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Ramalingam

Ramalingam Kalirajan  |8272 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 12, 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
Senthil Question by Senthil on Jun 20, 2024Hindi
Money

I am 40, I am getting 1.5 lakh in hand salary, having one apartment house and rented it for 15000, staying in rental house with 10000 rent. I have invested in 1.1 lakh in RD, 3 lakh in equities, 78k in MF through 7.5k SIP monthly and till paying it, 1 lakh in SGB. I have 80k PPF, 25 K PPF in kids name and 40k in SSA post office, 25K in NPS and all these I am contributing monthly 1000 to 1500. I am having cumulative debts of 70 Lakhs for 5 years. I want close out all debts and start contributing more in Investing,please suggest.

Ans: Your financial journey reflects dedication and planning. You've diversified your investments across various instruments. However, with significant debt, the goal should be to reduce this burden. Clearing debt will free up resources for further investments.

Income and Expenses
You have a stable monthly income of Rs 1.5 lakh. Out of this, Rs 25,000 goes towards rent and SIPs. Managing the remaining Rs 1.25 lakh wisely will help you tackle debt and enhance your investments.

Debt Management
A cumulative debt of Rs 70 lakhs is substantial. Prioritize paying off high-interest debts first. This will reduce the financial pressure and interest burden over time. Consider creating a debt repayment plan with clear milestones.

Current Investments
Recurring Deposit (RD)

Your RD of Rs 1.1 lakh provides fixed returns but is less effective against inflation. After maturity, consider reinvesting in more growth-oriented options.

Equities

Your Rs 3 lakh in equities shows a good risk appetite. Continue monitoring and adjusting your portfolio based on market conditions.

Mutual Funds (MF)

You have Rs 78,000 in mutual funds through a SIP of Rs 7,500. Consistent investment through SIPs is commendable.

Sovereign Gold Bonds (SGB)

Investing Rs 1 lakh in SGB is a wise choice for hedging against inflation and currency risks.

PPF and SSA

Your PPF investments total Rs 1.05 lakh, including Rs 25,000 in your child's name. These are safe long-term instruments with tax benefits.

NPS

The Rs 25,000 in NPS ensures retirement savings with tax benefits. Continue contributing to build a substantial retirement corpus.

Detailed Investment Analysis
Regular Funds vs Direct Funds
Regular funds come with the expertise of a certified financial planner (CFP). A CFP can offer personalized advice and active portfolio management. While direct funds have lower expense ratios, they lack professional guidance. This can be challenging for individuals without in-depth financial knowledge.

Actively Managed Funds
Actively managed funds have the potential for higher returns compared to index funds. Fund managers use their expertise to select high-performing stocks. This can lead to better performance, especially in volatile markets. Index funds, while low-cost, simply replicate market performance. They lack the flexibility to adapt to market changes.

Strategic Debt Repayment Plan
Identify High-Interest Debts

List all debts with their respective interest rates. Prioritize those with the highest rates.

Allocate Funds

Dedicate a portion of your monthly income to debt repayment. Ensure this amount is sustainable and does not strain your daily expenses.

Consider Debt Consolidation

Explore options like debt consolidation loans. This can simplify repayment and potentially reduce interest rates.

Increase Income Sources

Utilize skills or hobbies to generate additional income. This can accelerate debt repayment and provide more investment capital.

Investment Enhancements
Emergency Fund

Ensure you have an emergency fund covering at least six months of expenses. This provides financial security in unforeseen situations.

Diversified Portfolio

Continue diversifying your investments across equities, mutual funds, and safe instruments like PPF and SSA. This balances risk and returns.

Regular Reviews

Periodically review and adjust your investment portfolio. Market conditions and personal goals can change, requiring strategic shifts.

Children’s Future Planning
Education Fund

Start a dedicated education fund for your child. This ensures you can meet their educational needs without financial strain.

Health Insurance

Secure comprehensive health insurance for the family. This covers medical emergencies and protects your savings.

Retirement Planning
Increase NPS Contributions

Consider gradually increasing your contributions to the NPS. This enhances your retirement corpus and provides additional tax benefits.

Long-Term Investments

Focus on long-term investments with high growth potential. Equities and actively managed funds can offer substantial returns over time.

Tax Efficiency
Utilize Tax Deductions

Maximize contributions to PPF, NPS, and other tax-saving instruments. This reduces your taxable income and enhances savings.

Tax-Optimized Investments

Consider tax-efficient investment options. These can provide better post-tax returns and improve overall financial health.

Expert Guidance
Certified Financial Planner

Regular consultations with a CFP can provide personalized advice. A CFP helps navigate complex financial landscapes and achieve goals efficiently.

Continuous Learning

Stay informed about financial trends and investment opportunities. Knowledge empowers you to make informed decisions.

Final Insights
Your financial journey is well-structured but requires strategic adjustments. Focusing on debt repayment, diversifying investments, and seeking professional guidance will enhance your financial health. Remember, the key to financial success lies in disciplined planning and regular reviews. Stay committed to your goals and adapt as needed.

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.
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Ramalingam Kalirajan  |8272 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 02, 2024

Asked by Anonymous - May 02, 2024Hindi
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Hi, i am 31 yesrs now and have invested around 10,00,000.00 in stocks. I am investing around 15k per month for retirement plan of Tata AIA i.e for 7years and returning amount will be at 50years. 17k per month in bajaj Allianz for 5 years and returning will be at age of 40. And 25k per month in axis mutual funds returning will be in 3 years.These investments i have started form nearly 10months back. My expences will be 1 lakh a month. I am newly married now just about a month back and have debt of 4lakhs for gold purchase but i can manage in 1 year EMI payments. So what should i do to retair by 45 to 50 years maximum
Ans: Congratulations on your recent marriage and proactive approach to financial planning! To retire comfortably by the age of 45 to 50 years, it's essential to continue your disciplined saving and investment approach while managing your debt effectively. Here's a suggested plan of action:

Reevaluate Insurance Policies:
Reconsider your contributions towards Tata AIA and Bajaj Allianz policies, as they may not offer optimal returns for your retirement goals. Consider consulting with a financial advisor to explore exit options and minimize further contributions.
Explore Mutual Fund Exit Strategies:
Assess the exit options for the Tata AIA and Bajaj Allianz policies to potentially redirect those funds into more efficient investment avenues.
Investigate the possibility of systematic withdrawal plans (SWP) in mutual funds to provide a regular income stream during your retirement years.
Optimize Mutual Fund Investments:
Redirect the funds from the insurance policies towards more suitable investment options, such as mutual funds with a diversified portfolio of equity and debt securities.
Continue investing in Axis Mutual Funds with a focus on achieving short-term financial goals, but ensure alignment with your overall investment strategy and risk tolerance.
Manage Debt Strategically:
Prioritize paying off your gold purchase debt within the agreed-upon timeframe to avoid unnecessary interest payments.
Explore opportunities to optimize your debt repayment plan and allocate any surplus funds towards debt reduction to achieve financial freedom sooner.
Review Financial Plan Regularly:
Regularly review your financial plan to track progress towards retirement goals and make necessary adjustments based on changes in your financial situation and market conditions.
Seek guidance from a Certified Financial Planner to develop a comprehensive financial plan tailored to your specific needs and aspirations.
By reassessing your insurance policies, optimizing mutual fund investments, managing debt strategically, and seeking professional financial advice, you can work towards achieving your retirement goals more effectively and efficiently.

..Read more

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Asked by Anonymous - Apr 22, 2025Hindi
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Dear Sirs Please review my investment towards 7.5 CR. There are 2 components towards it , 1) Generate monthly income post tax of 4 lakhs, 2) Investment Corpus Towards Capital appreciation Towards option 1 : Investing in the following - a) Tata Motors or Chola Perpetual Bonds 1.4 cr , b) ICICI Balanced Advantage Fund 1cr, c) Kotak Balanced advantage fund 1 cr Towards option 2 ie Capital Appreciation investing in the following - a) HDFC Flexi Cap Equity fund 1.25 cr , b) Parag Parikh Flexi Cap Equity Fund 1.25 cr, c) ICICI Prudential India Opportunities Fund 80 Lakhs, d) ICICI Prudential Multi asset fund 80 lakhs I am looking at a 5 - 7 year investment timeline. Have taken early retirement at 50 years and need the funds to sustain myself. Please also advise if Perpetual bonds is a good option Thanks
Ans: Your investment strategy is thoughtfully constructed. You’ve clearly defined two components:

Monthly income of Rs. 4 lakhs

Capital appreciation with a horizon of 5 to 7 years

Let’s assess each component carefully and suggest improvements.

 

 

Monthly Income Generation Plan – Review and Insights
 

You’ve allocated the following towards income generation:

Perpetual Bonds – Rs. 1.4 crore

Two Balanced Advantage Funds – Rs. 2 crore

 

Let us look at the key strengths and areas to optimise.

 

Perpetual Bonds – Risk and Suitability

These bonds are issued with no maturity date.

Issuers can delay interest payments if they face pressure.

Tata Motors or Chola bonds offer high interest, but risk is also higher.

You need dependable income. Perpetuals may cause delays or cuts.

If rated ‘AA’ or lower, risk becomes even higher.

For safety, consider shifting part to high-rated corporate bonds.

Choose instruments with a defined maturity or high credit rating.

 

 

Balanced Advantage Funds – Regular Payout Source

You have allocated Rs. 2 crore to two funds here.

These are suitable for monthly SWP (Systematic Withdrawal Plan).

They reduce risk by shifting between equity and debt.

This provides smoother return and helps handle market volatility.

Ideal for your need of steady income.

Choose funds with a good track record of 5+ years.

Go for regular plans through a Certified Financial Planner.

They provide guidance and documentation support.

 

 

Key Adjustments to Consider for Income Plan

Don’t depend only on one instrument for income.

Keep part in ultra-short debt funds to manage emergency needs.

You may also allocate a small amount to floating rate funds.

Avoid riskier perpetuals if your lifestyle depends on this cash flow.

 

 

Capital Appreciation Portfolio – Review and Suggestions
 

You have allocated Rs. 4.1 crore across four funds:

Two Flexi Cap Funds – Rs. 2.5 crore

One Thematic Fund (Opportunities) – Rs. 80 lakhs

One Multi Asset Fund – Rs. 80 lakhs

 

This section looks well-structured. Still, here are some observations.

 

Flexi Cap Funds – Long Term Growth Drivers

These offer a mix of large, mid and small cap stocks.

Flexible allocation helps in market ups and downs.

You have spread Rs. 2.5 crore across two flexi caps.

It gives diversified equity exposure.

Good for your 5–7 year horizon.

Continue this investment.

 

 

Thematic Opportunities Fund – Aggressive but Focused

Thematic funds bet on specific trends.

They can perform well in short cycles.

But they are more volatile.

Rs. 80 lakhs is a high amount in one theme.

Reduce this to Rs. 50 lakhs.

Redirect balance to diversified equity or large-cap funds.

 

 

Multi Asset Fund – Helps Manage Volatility

These funds invest across equity, debt, and gold.

They balance returns with risk.

Ideal for medium-term wealth building.

You can continue this allocation.

Add a second multi-asset fund for balance.

 

 

Direct Plan Exposure – Re-evaluate for Personalised Support

Direct plans avoid distribution cost.

But guidance is missing.

Without CFP support, wrong fund choice or exit may happen.

Regular plans through a Certified Financial Planner give tracking.

They help during market swings, taxation and rebalancing.

This becomes very important in large-value portfolios.

 

 

Asset Allocation Review – What’s Working and What Needs Tune-Up
 

Your allocation is roughly:

45% towards income (Rs. 3.4 crore)

55% towards growth (Rs. 4.1 crore)

This mix looks aligned to your goal of current income and future corpus.

Still, consider the following:

 

Review this mix yearly with your Certified Financial Planner

If market rallies too much, shift some growth to income

If interest rates rise, reduce equity withdrawal and increase debt

Keep Rs. 25–30 lakhs in liquid fund for any large emergency

 

 

Taxation on Mutual Funds – Stay Aware of Recent Rules
 

Equity mutual funds:

LTCG above Rs. 1.25 lakh is taxed at 12.5%

STCG is taxed at 20%

 

Debt mutual funds:

Both LTCG and STCG taxed as per your tax slab

Most retirees fall in lower slab but tax planning still needed

Prefer SWP for income, not dividend option

Keep P&L statement ready for advance tax filing

 

 

Tax-Free Cash Flow – Can You Improve It?
 

You can also look at these steps:

Use HUF or family member’s name for part investment

Income from their investment gets taxed in their slab

Helps reduce your tax burden

Invest Rs. 1.5 lakh yearly in PPF for guaranteed, tax-free return

Can also explore Senior Citizen Savings Scheme (SCSS) if eligible

 

 

Avoid Index Funds – Not Suitable for Your Stage
 

Index funds copy the stock market

They don’t adjust based on conditions

There’s no downside protection in falling markets

Actively managed funds give more opportunity to earn and protect

Your current selection rightly avoids index funds

 

 

Avoid Direct Plans Without Support
 

Direct plans don’t include expert guidance

No one checks asset allocation or strategy alignment

You’re investing a large corpus. Mistakes cost more here

Use regular plans via an experienced Certified Financial Planner

They help in paperwork, KYC, taxation, SWP planning, rebalancing

Their personalised help adds more value than small cost savings

 

 

Perpetual Bonds – Should You Continue or Exit?
 

Not the best for regular income seekers

Issuer can skip interest if company faces pressure

Price of these bonds also swings with interest rates

You can’t rely fully on them for Rs. 4 lakh per month

Exit partly and shift to short-duration or banking PSU debt funds

These are better for predictable income with lower risk

 

 

Review of Liquidity and Emergency Planning
 

At least Rs. 30–35 lakhs should be in liquid or overnight funds

This money is for health, family needs or urgent situations

Don’t touch your income or capital funds for this purpose

This buffer will give you confidence and reduce portfolio risk

 

 

Risk Management – How to Prepare for Unseen Events
 

Review health insurance for self and spouse

If you’ve not already done it, get Rs. 25 lakh cover each

Consider critical illness policy to protect against long illness

Update nominations in all funds and accounts

Keep estate plan or Will ready. Talk to your planner on this

 

 

Rebalancing Strategy – Keep it Dynamic
 

Review portfolio every 6 months

Don’t chase top-performing funds blindly

Instead, rebalance as per your income need and age

Reduce equity by 5% every 2 years as you age

This protects corpus and supports steady cash flow

 

 

Finally
 

You’ve structured your Rs. 7.5 crore goal very thoughtfully

You are clear about income and long-term appreciation

Your fund choice is broadly good, with only minor changes needed

Avoid risky bonds like perpetuals as your lifestyle depends on monthly cash flow

Go for actively managed regular funds via Certified Financial Planner support

Keep tax, liquidity, insurance and emergency planning all in place

This will help you enjoy your retirement peacefully and confidently

 

 

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

...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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