, equity mutual funds are a tax-efficient way to grow wealth.

2. Balanced or Hybrid Mutual Funds
Risk Mitigation: Balanced funds invest in both equity and debt instruments, providing a balance between growth and stability. These funds suit individuals who are not comfortable with the higher volatility of pure equity funds but still want exposure to growth.

Steady Growth: These funds generally give moderate returns but reduce the risk during market downturns. They are an excellent way to protect your investment while still allowing it to grow.

3. Debt Mutual Funds
Lower Risk Option: If you are looking for lower-risk investments, debt funds are a good alternative. They invest in bonds and government securities, offering stable returns. However, the returns are usually lower than equity funds.

Tax Efficiency: Debt funds are now taxed as per your income slab rate. Long-term capital gains in debt funds are taxed as per your income slab if held for over 36 months.

Capital Preservation: Debt funds are a better option for capital preservation, especially if you have low risk tolerance.

4. Systematic Withdrawal Plans (SWP)
Regular Income: If you prefer to have a fixed income from your investment, consider setting up a Systematic Withdrawal Plan (SWP) in mutual funds. It allows you to withdraw a fixed amount at regular intervals while the remaining corpus continues to grow.

Tax Advantage: Only the gains you withdraw are taxed, making it more tax-efficient than Fixed Deposits or other fixed-income options.

5. Public Provident Fund (PPF)
Safe Long-Term Investment: PPF is a government-backed scheme that offers an attractive interest rate and tax-free returns. It is one of the safest long-term investment options for risk-averse investors.

Lock-in Period: The lock-in period of PPF is 15 years, making it ideal for long-term goals like retirement.

6. Sukanya Samriddhi Yojana (SSY)
For Daughters' Future: If you have a daughter, this scheme is a highly tax-efficient and safe investment option. It offers higher interest rates than most small savings schemes, and the returns are completely tax-free.
Direct vs Regular Mutual Funds
It’s essential to clarify why direct plans of mutual funds, while attractive due to lower expense ratios, might not always be the best choice for investors.

Lack of Guidance: Direct plans do not provide access to advisory services. Without expert guidance from a Certified Financial Planner, it’s easy to make uninformed decisions that could negatively affect your portfolio.

Potential Missed Opportunities: By working with a Certified Financial Planner, you get personalised advice, timely portfolio rebalancing, and insights into changes in market conditions, which could significantly improve your investment performance over time.

For these reasons, regular plans through a Certified Financial Planner can be a more suitable option, especially for investors looking for long-term wealth creation with professional advice.

Actively Managed Funds vs Index Funds
While you are currently investing in index funds, it’s important to consider the drawbacks they have in comparison to actively managed funds.

Limited Returns: Index funds are passively managed, meaning they aim to match the returns of the index they follow. This can lead to underperformance in volatile markets.

Lack of Flexibility: Index funds do not have the flexibility to pick individual stocks or sectors that could outperform the index, which limits potential returns.

Market Risk: In a declining market, index funds will follow the index downwards without any strategy to minimise losses.

On the other hand, actively managed funds are handled by professional fund managers who use their expertise to pick the best-performing stocks, making them better suited for long-term wealth creation.

Insurance Considerations
If you hold LIC or ULIP policies, you may want to review their performance. Often, these policies do not provide competitive returns compared to mutual funds. Surrendering these policies and reinvesting in mutual funds can help you achieve better long-term growth.

Tax-Saving Opportunities
If you are looking to save tax on the sale of your land, consider reinvesting the gains in eligible capital gains saving schemes.

Capital Gains Bonds: Under Section 54EC of the Income Tax Act, you can invest the capital gains from the sale of property in bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC). These bonds have a 5-year lock-in period, and the interest earned is taxable. However, the principal amount is exempt from tax.

Residential Property: Another option is to reinvest the sale proceeds into buying or constructing a residential property under Section 54F. This option could also help you save on capital gains tax.

Final Insights
In conclusion, you have a variety of investment options that can help you achieve long-term financial growth. Based on your risk tolerance, you can choose between equity mutual funds for high returns, balanced funds for moderate risk, or debt funds for stability. PPF and SSY are great options for safe, long-term investments.

It’s also important to decide the best tax option for the sale of your land. Using the Certified Financial Planner's expertise, you can choose the right tax-saving strategy, whether it’s opting for indexation benefits or reinvesting in capital gains bonds or property.

By staying focused on long-term wealth creation, making informed decisions, and using expert guidance, you can grow your Rs 20 lakhs into a strong financial foundation for your future.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7209 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2024

Listen
Money
I have sale my land of Rs 80 lakhs. I don't know how to invest my money but I want regular monthly income from my investment. Please guide me sir
Ans: Maximizing Returns from Your Land Sale Proceeds

Congratulations on the successful sale of your land! With the proceeds of Rs 80 lakhs, you have an excellent opportunity to generate regular monthly income through strategic investments. Let's explore suitable options to help you achieve your goal.

Fixed Deposits (FDs) or Recurring Deposits (RDs):
Consider allocating a portion of your proceeds to fixed deposits or recurring deposits with banks or financial institutions. While FDs offer a fixed interest rate for a specific term, RDs allow you to invest a fixed amount regularly for a predetermined period. Both options provide stability and predictable returns, ensuring a steady monthly income.

Dividend-Paying Stocks:
Investing in dividend-paying stocks of established companies can provide a regular stream of income through dividend payments. Focus on companies with a consistent track record of dividend payouts and stable financial performance. Dividend income from stocks can supplement your monthly cash flow while potentially offering capital appreciation over time.

Monthly Income Plans (MIPs) or Debt Mutual Funds:
Monthly Income Plans (MIPs) offered by mutual funds allocate a portion of investments to debt securities while providing regular income through dividends or interest distributions. Similarly, debt mutual funds invest in a mix of fixed income securities, offering stable returns and liquidity. Opting for MIPs or debt funds can generate monthly income while maintaining capital preservation.

Systematic Withdrawal Plans (SWPs):
Investing in mutual funds and setting up Systematic Withdrawal Plans (SWPs) allows you to withdraw a fixed amount regularly, providing a steady income stream. By choosing the appropriate fund category based on your risk tolerance and investment horizon, you can customize SWPs to meet your monthly income needs while potentially benefiting from capital appreciation.

Annuity Plans:
Consider purchasing annuity plans offered by insurance companies, which provide a guaranteed income for life in exchange for a lump sum investment. Annuities offer security and peace of mind by ensuring a regular stream of income throughout retirement. Evaluate different annuity options to select one that aligns with your financial objectives and risk appetite.

Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InvITs):
REITs and InvITs allow investors to participate in income-generating real estate and infrastructure projects. By investing in these trusts, you can diversify your portfolio and receive regular dividends, providing an additional source of monthly income.

Professional Advice:
Consulting with a Certified Financial Planner (CFP) can help you develop a comprehensive investment strategy tailored to your financial goals, risk tolerance, and income requirements. A CFP can assess your financial situation, recommend suitable investment options, and provide ongoing guidance to ensure your financial well-being.

In Conclusion:

By diversifying your investments across various income-generating avenues, you can create a balanced portfolio that generates regular monthly income while preserving capital. Evaluate each option carefully, consider your financial objectives, and seek professional advice to make informed investment decisions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7209 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

Asked by Anonymous - Apr 28, 2024Hindi
Listen
Money
I have 10 Lakhs now to invest and I need this may be after 5 years for a down payment of House purchase. Please suggest where should I invest? Note: I have no debt, living in rental house. I am fine for market risk.
Ans: Understanding Your Investment Goals
You have ?10 lakhs to invest for a period of five years to fund a house down payment. Since you are comfortable with market risks, you can explore investment options that balance growth potential with some degree of safety.

Short-Term vs. Long-Term Investments
Given your five-year timeline, it's crucial to strike a balance between growth and stability. Short-term volatility can impact your investment if not managed well. Diversifying your investment can mitigate this risk.

Recommended Investment Options
Actively Managed Mutual Funds
1. Equity-Oriented Hybrid Funds:

These funds invest in both equities and debt instruments.
They offer growth potential from equities and stability from debt.
They are managed by professionals who can adapt to market changes.
Actively managed funds can outperform passive index funds through strategic decisions.
2. Balanced Advantage Funds:

These funds dynamically adjust the allocation between equity and debt based on market conditions.
They offer a balanced risk-reward ratio suitable for a five-year investment horizon.
They reduce risk during market downturns by increasing debt allocation.
3. Flexi Cap Funds:

These funds invest across large, mid, and small-cap stocks.
They provide diversified equity exposure with the flexibility to shift between different market caps.
Fund managers actively manage these funds to optimize returns based on market conditions.
Direct vs. Regular Funds
Regular Funds through a Certified Financial Planner:

While direct funds have lower expense ratios, regular funds offer professional guidance.
A Certified Financial Planner (CFP) helps monitor and adjust your portfolio.
CFPs provide insights into market trends, helping to maximize your returns and manage risks.
The cost difference between direct and regular funds is often outweighed by the benefits of expert advice.
Diversification and Risk Management
Diversification:

Diversify your investment across different funds to reduce risk.
Consider a mix of equity-oriented hybrid funds, balanced advantage funds, and flexi cap funds.
Diversification helps manage market volatility and enhances potential returns.
Systematic Investment Plan (SIP):

Consider investing a portion of your ?10 lakhs through a SIP.
SIPs spread your investment over time, reducing the impact of market volatility.
They enforce disciplined investing and reduce the risk of market timing.
Monitoring and Review
Regular Review:

Regularly review your investment portfolio to ensure it aligns with your goals.
Market conditions and personal circumstances can change, necessitating adjustments.
A Certified Financial Planner can provide ongoing advice and portfolio rebalancing.
Adjusting Based on Performance:

Monitor the performance of your chosen funds.
If a fund consistently underperforms, consider switching to a better-performing one.
Ensure your investment stays on track to meet your down payment goal.
Final Thoughts
Investing ?10 lakhs with a five-year horizon requires a balanced approach. Actively managed mutual funds, especially equity-oriented hybrid, balanced advantage, and flexi cap funds, offer a good mix of growth potential and stability. Regularly review your investments and consider professional guidance to optimize your portfolio. Your comfort with market risk allows you to take advantage of equity market growth, while diversification helps manage risks.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7209 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 10, 2024

Money
Hallo sir,I am serving in a private sector,and now I am 60 years old.I want to sale my landed property for around sixty lakhs.Where can I invest that amount so that I can get around 30 thousand per month for my living
Ans: You are 60 years old and plan to sell your property for Rs. 60 lakh. You wish to receive approximately Rs. 30,000 per month for living expenses. This is a common scenario for many retirees who wish to generate a steady monthly income after their working life.

Let’s explore the best ways to achieve your goal of a regular monthly income while keeping your capital secure and maximising returns.

Factors to Consider Before Investing
Before we dive into specific investment options, it’s crucial to evaluate a few factors that will influence your decision:

Risk Tolerance: Since you are nearing retirement, your ability to take risks is lower. Focus on less risky options with stable returns.

Inflation: Ensure that the income generated keeps pace with inflation over time. Rs. 30,000 today may not have the same purchasing power 10 years from now.

Liquidity: You may need to access the funds in emergencies. Ensure that part of your investment remains easily accessible.

Tax Efficiency: It is important to consider the tax treatment of your income sources to minimize the tax burden.

With these considerations in mind, let’s explore the available options.

Investment Strategies for Generating Monthly Income
1. Systematic Withdrawal Plans (SWP) from Mutual Funds
One of the most effective ways to create a regular income is through a Systematic Withdrawal Plan (SWP) in mutual funds.

Equity Funds: Equity mutual funds have the potential to offer higher returns over the long term, though they come with some risk. Withdrawing Rs. 30,000 per month while the principal continues to grow in value could be a good strategy.

Balanced/Hybrid Funds: These funds offer a balance between equity and debt. They tend to be less volatile than pure equity funds but can still provide inflation-beating returns. This mix can give you some capital appreciation while generating stable income.

Debt Funds: These funds are lower risk and can generate consistent income. Though they may not provide high returns, they offer stability and are less volatile.

With an SWP, you can withdraw a fixed amount each month from your investment. It allows you to receive a steady income while leaving the principal to grow or at least remain stable.

Ensure to consult with a Certified Financial Planner (CFP) to help you select the best funds suited for your risk tolerance and goals.

2. Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme (SCSS) is designed specifically for retirees like you. It offers:

Guaranteed returns, with the interest being paid quarterly.
The safety of capital since it is backed by the Government of India.
The current interest rate on SCSS is competitive. By investing a portion of the Rs. 60 lakh (the maximum limit is Rs. 15 lakh), you can generate a safe and stable income.

This scheme would provide some of the guaranteed income, while the rest of your capital could be invested in other higher-return options.

3. Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is another safe investment option for retirees seeking regular income.

It offers fixed monthly interest payments.
The maximum investment limit is Rs. 9 lakh for joint accounts and Rs. 4.5 lakh for individual accounts.
Like SCSS, POMIS can form the fixed-income part of your portfolio. The interest earned can supplement your monthly expenses while keeping the capital safe.

4. Corporate Fixed Deposits (FDs)
Corporate FDs typically offer higher interest rates compared to bank FDs. However, they come with some risk, so it’s important to choose a company with a strong credit rating.

You can opt for non-cumulative deposits that pay monthly interest, providing a regular stream of income.
Ensure that you diversify the investment across different companies to mitigate risk.
Corporate FDs can provide a reliable income stream if you are cautious in selecting safe options.

5. Debt Mutual Funds
Debt mutual funds invest in fixed-income securities like bonds, government securities, and corporate debt. They are relatively low risk compared to equity funds and can offer decent returns.

They offer better tax efficiency than bank FDs if you plan to hold them for more than three years. Long-term capital gains (LTCG) on debt funds are taxed at a lower rate with indexation benefits.

You can use a Systematic Withdrawal Plan (SWP) with debt funds to generate monthly income, just like in equity funds.

By investing in debt funds, you may balance stability with better post-tax returns.

6. Monthly Income Plans (MIPs) from Mutual Funds
Monthly Income Plans (MIPs) are hybrid mutual funds that invest predominantly in debt but have a small exposure to equity (around 10-15%).

These plans aim to provide a regular payout to investors, though the payout is not guaranteed.
MIPs tend to generate slightly better returns than pure debt instruments because of the small equity exposure, but they carry a bit more risk.
While MIPs don’t offer guaranteed monthly income, they are more tax-efficient and have a higher return potential than bank FDs or post office schemes.

7. Tax Considerations
When you start withdrawing from your investments, it is important to keep taxation in mind.

SWP from Mutual Funds: If you invest in equity-oriented funds and hold them for more than a year, your long-term capital gains (LTCG) over Rs. 1.25 lakh will be taxed at 12.5%.

SCSS and POMIS: Interest earned from these schemes is fully taxable according to your income tax slab.

Debt Funds: LTCG from debt funds are taxed as per your income tax slab, but you get indexation benefits if held for more than three years, which can reduce your tax liability.

Make sure to consult with a CFP to understand the tax impact of your withdrawals and how to optimise them.

8. Emergency Fund and Contingency Planning
It’s important to maintain an emergency fund for any unexpected expenses that may arise.

Set aside 6 to 12 months of your monthly expenses in a liquid fund or short-term FD. This fund should be easily accessible at all times.

This will ensure that you don’t need to dip into your main investments for emergency needs.

By securing your immediate financial needs, you can better manage your retirement corpus.

Structuring Your Rs. 60 Lakh for Monthly Income
Given your goal of generating Rs. 30,000 per month, here’s a potential strategy for allocating your Rs. 60 lakh to generate regular income while maintaining safety:

Rs. 15 lakh in SCSS for guaranteed quarterly payouts. This will provide around Rs. 9,000-10,000 per month.

Rs. 9 lakh in POMIS for fixed monthly interest, generating approximately Rs. 5,500-6,000 per month.

Rs. 30 lakh in a combination of Debt Mutual Funds and Balanced Funds. You can initiate a Systematic Withdrawal Plan (SWP) for the remaining Rs. 15,000-20,000 monthly income, depending on the performance of the funds.

Rs. 6 lakh in a liquid fund or short-term FD for emergencies, providing immediate liquidity if needed.

This strategy provides a mix of safety, income generation, and some growth potential to keep pace with inflation.

Best Practices to Ensure a Secure Retirement
Diversification: Spread your investments across different asset classes to reduce risk. Avoid putting all your money in one product.

Review Your Investments Regularly: As your needs and the market evolve, review and rebalance your portfolio with the help of a CFP.

Health Insurance: Ensure you have adequate health insurance. Health costs can be significant in retirement, and having the right insurance can help protect your savings.

Don’t Depend Entirely on One Income Source: Ensure you have multiple streams of income, such as interest, dividends, or rental income, to reduce dependency on one source.

Estate Planning: Create a will and ensure your investments are in line with your estate planning goals to avoid complications later.

Finally
Your Rs. 60 lakh can comfortably generate Rs. 30,000 per month if invested wisely. The key is to create a diversified portfolio that balances safety, income, and growth. Combining SCSS, POMIS, SWP from mutual funds, and some low-risk debt instruments can help achieve your goal.

Review your investments regularly and ensure that your retirement portfolio remains aligned with your long-term financial needs.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Dr Anshuman

Dr Anshuman Manaswi  |6 Answers  |Ask -

Plastic-Aesthetic Surgeon, Emergency Care Consultant - Answered on Dec 05, 2024

Asked by Anonymous - Dec 05, 2024Hindi
Listen
Health
Dear Doctor, I work as a corporate lawyer in Delhi. I’ve been considering undergoing a cosmetic procedure for my skin for some time now, but I’m feeling a bit overwhelmed by the number of surgeons available. I want to ensure that I choose someone who is experienced, as this is a big decision for me. Could you advise what I should look for when selecting a plastic-aesthetic surgeon? Are there any specific red flags I should be aware of when researching potential surgeons? I want to make sure I’m in safe hands. I’m 40 years old.
Ans: This is a beautiful question.
Before I dwell on your question, there are a few points which are very important for the patient to know.
1. You should roughly know what result you wish to have.
2. Never think of a perfect result. There is no such result.
3. You must think in terms of improvement and if you are sble to achieve more than 90% approx, it can be considred good.
4. Dont compare your results with any celebrity's result. There body structure is different, they have probably taken better care till now and importantly, the result you see on a public platform is after make up and not the real result. Some times it may be a photoshopped image
5. Let your doctor know if you have any medical history and addictions.
6. Don't go with pre concieved notion (especially if you have researched a lot online). Discuss with the doctor, listen to his/ her views and raise your concerns if any
7. Try and see some results of the doctors work (Remember, too good a result may not be the true result). Realistic result is what you should want to look at and believe.
8. Don't fall for less budget! its obvious a meticulous job needs more surgical time. This means that the doctor may charge more. Seniority also adds to the cost.
What I mean, there is a price to be paid for a good job.(whether medical or anywhere).
Now coming to the Plastic surgeon's choice.
1. Research well, but dont fall prey to only advertisement. Small and big centers, both advertise,
2. Dont fall for glamour. You are going to a surgeon. A plastic surgeon's clinic is clean but not lavish generally. At least I believe that the person coming is not a client, but a patient. A patient - Doctor relationship is more pure than a client-Professional relationship.
3. Talk and discuss with the doctor. A too busy doctor may not always be the best doctor for you. Plastic surgery is about thinking, planning and execution. A doctor who thinks aloud about your problem ( especially if ut us face, nose, breast etc) is applying his/ her knowledge for your betterment, because every oerson is different.
4. Check the resilts? Look for genuinity.
5. Be wary of arrogant, loud and boisterous people. There is a difference between confidence and fambloyence.
6. Doctors who are attached to reputed hospitals are generally good in their work.
7. A doctor who can talk about probable complications is also a doctor worth trusting.
I hope I am able to do justice to this difficult question. All the best. You can write again if you need any other clarifications.
Dr. Anshuman Manaswi

...Read more

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x