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Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 23, 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
Disha Question by Disha on Jun 23, 2024Hindi
Money

Hi sir I am 40 YO single women earning 1.10 lacs annually. I wish to retire at 45. My savings and investments - House 75 lacs (loan of Rs 14.50 lacs) Mutual funds total 47 lacs ( SIPs ongoing Rs 25k) PPF 5.84 lacs Gold 11 lacs Car 6 lacs A land 30 lacs ( planning to construct double story for rent purpose - passive income. I want a regular income of atleast 50000/- as I don't have any such liability of parents or kids. I do donations regularly and also pay for my sister's daughter school fees around 1.5 lacs yearly at present ( will paying for another 3-4 years ) Kindly guide me

Ans: I appreciate your detailed information. Let’s dive deep into your current situation and plans, and evaluate the best strategies to ensure a comfortable and financially secure retirement by age 45.

Assessing Current Financial Status
Income and Savings Overview
Your annual income of Rs 1.10 lacs is a crucial factor. It's important to maximise savings and investments. Currently, you have several investments, including mutual funds, PPF, gold, and real estate.

Investments and Liabilities
House: Worth Rs 75 lacs with an outstanding loan of Rs 14.50 lacs.
Mutual Funds: Total of Rs 47 lacs with ongoing SIPs of Rs 25,000 monthly.
PPF: Rs 5.84 lacs.
Gold: Valued at Rs 11 lacs.
Car: Worth Rs 6 lacs.
Land: Valued at Rs 30 lacs, with plans to build a double-story house for rental income.
Expenditures and Commitments
You have regular expenses such as donations and school fees for your sister's daughter. These are commendable commitments that reflect your generosity and family support.

Strategic Financial Planning for Retirement at 45
Evaluating Retirement Goal
Your aim is to retire at 45, which is just five years away. A key part of this goal is to ensure you have a regular income of Rs 50,000 post-retirement. Let’s evaluate how your current investments and potential strategies can help achieve this.

Investments and Their Potential
Mutual Funds
Your ongoing SIPs and mutual fund investments are commendable. These are likely generating good returns, but it's important to regularly review the performance. Actively managed funds can offer better returns compared to index funds, which may not beat the market consistently.

Regularly monitoring your mutual funds with a Certified Financial Planner can help optimize your portfolio. Actively managed funds benefit from expert management, and these experts can navigate market fluctuations better than passive index funds.

PPF
Your PPF account is a secure, tax-efficient investment. It provides steady growth with government backing. Continue investing in PPF, but remember it has a lock-in period. It will be a solid part of your retirement corpus due to its reliability and tax benefits.

Gold
Gold is a good hedge against inflation. However, it doesn’t generate regular income. Consider holding onto gold as a part of your emergency fund or for long-term capital appreciation, but don’t rely on it for regular income.

Managing Real Estate
House and Loan
Your house is a significant asset. Ensure timely repayments of the Rs 14.50 lacs loan to avoid unnecessary interest. Once the loan is cleared, it will be a substantial part of your net worth.

Land Development
Constructing a double-story house on your land for rental income is a smart move. This can provide a steady passive income. However, construction costs and timeframes should be carefully planned. Ensure you have sufficient funds or financing options in place to avoid cash flow issues during construction.

Optimizing Investment Strategies
Mutual Fund Optimization
While you have substantial investments in mutual funds, it’s crucial to review your portfolio regularly. Actively managed funds should be preferred as they tend to outperform index funds due to professional management. They adjust portfolios based on market conditions, unlike index funds that passively follow market trends.

Regular vs Direct Funds
Investing through regular funds with a Certified Financial Planner can be beneficial compared to direct funds. Regular funds provide professional advice, helping you make informed decisions and manage your portfolio effectively. Direct funds might seem cost-effective, but without professional guidance, you might miss out on better opportunities or fail to manage risks properly.

Balancing Risk and Returns
Diversification is key to managing risk. Your current portfolio is diversified across various asset classes. Continue this practice but adjust the proportions as per market conditions and financial goals. For instance, you may want to reduce exposure to riskier assets as you near retirement.

Financial Discipline and Planning
Budgeting and Saving
Ensure you have a clear budget. Track your expenses meticulously. Automate your savings and investments to stay disciplined. This will help in building a substantial retirement corpus over the next five years.

Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of your expenses. This fund should be easily accessible and separate from your retirement corpus. This ensures you’re prepared for any unexpected financial needs without disrupting your long-term goals.

Retirement Income Planning
Passive Income Sources
Your plan to generate rental income from the newly constructed double-story house is excellent. Ensure the property is in a desirable location to attract tenants and secure a stable income stream.

Withdrawal Strategy
Plan a withdrawal strategy from your retirement corpus. Systematic Withdrawal Plans (SWPs) from mutual funds can provide regular income. This approach ensures that your principal continues to grow while you receive regular income.

Additional Considerations
Insurance Coverage
Ensure you have adequate health and life insurance coverage. Health insurance is critical as medical costs can be significant. Life insurance will provide financial security to your dependents if any unforeseen event occurs.

Estate Planning
Consider creating a will and possibly setting up a trust. This ensures that your assets are distributed according to your wishes and can also provide tax benefits.

Monitoring and Reviewing
Regular Reviews
Regularly review your financial plan with a Certified Financial Planner. Markets and personal situations change, and your plan should be flexible enough to adapt. A CFP can provide the necessary expertise to navigate these changes effectively.

Staying Informed
Stay informed about market trends and economic changes. This knowledge can help you make informed decisions and adjust your financial strategies accordingly.

Final Insights
Retiring at 45 is an ambitious yet achievable goal with disciplined financial planning and strategic investments. Your current investments in mutual funds, PPF, and gold provide a strong foundation. However, optimizing your mutual fund portfolio with actively managed funds and professional guidance can yield better returns.

Constructing a rental property is a smart move for passive income, but ensure it’s well-planned financially. Regularly review your investment strategy and stay disciplined with your savings and expenses. With proper planning and execution, you can achieve financial independence and enjoy a comfortable retirement.

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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Milind Vadjikar  |741 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 03, 2024

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What happens when a Mutual Fund company shuts down / gets sold off?
Ans: Hello;

If a mutual fund company gets sold or fails, the process is prescribed by SEBI:

In case MF company is Sold,
The new fund house may:
1. Continue the scheme with a new name and management.

2. Merge the scheme with similar funds and offer investors the option to exit without any exit load.

In case MF company shuts down,
The fund house will:
1. Pay out investors based on the fund's last recorded Net Asset Value (NAV) and the number of units the investor holds, after deducting expenses.

2. If the company is not in a position to do so then SEBI may liquidate the funds assets and distribute the proceeds to unit holders.

It is also pertinent to note that mutual fund regulation in India is one of the most stringent and hence best, from investor's point of view, globally.

This is not just in theory. We have seen how the Franklin Templeton abrupt closure of debt funds was handled with surgical precision, by SEBI, with no loss to unitholders.


Skin in the game regulation mandates that 20% salary of key mutual fund personnel and fund managers is paid in terms of units of their funds with a 3 year lock-in.

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Happy Investing;
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Ravi

Ravi Mittal  |450 Answers  |Ask -

Dating, Relationships Expert - Answered on Dec 03, 2024

Asked by Anonymous - Dec 03, 2024Hindi
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Relationship
Hello, my wife is Ugandan and I’m of English national, 30 years old and she’s 26, we met nearly a year ago and got married in uk with some of her friends and small family. We haven’t done kuchala (not sure if that’s correct spelling) yet and I’m feeling anxious for when the time comes. She said her family will kneel when they greet me and being white this is already stinging my moral (due to history). I also talked about moving in together before the meet the parents happen however she says she’s rather move in after? Currently this could take two years before going to Uganda, how should I proceed without overstepping her cultural beliefs as after all we are married and by my culture we should already be living together
Ans: Dear Anonymous,
It is very nice of you to be so considerate and sensitive while handling these cultural nuances. Let's discuss the kneeling tradition. It's a sign of respect and it's deeply rooted in Ugandan culture. While I understand your point of view, you also have to remember that it can have significant meaning to her and her family. I suggest you politely express your feelings and let her know why it is uncomfortable for you to see her family kneel. When you explain, mention how much her culture means to you as well. I am sure both of you can communicate and come to a compromise that makes you both happy. Just in case, they persist in following the ritual, just look at it as a gesture of love and respect and not submission.

About the moving in together part, in certain parts of the world, couples living together before the traditional wedding is not considered respectful. But since you are already married, you can try explaining to your wife how the living situation does not go against her cultural expectations. But if it is a really big deal for her and her family, consider seeing it from her perspective.

Communication is everything here. Look at every problem as a team; it's not your problem vs her problem. It's both of you vs the problems.

I hope this helps

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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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