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41 year old with 60 lakh salary, how to build a 20 crore wealth in 20 years?

Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 22, 2025

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
Asked by Anonymous - Jan 13, 2025Hindi
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I am 41 years old. How to create a financial plan to accumulate a wealth of 20 crore in 20 years. My annual salary is 60 lakhs. My current home loan emi is 1.2L for 20 years and car emi is 35K for 7 years.

Ans: To achieve your financial goal, a well-structured financial plan is essential. Below is a detailed, step-by-step guide tailored to your current financial situation and aspirations.

Assess Your Current Financial Position
Annual salary: Rs 60 lakh
Home loan EMI: Rs 1.2 lakh per month
Car loan EMI: Rs 35,000 per month
This implies an annual EMI outflow of Rs 18.6 lakh. You must allocate your remaining income judiciously.

Emergency Fund
Build a fund covering 12 months of expenses.
Include EMIs, household expenses, and lifestyle costs.
Park this amount in a mix of liquid and ultra-short-term funds for safety.
Insurance Coverage
Life Insurance: Ensure you have a term insurance policy for adequate coverage. Coverage should ideally be 10–15 times your annual income.
Health Insurance: Opt for a comprehensive health insurance plan for your family.
Review existing LIC, ULIP, or investment-linked policies. Surrender such policies and reinvest in mutual funds for better returns.

Investment Strategy for Wealth Creation
1. Asset Allocation
Allocate your investments based on your risk tolerance and time horizon.
A 70:30 equity-to-debt ratio can balance growth and stability.
2. Equity Investments
Prefer actively managed mutual funds for wealth creation.
Actively managed funds have professional fund managers aiming to outperform benchmarks.
Regular investments through an MFD with a Certified Financial Planner (CFP) ensure disciplined investing.
3. Debt Investments
Invest in debt funds for stable returns and liquidity.
Avoid direct debt investments as they lack professional management.
4. Avoid Index Funds and ETFs
Index funds mirror market performance without aiming for higher returns.
Actively managed funds often outperform index funds in India.
Professional management in actively managed funds ensures better risk management.
Systematic Investment Plan (SIP)
Calculate your monthly SIP contribution needed to accumulate Rs 20 crore in 20 years.
Invest consistently in equity mutual funds for long-term growth.
SIPs offer rupee cost averaging and promote disciplined investing.
Managing Debt
Continue paying your home loan EMI as planned.
Avoid prepaying your home loan if the interest rate is reasonable.
For your car loan, avoid taking new loans after completion of the current one.
Tax-Efficient Planning
Equity Mutual Funds: LTCG above Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%.
Debt Mutual Funds: Gains are taxed as per your income tax slab.
Focus on tax-efficient investments to maximize post-tax returns.
Periodic Review
Review your financial plan every six months.
Ensure your investments align with your goals and risk tolerance.
Rebalance your portfolio if needed to maintain the desired asset allocation.
Lifestyle and Expense Management
Avoid unnecessary lifestyle inflation.
Focus on increasing savings and investments.
Create a monthly budget to track expenses and prioritize savings.
Additional Tips
Invest in your skills and career growth to boost income.
Explore alternative income streams for supplementary savings.
Stay disciplined and avoid emotional decisions during market volatility.
Final Insights
Accumulating Rs 20 crore in 20 years requires disciplined savings, tax-efficient planning, and a growth-focused investment approach. Work with a Certified Financial Planner to create and execute a customized financial plan.

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.
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Mutual Funds, Financial Planning Expert - Answered on May 23, 2024

Asked by Anonymous - May 22, 2024Hindi
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Hello Dev, I require a financial planning guidance for next 20 years. At present - my age is 50 yrs & is unemployed.( Looking to start business but have doubt or opt for job ) Having term insurance of 1cr.health insurance of 10L. 50L in fd. Share market investment of 5l. Home Loan of 20l with emi 20k, for next 8 yrs. Wife ( 48age) is lecture earning 60k/month Daughter studing in 11 aspirant for engineering + PG at abroad. Having other asset of flat+ gold + plot will amount 50l. Thanking you- NN
Ans: Financial Planning Guidance for the Next 20 Years
Current Financial Situation and Goals
You are 50 years old, unemployed, and considering starting a business or opting for a job. Your wife is a lecturer earning Rs. 60,000 per month. You have a daughter aspiring for engineering and postgraduate studies abroad. You have Rs. 50 lakhs in fixed deposits, Rs. 5 lakhs in the share market, and a home loan of Rs. 20 lakhs with an EMI of Rs. 20,000 for the next eight years. You also have assets in the form of a flat, gold, and plot worth Rs. 50 lakhs.

Your detailed understanding of your current financial situation is commendable. You have taken significant steps by securing term and health insurance and investing in diverse assets.

Assessing Employment vs. Business
Job Stability
Opting for a job can provide a stable income stream, essential for meeting ongoing expenses, especially with a home loan EMI and your daughter's education.

Starting a Business
Starting a business involves risk but can offer higher returns. Evaluate your risk tolerance, potential business opportunities, and market conditions before deciding.

Insurance Coverage
Term Insurance
You have a term insurance of Rs. 1 crore, which is adequate. Ensure that the coverage remains sufficient as your financial situation changes.

Health Insurance
A health insurance cover of Rs. 10 lakhs is good. Consider increasing this coverage, given rising healthcare costs and your age.

Managing Existing Investments
Fixed Deposits
Fixed deposits provide safety but offer lower returns. Consider diversifying some of your FD investments into higher-yielding options.

Share Market Investments
With Rs. 5 lakhs in the share market, review the performance of these investments. Regular monitoring and rebalancing can enhance returns.

Home Loan Management
Reducing EMI Burden
Your home loan EMI is Rs. 20,000 for the next eight years. Consider making lump-sum payments towards the principal to reduce the EMI burden and interest outgo.

Balance Transfer
Explore the option of a home loan balance transfer to a lender offering a lower interest rate. This can reduce your EMI and overall interest burden.

Daughter’s Education Planning
Engineering and PG Abroad
Education costs, especially abroad, can be substantial. Start a dedicated education fund for your daughter, investing in diversified mutual funds to accumulate the required corpus.

Asset Management
Flat, Gold, and Plot
Your assets amount to Rs. 50 lakhs. Ensure they are effectively utilized or can be liquidated when needed for significant expenses like education or emergencies.

Investment Strategy
Diversification
Diversify your investments across asset classes to manage risk and optimize returns. Consider a mix of equity, debt, and hybrid funds.

Regular Investments
Continue regular investments through SIPs. This will help in rupee cost averaging and building a substantial corpus over time.

Evaluating Direct vs. Regular Funds
Disadvantages of Direct Funds
Direct funds save on commissions but lack personalized guidance. Professional advice from a Certified Financial Planner (CFP) can provide strategic insights and help in making informed decisions.

Benefits of Regular Funds
Investing through regular funds ensures you receive expert advice, optimizing your portfolio for better returns and risk management.

Retirement Planning
Building a Retirement Corpus
Plan to build a substantial retirement corpus. Regularly invest in a mix of equity and debt funds, considering your risk tolerance and time horizon.

Systematic Withdrawal Plan
Consider a Systematic Withdrawal Plan (SWP) post-retirement. This will provide a steady income stream while keeping your investments growing.

Emergency Fund
Importance of Liquidity
Maintain an emergency fund equivalent to 6-12 months of expenses. This provides liquidity and financial stability during unforeseen events.

Professional Guidance
Certified Financial Planner (CFP)
Engage a Certified Financial Planner for personalized financial advice. They can help you navigate complex financial decisions and achieve your long-term goals.

Conclusion
Balancing immediate financial needs with long-term goals is crucial. Diversify investments, reduce debt, and plan for significant expenses like education. Regularly review and adjust your financial plan to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |7922 Answers  |Ask -

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

Asked by Anonymous - May 25, 2024Hindi
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How can I create a financial plan to accumulate a wealth of ?50 crore for retirement in 30 years, given that my annual salary is ?24 lakhs, I save ?18 lakh annually, and I currently have no investments? Additionally, I need to plan for upcoming marriage, future child upbringing expenses, currently I'm paying a monthly car loan repayment of ?30,000 for the next two years.
Ans: Creating a Financial Plan for Rs. 50 Crore Retirement Corpus in 30 Years
To achieve a retirement corpus of Rs. 50 crore in 30 years, you need a well-structured financial plan. Your annual salary is Rs. 24 lakhs, and you save Rs. 18 lakhs annually. Additionally, you have upcoming expenses related to marriage, child upbringing, and a car loan repayment of Rs. 30,000 per month for the next two years. Let's create a comprehensive financial plan.

Understanding Your Financial Situation
Current Income and Savings:

Annual Salary: Rs. 24 lakhs
Annual Savings: Rs. 18 lakhs
Current Expenses:

Car Loan Repayment: Rs. 30,000 per month (for 2 years)
Upcoming Expenses:

Marriage and Child Upbringing: These expenses need to be planned and saved for separately.
Setting Clear Financial Goals
Primary Goal:

Accumulate Rs. 50 crore for retirement in 30 years.
Secondary Goals:

Plan for marriage expenses.
Plan for future child upbringing expenses.
Manage current car loan repayment.
Managing Your Savings and Expenses
Current Savings Allocation:

Your current savings rate is impressive. Allocating Rs. 18 lakhs per year towards investments is a solid start.

Car Loan Repayment:

Your car loan of Rs. 30,000 per month will be paid off in 2 years. After that, you will have an additional Rs. 3.6 lakhs annually to invest.

Investment Strategy for Rs. 50 Crore Corpus
To achieve Rs. 50 crore in 30 years, you need to invest in instruments that offer high returns. A diversified portfolio with a mix of equity, mutual funds, and other growth-oriented assets is essential.

Equity Investments:

Equity investments offer high returns over the long term. Allocate a significant portion of your savings to equity mutual funds and direct stocks.

Mutual Funds:

Invest in a mix of large-cap, mid-cap, and small-cap mutual funds. Actively managed funds can potentially outperform index funds and provide higher returns.

Systematic Investment Plans (SIPs):

SIPs allow disciplined and regular investment in mutual funds. Start SIPs with a portion of your savings to benefit from rupee cost averaging and compounding.

Calculating the Required Investment
Investment Growth Assumption:

Assume an average annual return of 12% from a diversified portfolio of equities and mutual funds.

Monthly Investment Required:

Using the future value formula, calculate the monthly investment required to achieve Rs. 50 crore in 30 years. This helps in setting a clear investment target.

Planning for Marriage and Child Upbringing
Marriage Expenses:

Estimate the total cost of your upcoming marriage. Create a separate savings plan to accumulate this amount over the desired period.

Child Upbringing Expenses:

Estimate future expenses for your child's education and upbringing. Start a dedicated savings or investment plan to meet these future needs.

Optimizing Tax Benefits
Tax-Advantaged Investments:

Invest in tax-saving instruments like ELSS (Equity Linked Savings Scheme) to save on taxes under Section 80C of the Income Tax Act.

PPF and EPF:

Continue contributing to PPF and EPF accounts to benefit from tax-free interest and secure returns.

Review and Adjust Your Plan Regularly
Periodic Reviews:

Review your financial plan annually to ensure you are on track to meet your goals. Adjust your investments based on market conditions and life changes.

Adjusting Asset Allocation:

As you approach retirement, gradually shift your investments from high-risk equities to safer debt instruments to protect your corpus.

Financial Discipline and Emergency Fund
Maintain Financial Discipline:

Stick to your investment plan and avoid impulsive spending. Financial discipline is crucial for achieving long-term goals.

Emergency Fund:

Maintain an emergency fund with 6-12 months of living expenses. This fund provides financial security in case of unforeseen circumstances.

Professional Guidance
Certified Financial Planner:

Consult a Certified Financial Planner (CFP) to tailor your investment strategy and ensure it aligns with your financial goals and risk tolerance.

Practical Steps to Implement the Plan
Start Investing Immediately:

Begin your investments as soon as possible to take advantage of compounding.

Increase Investments Over Time:

As your income grows, increase your investment amount to stay on track with your financial goals.

Use Technology:

Use financial planning and investment apps to track your savings, investments, and progress towards your goals.

Conclusion
Achieving a Rs. 50 crore corpus in 30 years is ambitious but achievable with disciplined savings, smart investments, and regular reviews. By diversifying your portfolio and staying committed to your plan, you can secure a comfortable and financially independent retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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I am 51 single, divorced and have one little sister who is 32. Recently I lost my job, and I am not in the mood to search for a new one. I am in the process of making arrangement to fulfill my monthly needs. I am holding the NPS which has a small corpus of 5 lacs in tier 1 and 45k in tier 2. Now I want to completely exit from the NPS. Now I must compulsorily accept the 20% withdrawal and 80% annuity. I have a few queries below. 1. Should I consider buying 100% annuity. 20% withdrawal does not make sense 2. Should I consider putting 1.5 lacs more to enhance the annuity (The corpus will become 7 lacs approx.). 3. Should I consider taking out the annuity on a yearly basis (Please explain Its pros and cons), since it offers more benefit. 4. Should I consider the Shriram life insurance. 5. Will it be safe to consider Shriram life insurance for life long future annuity. It offers the highest annuity. 6. Should I consider Annuity for Life with ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s). The annual offer is 49,063.00 (7.01%) 7. Should I consider Annuity for Life without ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases, and no further amount will be payable. The annual offer is 58,112.00 (8.30%)
Ans: Hello;

Point wise answers to your queries as given below:

1. Yes.
2. Yes.
3. If you do monthly annuity the rate will be lower but you get monthly payouts. In yearly the rate will higher but only one shot payment per year so it depends on your preference.

4. Cannot comment on suitability of xyz firm.

5. Consider an insurer which has good capital adequacy, growing profitable business, preferably listed, reputation of the owner/group apart from decent annuity rates on offer.

6 & 7. My suggestion would be to opt for annuity for life with ROP to your nominee. Ultimately it is your call.

Please have adequate healthcare insurance cover.

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Ans: Hello Manan,
My simple advice to you would be to get back to some job while you can continue to ponder over your long term goals/passion/pursuits.
Sitting idle (with no funds) at home won't help & it is not going to do any good to your career/life plans.
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Likewise ask yourself questions for each option you have in mind & be honest in responses, that will help you to zero on your real aspiration & then do the proper detailing/planning. This may entail some compromises in short term but will certainly pave your way to achieve long term goals.

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Me and my girlfriend we both are in relationship from about last 2 years (almost). After such a long time I got to know that she had 2 relationships before me that too she didn't told I got to know it by third person she was sexually involved too (not intercourse but yes other things with one of them)... When I asked her that why you didn't told anything to me before she said she was scared that if she'll tell it to me so I'll leave her and she really did not wanted that... She was scared to loose me. And she was still in contact with that guy and when I asked her that why you were still in contact with him (it's been around 3 years they got separated) so she says that she is like that only... She can't deny anyone because of her soft hearted nature but she did not had any feelings for him. She also said that once she even went to meet him when he requested to meet and also on the same she claims that her soft hearted nature has done that she wasn't able to deny. I loved her too much but now all these things are hurting me like anything. (She is my first relationship before her i never had anyone)
Ans: Dear Anonymous,
I understand that you are hurt and the complexities of the hearts might be difficult sometimes to grasp. The first reason for your sorrow, her past relationship, and the fact that she was physically intimate with them is not completely justifiable. Though I understand that you feel hurt because she did not disclose it to you, still it should not matter so much as to ruin your present relationship. And whether she will open up about such sensitive details is actually up to her. It has nothing to do with how much she loves you or trusts you. Please understand that.

Now coming to the next thing, the fact that she is still in touch with them and has even met one of them, that is slightly concerning. It would have been okay if she did that openly- please understand that I am not saying she should have asked for your permission, but rather discuss the same with you. Moreover, in a relationship, it is also important to understand how much your partner is comfortable with- goes for both men and women. If you are uncomfortable with her relationship with her exes, she should consider that. I would have said the same if the table was turned. I suggest you have a clear conversation with her and express how you feel about this situation- depending on how she reacts and how the conversation goes, you both can think about the next step.

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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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