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Vivek

Vivek Lala  |301 Answers  |Ask -

Tax, MF Expert - Answered on Mar 12, 2024

Vivek Lala has been working as a tax planner since 2018. His expertise lies in making personalised tax budgets and tax forecasts for individuals. As a tax advisor, he takes pride in simplifying tax complications for his clients using simple, easy-to-understand language.
Lala cleared his chartered accountancy exam in 2018 and completed his articleship with Chaturvedi and Shah. ... more
Saikat Question by Saikat on Nov 28, 2023Hindi
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I am 40 years old and currently residing out of india and parked 1 cr in NRE tax free deposits and have nearly 30 lakks in mutual funds. I would like your guidance to invest my FD amounts in some other place to get more monetary gains. Please advice.

Ans: Hello, you can diversify your money in FD in the following funds provided your time horizon is 7 years plus :
Small cap - 20%
Mid cap - 20%
Multi cap - 20%
Large and mid cap - 20%
Focused fund - 10%
Thematic fund - 10%

Please note that these suggestions are based on your stated goals and the information you provided. It is always a good idea to consult with a financial advisor in person to better understand your risk tolerance, time horizon, and specific financial goals.
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  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2024

Money
I am a retired army officer with 1 CR in FD.I am now working in a bank with 95 000 rs as take home salary.I am 39 years old.i have no liabilities. I am single. Please guide where should I invest my FD amount so as to get better returns. I would not like to invest in shares. Regards Maj Abhishek
Ans: Hi Maj Abhishek,

Firstly, I want to appreciate your dedication and service to our country. It’s an honour to assist you with your financial planning. Let's explore some investment options that suit your profile and goals.

Understanding Your Financial Landscape
You’ve done a commendable job by saving Rs 1 crore in a fixed deposit (FD). It shows discipline and a focus on financial security. Your monthly income of Rs 95,000, without any liabilities, puts you in a strong financial position. At 39, you have a good time horizon to grow your wealth. Let’s explore some investment avenues that can offer you better returns than FDs, while managing risks effectively.

Mutual Funds: A Balanced Approach
Mutual funds are a great way to diversify your investments. They pool money from many investors to invest in various assets like stocks, bonds, and other securities.

Categories of Mutual Funds
Equity Mutual Funds

These funds invest in stocks and aim for high returns over the long term. They come with higher risks compared to debt funds. Given your age and financial stability, equity mutual funds can be a good choice for a portion of your investments.

Debt Mutual Funds

These funds invest in fixed-income securities like government and corporate bonds. They are less risky than equity funds and provide more stable returns. They can be a good option for maintaining liquidity and safety in your portfolio.

Hybrid Mutual Funds

These funds invest in a mix of equities and debt. They balance the potential for higher returns from equities with the stability of debt. This can be a good option for someone like you who seeks moderate risk and balanced growth.

Advantages of Mutual Funds
Professional Management
Mutual funds are managed by experienced fund managers who make investment decisions on your behalf. This is beneficial if you prefer not to handle the complexities of individual stock picking.

Diversification
Mutual funds provide diversification by investing in a variety of assets. This reduces risk compared to investing in individual securities.

Liquidity
Mutual funds offer good liquidity, allowing you to redeem your units on any business day at the current NAV.

Compounding Power
Investing in mutual funds over the long term allows your returns to compound, significantly enhancing your wealth. Regular investments through Systematic Investment Plans (SIPs) can further boost your returns.

Actively Managed Funds vs. Index Funds
You may have heard about index funds, but let’s discuss why actively managed funds can be a better choice.

Disadvantages of Index Funds
Index funds replicate a market index. They offer average market returns and lack the flexibility to respond to market changes. They may not perform well during market downturns.

Benefits of Actively Managed Funds
Actively managed funds aim to outperform the market by making strategic investment choices. The fund manager actively buys and sells securities to take advantage of market opportunities. This can potentially offer higher returns, especially in volatile markets.

Regular Funds vs. Direct Funds
Investing through a Certified Financial Planner (CFP) can be advantageous.

Disadvantages of Direct Funds
Direct funds require you to handle all investment decisions and paperwork. This can be time-consuming and complex, especially without professional guidance.

Benefits of Regular Funds
Investing through a CFP ensures you get expert advice tailored to your financial goals. A CFP can help you choose the right funds, monitor your portfolio, and make adjustments as needed. The guidance of a CFP can be invaluable in optimizing your returns and managing risks.

Systematic Investment Plans (SIPs)
SIPs allow you to invest a fixed amount regularly in mutual funds. This approach is beneficial for disciplined investing and takes advantage of rupee cost averaging. SIPs can help mitigate market volatility and build wealth over time.

Risk Assessment and Management
Understanding and managing risk is crucial. Mutual funds come with different risk levels.

Equity Funds Risks
Equity funds are subject to market risks and volatility. However, they have the potential for higher returns over the long term.

Debt Funds Risks
Debt funds carry lower risk compared to equity funds but are not risk-free. They are subject to interest rate risk and credit risk.

Hybrid Funds Risks
Hybrid funds balance the risks of equity and debt investments. They offer moderate risk and are suitable for balanced growth.

Insurance Policies and ULIPs
If you have any LIC, ULIP, or investment-cum-insurance policies, consider reviewing them. These policies often have lower returns compared to mutual funds. Surrendering these policies and reinvesting in mutual funds could be a better option for higher returns.

Tax Efficiency
Mutual funds offer tax benefits compared to FDs. Long-term capital gains (LTCG) from equity funds are tax-free up to Rs 1 lakh per annum. Gains above this are taxed at 10%. Debt funds held for more than three years qualify for indexation benefits, reducing the taxable amount.

Emergency Fund
It’s important to keep an emergency fund equal to 6-12 months of expenses. This fund should be in a liquid asset like a savings account or a liquid mutual fund. It ensures you have quick access to cash in case of unexpected expenses.

Retirement Planning
Given your age, retirement planning should be a priority. Investing in a mix of equity and debt mutual funds can help build a substantial retirement corpus. Regularly reviewing and adjusting your portfolio will ensure it aligns with your retirement goals.

Diversification
Diversification is key to managing risk. A well-diversified portfolio across different asset classes can provide better risk-adjusted returns. Avoid putting all your money in one type of investment.

Professional Guidance
Working with a Certified Financial Planner (CFP) can provide you with personalized investment strategies. A CFP can help you navigate the complexities of the financial markets and make informed decisions.

Final Insights
Investing your FD amount in a diversified portfolio of mutual funds can offer better returns than FDs. Equity, debt, and hybrid funds each have their advantages and risks. Balancing these funds in your portfolio can help you achieve your financial goals while managing risks.

Working with a CFP can provide you with expert guidance and peace of mind. SIPs can instill disciplined investing and take advantage of compounding.

Regularly reviewing your investments and making adjustments is essential to stay on track with your financial goals. With careful planning and professional advice, you can optimize your returns and build a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2024

Asked by Anonymous - Jul 03, 2024Hindi
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Hi Sir, I am a Non-Resident Indian with 10 lakhs in my NRE account. Currently, I do not need this money for six months. I am hesitant to put this money into Fixed Deposits or Savings accounts. Would it be advisable to invest in Mutual Funds? Alternatively, could you please suggest a safe investment option other than Fixed Deposits and Savings accounts?
Ans: It’s great that you have Rs. 10 lakhs in your NRE account. Having this liquidity gives you a lot of flexibility. Let’s explore your options to grow this money effectively while balancing safety and potential returns.

Understanding Your Situation
You mentioned you do not need this money for six months. That gives you a short-term investment horizon. We need to consider both safety and potential returns.

Mutual Funds: A Balanced Approach
Mutual funds can be an excellent option. They offer diversification, which spreads risk across various assets. Since you are looking for a short-term investment, we should focus on categories suited for shorter horizons.

Types of Mutual Funds for Short-Term Investment
Liquid Funds:

These are ideal for short-term investments. They invest in very short-term debt instruments. They offer higher returns than savings accounts and are relatively low risk.

Ultra-Short Duration Funds:

These funds invest in debt instruments with slightly longer maturities than liquid funds. They offer a balance between safety and returns.

Short-Term Debt Funds:

If you can extend your investment horizon slightly beyond six months, short-term debt funds are worth considering. They invest in debt instruments with maturities of one to three years.
Arbitrage Funds:

These funds exploit price differences in different markets. They are relatively safe and provide returns comparable to short-term debt funds.

Money Market Funds:

These invest in short-term instruments like treasury bills, commercial paper, and certificates of deposit. They are low-risk and suitable for short-term investments.
Advantages of Mutual Funds
Diversification:

Your investment is spread across multiple securities, reducing risk.

Professional Management:

Fund managers make informed decisions based on market research and analysis.

Liquidity:

You can easily redeem your investments without significant penalties.

Flexibility:

You can choose funds based on your risk appetite and investment horizon.

Risks to Consider
Market Risk:

Even though short-term debt funds are relatively stable, they are not entirely risk-free.

Interest Rate Risk:

Changes in interest rates can affect the returns of debt funds.

Regular vs. Direct Funds
Investing through a Certified Financial Planner (CFP) can be beneficial. Regular funds through an MFD with CFP credentials provide professional guidance. Direct funds might seem cost-effective, but the lack of expert advice can lead to suboptimal decisions.

I appreciate your cautious approach. It's wise to consider alternatives to traditional fixed deposits. Your decision to explore mutual funds shows your willingness to grow your wealth while managing risk. It’s also great that you’re seeking advice to make informed choices.

Final Insights
Investing Rs. 10 lakhs for six months requires a balanced approach. Mutual funds, especially liquid and ultra-short duration funds, offer a good mix of safety and returns. They provide diversification, professional management, and liquidity. If you prefer not to invest in mutual funds, treasury bills and money market funds are safe alternatives.

Always consider your risk tolerance and investment horizon. Consulting a Certified Financial Planner can help tailor investments to your needs. They can provide valuable insights and help you navigate the investment landscape effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 28, 2024

Asked by Anonymous - Oct 27, 2024Hindi
Money
Hi, Im 49 years and have opted for retirement. Will be returning to India by Dec 2024. Currently have 7.5 Cr invested in NRE FD's which i dont intend renewing post Apr 2025. Please suggest where i should invest this corpus . I am looking at a monthly income of 4.5 lakhs post tax
Ans: To meet your Rs 4.5 lakh monthly income requirement, it’s essential to optimise your current corpus. A combination of investments with stable returns and moderate growth potential can provide this.

Required Monthly Income Post-Tax: At Rs 4.5 lakh per month, your annual need is Rs 54 lakh post-tax.

NRE Fixed Deposits Maturity Consideration: Since you don’t intend to renew your NRE FDs, exploring alternatives will ensure efficient tax management and long-term income.

Investing in Debt-Oriented Instruments for Stability

Debt-oriented instruments offer predictable returns and can help stabilise your portfolio.

Senior Citizen Savings Scheme (SCSS): Given your age, SCSS can offer high fixed interest rates. The scheme has a five-year lock-in, making it suitable for a long-term income goal.

Corporate Bonds and Government Bonds: Investment-grade corporate bonds or government bonds offer decent returns with relatively low risk. However, choose high-credit-rated bonds for lower volatility.

Debt Mutual Funds: Debt funds are tax-efficient, especially in the long term. By holding investments for over three years, you can benefit from long-term capital gains with indexation benefits.

Balancing Income and Growth through Hybrid Mutual Funds

A combination of stability and growth helps offset inflation and maintain purchasing power. Hybrid mutual funds are ideal here.

Balanced Hybrid Funds: These funds balance equity and debt, providing moderate growth and stability. Income generation and capital appreciation ensure both income and growth needs.

Equity Savings Funds: These funds have limited equity exposure and focus on debt. The equity component brings slight growth potential, while the debt provides stability.

Tax-Efficient Monthly Income from SWP in Mutual Funds

Systematic Withdrawal Plans (SWP) allow tax-efficient withdrawals. This strategy provides a monthly income while managing tax exposure effectively.

Using SWP from Equity-Oriented Funds: Equity mutual funds held for over a year are subject to lower long-term capital gains tax. An SWP allows regular income with reduced tax liability compared to traditional interest-bearing instruments.

Choosing Growth Option over Dividend: Opt for growth funds and SWP over dividend options to control the timing and tax impact of each withdrawal.

Incorporating Equity Exposure for Inflation Beating Returns

Equity investments add growth potential and counter inflation over time. A 20-30% allocation in equity-focused investments balances risk and returns.

Actively Managed Equity Funds: Actively managed funds offer the potential for growth and outperformance. These funds can be adjusted based on market trends and portfolio requirements.

Flexi-Cap and Large-Cap Funds: Focus on Flexi-Cap and Large-Cap funds with a moderate risk level. Flexi-Cap funds adapt to changing market conditions, while large-cap funds provide stability with blue-chip stocks.

Ensuring Emergency Fund and Health Coverage

Before finalising your investment, securing an emergency fund and medical insurance is vital.

Emergency Fund for Liquidity Needs: Set aside 6-12 months of expenses in a liquid, risk-free account. This fund helps manage unexpected expenses without affecting long-term investments.

Health Insurance for Medical Security: Ensure comprehensive health coverage to avoid out-of-pocket expenses. It’s crucial as you move into retirement without employer-sponsored coverage.

Tax Planning and Efficient Withdrawals

Tax-efficient planning is essential to maintain post-tax income at Rs 4.5 lakh monthly. Regularly reviewing the tax impact of each withdrawal helps meet your income target.

Capital Gains on Equity and Debt Funds: Keep your equity mutual fund withdrawals under Rs 1.25 lakh annually to stay in the 12.5% LTCG bracket. For debt funds, withdrawals are taxed as per your income slab.

Optimising SWP for Tax Efficiency: Withdraw smaller amounts consistently to benefit from lower tax liabilities. An SWP with a higher initial corpus but lower withdrawal rate balances tax efficiency and income.

Monitoring and Reviewing Investments Regularly

Periodic reviews help optimise portfolio returns and manage risk as your retirement progresses.

Annual Portfolio Review: Adjust your portfolio annually based on income needs, market trends, and any changes in tax laws. Consulting a Certified Financial Planner can provide valuable insights for these adjustments.

Evaluating Income against Inflation: Income needs may increase over time due to inflation. Consider small increments in equity allocation to preserve purchasing power.

Final Insights

Crafting a retirement income strategy requires balancing stability, growth, and tax efficiency. By optimising each investment type and using tax-efficient withdrawal strategies, you can achieve your monthly income target while maintaining capital.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Latest Questions
Radheshyam

Radheshyam Zanwar  |1054 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Nov 21, 2024

Asked by Anonymous - Nov 21, 2024Hindi
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Hello, I am 3 yr neet dropper.in 2025 it will be my third attempt... I'm trying my best to crack neet ...i don't know what will happen will i score good marks or not ... please help me in suggesting good career options if not crack neet .....there are many options through neet marks also like bhms , veterinary...etc. i will also give entrance exam also like cuet ,gbpuat ,....but i want that what to choose which course will be best for me ...i want to make my life good and happy... having a good degree, good job ,...
Ans: Hello.
Have you analyzed your failure in 2 successive attempts in the NEET examination? If yes, then the question is what you have done for improvement and not then again the question arises why not? Here, I would like to suggest you focus now only on the NEET examination which is your 3rd attempt. Don't think about any other options right now till May 2025. After the NEET exam is over, you have ample time to explore the options available. Depending on your score in NEET 2025, we will guide you at that time. But yet, if you are confused, then looking towards your question and anxiety, you need personal counseling where you can express yourself face-to-face. Only after the NEET exam is over, you contact a counsellor for one-to-one counseling. Till then, keep mum and focus only on NEET. Take this exam as your mission and project. Work on this project, apply forces from all sides, success is there which is waiting for you eagerly.
Best of luck for your bright future.

Some tips: (1) Analyse separately Phy, Che, Bio (2) Prepare a list of hard topics (3) First focus more on the topics which are easy for you and then try to excel in hard topics (4) Appear more and more online/offline examinations (4) Prepare your short-cut file for all subjects (5) Prepare a file for each subject having only synopsis of all chapters (6) Try to solve the problems at the lightening speed and observe the period on regular basis (7) Create your time table to revise the topics on regular basis (8) Do not hesitate to ask your difficulties to your teachers, if you have joined to offline classes (9) Keep the habit of marking the answers which you know 100%. Don't guess the answers and mark them, as there is -ve marking scheme. (10) Be calm, quite, and smiling all the time to release the tension and always have a healthy chat with your friends.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

...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.

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