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Stuck in my 40s: 3 Lakh Monthly Income, 1 Crore Corpus & Want 10 Crore Retirement - How?

Milind

Milind Vadjikar  |618 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 15, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Oct 12, 2024Hindi
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Money

HI, I am 40 years only and my monthly income is 3 lacs. I have a corpus of 1 cr. Of mutual funds. I have been investing from last 7 yrs. Now I have reached to a monthly SIP of 2 lacs. I want to retire in the age of 60 please advise how can I build a corpus of 10 cr in 10 yrs. Also, recently I have purchased a house of 1.3 Cr and paid 30% from my saving. I will have emi's starting in next 3 years at the time of possession. Should I take home loan then or should I put more money from my then corpus to reduce the total emi. Kindly advise.

Ans: Hello;

It makes prudent practical sense to utilise your corpus to reduce the loan EMI as much as possible.

You should work to maximise your gains not that of the lending agency.

If you continue your monthly sip of 2 L for the next 15 years, you may achieve a corpus of 10 Cr assuming modest return of 12%.

If you are keen to achieve 10 Cr target in 10 years then you must top-up the monthly sip amount(2L) by 20% each year upto 10 years after which you may accumulate corpus of 10 Cr+.

Happy Investing!!

You may follow us on X at @mars_invest for updates.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.
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  |7026 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 27, 2024

Asked by Anonymous - May 26, 2024Hindi
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Hi, we are a couple with monthly income of 7.5L per month (after tax & PF, NPS savings). Have around 50L in FDs, 1Cr in PF, 22L in NPS and 20L in stocks/Mutual Funds. Our expenses are around 2L pm and have a Home loan of 50L. We own 2 flats & land having value of around 11.5 Cr. Need to create a corpus of 10 Cr within next 10 year to retire. Can invest around 3L every month & can increase it by 8~10% every year. Our age is 45 & 42 years. Please advise how we can we achieve this.
Ans: Evaluating Your Financial Situation
You and your spouse have a combined monthly income of Rs 7.5 lakhs after tax and savings in PF and NPS. You have an existing portfolio consisting of:

Fixed Deposits (FDs): Rs 50 lakhs
Provident Fund (PF): Rs 1 crore
National Pension System (NPS): Rs 22 lakhs
Stocks/Mutual Funds: Rs 20 lakhs
Home loan outstanding: Rs 50 lakhs
Real estate assets (2 flats and land): Rs 11.5 crores
Your monthly expenses are around Rs 2 lakhs, and you aim to create a corpus of Rs 10 crores within the next 10 years. You can invest Rs 3 lakhs per month, increasing this by 8-10% annually. Let's explore a strategy to achieve this goal.

Setting a Retirement Corpus Target
To reach your goal of Rs 10 crores in 10 years, a systematic and disciplined investment approach is necessary. Considering your high monthly savings potential, diversification and growth-oriented investments will be key.

Monthly Investment Strategy
Start with Equity Mutual Funds
Equity Mutual Funds: Allocate a significant portion to equity mutual funds. These funds typically offer higher returns compared to other asset classes over the long term.

Balanced Advantage Funds: Consider these for a balance between equity and debt, reducing risk while still offering growth.

Debt Instruments for Stability
Debt Mutual Funds: These provide stability and lower risk compared to equity funds, suitable for part of your portfolio.

Public Provident Fund (PPF): PPF offers tax benefits and assured returns, providing a stable component to your portfolio.

Increasing SIP Contributions
Given your ability to increase investments by 8-10% annually, start with an SIP of Rs 3 lakhs per month. Increase your SIPs annually to keep pace with your income growth and inflation.

Portfolio Diversification
Diversify Across Asset Classes
Large Cap Funds: These funds are less volatile and provide stable returns over the long term.

Mid Cap and Small Cap Funds: Allocate a portion to these funds for higher growth potential, though they carry more risk.

Sector-Specific Funds: Consider investing in specific sectors like technology or healthcare, which have high growth potential.

Review and Adjust Regularly
Monitor Performance
Regular Reviews: Review your portfolio every six months to ensure it aligns with your goals.

Rebalance Portfolio: Adjust your investments based on performance and market conditions to stay on track.

Avoid Index Funds
Disadvantages of Index Funds
Limited Returns: Index funds only match market returns and do not aim to outperform.

Lack of Flexibility: They cannot react quickly to market changes, potentially missing out on higher returns.

Actively Managed Funds Advantage
Professional Management: These funds benefit from the expertise of fund managers who make informed decisions.

Higher Returns: Actively managed funds aim to outperform the market, providing better growth potential.

Direct Funds vs Regular Funds
Disadvantages of Direct Funds
Lack of Guidance: Direct funds do not offer professional guidance, which can be crucial for optimal investment decisions.

Time-Consuming: Managing direct investments can be time-consuming and complex without expert help.

Benefits of Regular Funds via MFD with CFP Credential
Expert Advice: Regular funds provide access to certified financial planners who can offer tailored advice.

Comprehensive Planning: Investing through a CFP ensures a holistic approach to financial planning.

Better Performance: Professional management often results in better performance compared to self-managed direct funds.

Education Planning for Children
Education Savings Plans
Dedicated Education Funds: Invest in plans specifically designed for education to build a sufficient corpus for your children’s higher education.

Sukanya Samriddhi Yojana: If you have daughters, this scheme offers attractive interest rates and tax benefits.

Balancing Current and Future Needs
Emergency Fund: Maintain an emergency fund equal to 6-12 months of expenses for unforeseen events.

Debt Management: Continue servicing your home loan, ensuring it doesn’t burden your future finances.

Achieving Your Corpus Goal
Target Corpus Calculation
Assuming an average annual return of 12%, your monthly investments need to grow consistently. Start with Rs 3 lakhs per month and increase it by 8-10% yearly. This disciplined approach will help you reach your goal of Rs 10 crores.

Importance of Professional Guidance
Certified Financial Planner: Regular consultations with a CFP will ensure you stay on track and make necessary adjustments.

Tailored Advice: A CFP can provide tailored advice based on your specific financial situation and goals.

Final Thoughts
Your current financial health is strong, and your disciplined savings approach will help you achieve your retirement goal. Regular investments, portfolio diversification, and professional guidance are key to your success.

Staying on Course
Regular Reviews: Stay informed about your investments and review them periodically.

Flexibility: Be ready to adjust your strategy based on market conditions and personal circumstances.

Discipline: Maintain a disciplined approach to savings and investments.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7026 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 11, 2024

Asked by Anonymous - Nov 10, 2024Hindi
Money
HI, I am 35 years only and my monthly income is 3 lacs. I have a corpus of 1 cr. Of mutual funds. I have been investing from last 7 yrs. Now I have reached to a monthly SIP of 2 lacs. I want to retire in the age of 45, and my monthly expense is about 1 lac. Please advise can build a corpus of 10 cr in 10 yrs and how can I build that. Also, recently I have purchased a house of 1.3 Cr and paid 30% from my saving. I will have emi's starting in next 3 years. Should I take loan or should I put more money from my corpus to reduce the total emi. Please advise.
Ans: You have made commendable progress in your financial journey. Achieving a corpus of Rs 10 crore in 10 years is ambitious yet achievable with a disciplined approach.

Let’s break down your goals and create a detailed plan.

Assessment of Your Current Financial Situation
You have been investing diligently for the past 7 years and have already built a significant corpus of Rs 1 crore in mutual funds.

Your monthly income of Rs 3 lakh with a monthly expense of Rs 1 lakh indicates that you have a healthy surplus for investments.

Currently, you have a substantial SIP of Rs 2 lakh per month. This shows a strong commitment to growing your wealth.

You have recently purchased a house worth Rs 1.3 crore, paying 30% upfront. The EMI for the remaining amount will start in 3 years.

This background will guide our strategy to reach your target.

Strategic Investment Plan for Rs 10 Crore Goal
1. Leverage Your Current SIP Investments
Increasing your monthly SIP to Rs 2 lakh is a great step. Continue to channel this amount into a mix of actively managed equity mutual funds.

Actively managed funds tend to outperform index funds over the long term due to the expertise of fund managers. This can help generate higher returns compared to passively managed funds.

Avoid investing in index funds. They might seem low-cost, but they miss out on potential alpha generation. Actively managed funds provide better returns, especially during market downturns when fund managers can adjust strategies.

Invest in regular plans through a certified mutual fund distributor (MFD). This will give you access to expert guidance and ongoing support, which is critical for optimizing your portfolio.

You should diversify across different categories, such as large-cap, mid-cap, and small-cap funds. This strategy reduces risk and provides a balanced growth opportunity.

2. Consider Equity-Linked Savings Schemes (ELSS)
If you have not fully utilized your tax-saving options under Section 80C, consider investing in ELSS.

These funds have a lock-in period of 3 years, offering both tax benefits and potential long-term growth.

However, avoid investing in direct funds. Regular plans through MFDs will help you navigate market volatility better and keep you aligned with your financial goals.

Optimizing Your Real Estate Loan Strategy
Now, let's address your query regarding your new home purchase:

You paid 30% upfront, which is a good strategy. The remaining 70% will be funded through a loan with EMIs starting in 3 years.

It is usually beneficial to take a home loan, especially with the tax deductions on principal repayment (Section 80C) and interest payments (Section 24).

However, with your current savings and surplus, you can consider partially prepaying the loan. This will reduce the overall interest burden without affecting your liquidity significantly.

Avoid using a significant portion of your mutual fund corpus for prepayment. This corpus is vital for your retirement goal. Instead, prepay the loan gradually using your surplus income.

Tax Implications of Mutual Fund Investments
Understanding the new tax rules is crucial:

For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh are now taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

For debt mutual funds, both LTCG and STCG will be taxed according to your income tax slab rate. This is higher than the previous LTCG rate of 20% with indexation benefits.

To maximize your returns, consider holding your equity mutual funds for the long term to benefit from lower LTCG taxes.

If you need to rebalance your portfolio, plan your redemptions carefully to minimize tax liabilities.

Prioritizing Your Financial Goals
You aim to retire at 45 with a passive income of Rs 1 lakh per month. Let's map out how you can align your investments to achieve this.

1. Focus on Equity for Wealth Accumulation
Equity mutual funds should continue to be your primary investment vehicle. Given your 10-year horizon, equity has the potential to provide higher returns compared to debt instruments.

To reach your Rs 10 crore goal, you may need to increase your SIP amount gradually as your income grows.

2. Emergency Fund and Liquidity
Ensure that you have an emergency fund equivalent to 12-18 months of expenses in a safe, liquid instrument like a bank fixed deposit or a liquid mutual fund. This will protect your investments from being disrupted in case of any unexpected expenses.

Avoid using your emergency fund for loan prepayment or large investments. It should remain accessible at all times.

Insurance Coverage and Risk Management
Since you have a home loan, it is crucial to ensure you have adequate life insurance coverage. This will protect your family from financial liabilities if something were to happen to you.

Consider increasing your term insurance to cover the outstanding home loan amount and provide for your family’s future needs.

Review your health insurance coverage as well. Given the rising healthcare costs, ensure that your family is adequately covered.

Debt vs. Equity Balance for Your Retirement Plan
As you approach your retirement age of 45, it is essential to gradually reduce exposure to equity and shift towards safer debt instruments.

At the age of 45, consider reallocating a portion of your portfolio into debt mutual funds, which offer stability. This will help generate a steady monthly income while preserving your capital.

However, do not fully exit equity. A small portion should remain invested to combat inflation and sustain your wealth over a longer retirement period.

Achieving Financial Independence by Age 45
By following the plan outlined above, you can achieve your goal of building a corpus of Rs 10 crore and retire comfortably at 45.

Continue your disciplined SIP investments, optimize tax benefits, and manage your loan efficiently.

Make periodic assessments of your portfolio to ensure it aligns with your risk tolerance and financial goals.

It’s advisable to consult a certified financial planner annually. This ensures that your investment strategy remains on track, and any necessary adjustments can be made.

Final Insights
You have made significant strides toward financial independence. Keep up the disciplined approach.

A well-diversified portfolio, optimized tax strategy, and careful debt management will help you reach your target corpus of Rs 10 crore.

Retirement at 45 with a stable passive income is a realistic goal if you stick to the plan outlined here.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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Dr. Shyam, I had my teeth cleaned 6 months ago and after that was done I saw discoloration on certain teeth that wasn't there before. Years ago I had my teeth cleaned and one particular tooth after the cleaning was sensitive to touch. I had a crown put in from two different dental offices. The first one did the crown right, but was trying to charge me $3,500 more than the agreement they made with Medicare. Medicare corrected that. I other dentist did a crown and it didn't go all the way up to my gums and is sensitive to especially cold things. I'm not having very good experiences with dentist by and large. Can't find an honest one or one that can actually do the job right. I feel being on Medicare your a target to bring in money. Not sure what to do next. Supposed to go back and have them redo the crown that didn't go to my gums, but it also was ttd place to didn't clean my teeth right and discolored some of them. Any suggestions on how to trust there is actually an capable and honest dentist out there who can perform properly?
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1. Ask for referrals: Ask friends, family, or coworkers for recommendations. They can provide valuable insights into a dentist's work quality and bedside manner.

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Dating, Relationships Expert - Answered on Nov 14, 2024

Asked by Anonymous - Nov 03, 2024Hindi
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Hi, I am 30 years old not married & now my parents are forcing me to get married. I think i am good looking guy. It's not like i have never been with girls. I have had brief flings with multiple girls. And there was one girl whom i was in a platonic relationship with with lot of emotional sharing & have spent a lot of time with her. The same goes with another girl. Both of them have told me that i have been pretty cool & girls would like me to be their bf or husband. But i am not able to accept anyone because of the guilt that of my past that i never had a relationship. Never been able to tell anyone that i had a gf. I know this is wrong to compare my life but i can't stop thinking that way. Can you tell me what to do? Like a contsant regret of not having a very steamy cool fancy relationship from outside. I know relationships have it's own ups & downs. But this guilt is killing me that i missed out lot of things in life & if get married in an arranged marriage i would feel myself to be a looser who couldn't even find a girl on his own. Though i know all of these comparisons are wrong & i should be rational. I am not able to help it. Please help me out
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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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