Home > Money > Question
Need Expert Advice?Our Gurus Can Help

42-year-old investor seeks advice on reaching 2 lakh monthly income in 10 years

Milind

Milind Vadjikar  |683 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 03, 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 - Sep 09, 2024Hindi
Listen
Money

I am 42 years old, and for the last 18 months, I have been investing ?90,000 per month in SIPs (20% in small cap, 25% in multicap, 20% in hybrid, 30% in large cap, and 5% in an IT digital fund). The total value of these funds is now ?18,00,000. I also have a PF of ?11,00,000, ?3 lakh in the stock market, and two houses with a monthly EMI of ?40,000. Currently, this is all the wealth I have. I would like to achieve a monthly income of ?2 lakh after 10 years. Could you please suggest the best steps I can take to reach this goal? Thank you in advance for your guidance. Best regards,

Ans: Hello;

You need to hike your sip amount to 1.2 L per month or else top-up the existing sip amount(90 K) by 10% each year for 10 years.

I am advising you to put pf balance and stock holdings also into mutual fund so your MF corpus as on today will be 18L + 14L=32 L which when invested in MFs will yield you a sum of 1.09 Cr after 10 years.

The sip corpus after 10 years through either of the above routes will yield you a sum of around 3 Cr.

If you buy an immediate annuity for 4.09 Cr after 10 years at an annuity rate of 6% then you can expect to receive monthly payout of 2 L as desired.

Return of 13% considered.

Happy Investing!!

*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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

Asked by Anonymous - Feb 19, 2024Hindi
Listen
Money
Hello, I am 34 earning 2 lacs per month. I have been investing in Mutual funds from past 6 years and from pass 2- 2.5 years I have reached and investing 1.6 lacs per month in Mutual funds. In next 10 years I want to have an automatic income of about 3 lacs per month. Can you advise how is it possible. I am investing in Mirae emerging asset, DSP, axis long term quity, parag pariek flexi cap, HDFC mic cap, HDFC Top 100, Nippon, SBi (small cap) Please advise the mutual fund I should invest and the amount to get an income of 3 lacs per month in next 7-10 years Also, i have bought a house for 1.5 cr. Have paid about 25 lacs from my investments already. Planning to pay about 70% as down payment in the next 3-4 years and 30 % loan. Is that a wise decision. Please advise
Ans: To achieve an automatic income of 3 lakhs per month in the next 7-10 years, you'll need to focus on building a substantial corpus through your investments. Given your current investment capacity and time horizon, you may consider allocating a significant portion of your monthly investments to high-growth potential mutual funds, particularly those with exposure to mid-cap and small-cap segments.

Ensure your investment portfolio remains well-diversified across different asset classes and investment styles to manage risk effectively. Regularly review your portfolio's performance and adjust your investment strategy as needed to stay on track towards your income goal.

Regarding your decision to pay 70% down payment for your house purchase, it can be a wise move if it aligns with your financial goals and risk tolerance. By making a higher down payment, you can potentially reduce your loan burden and overall interest costs. However, it's essential to ensure that you maintain an adequate emergency fund and continue investing for your long-term financial goals alongside your home purchase plans.

Consider consulting with a financial advisor to develop a comprehensive financial plan tailored to your specific needs and objectives. They can provide personalized advice and help you navigate through your investment and home purchase decisions effectively.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 05, 2024

Asked by Anonymous - May 05, 2024Hindi
Listen
Money
Hello, I am 34 earning 3 lacs per month. I have been investing in Mutual funds from past 7 years and from pass 3 years I have reached and investing 1.6 lacs per month in Mutual funds. In next 10 years I want to have an automatic income of about 3 lacs per month. Can you advise how is it possible. I am investing in Mirae emerging asset, DSP, axis long term quity, parag pariek flexi cap, HDFC mic cap, HDFC Top 100, Nippon, SBi (small cap) Please advise the mutual fund I should invest and the amount to get an income of 3 lacs per month in next 7-10 years Also, i have bought a house for 1.5 cr. Have paid about 25 lacs from my investments already. Planning to pay about 70% as down payment in the next 3-4 years and 30 % loan. Is that a wise decision. Please advise
Ans: It's impressive to see your commitment to investing and your ambitious goal of generating a passive income of 3 lakhs per month in the next decade. With your current investment capacity and timeframe, achieving this target is feasible, but it requires careful planning and strategic allocation of your resources.

Given your investment horizon, you might consider a combination of growth-oriented and income-oriented mutual funds. Growth-oriented funds can provide capital appreciation over time, while income-oriented funds can generate regular dividends or interest payments.

To meet your income goal, you'll need to accumulate a significant corpus that can generate a sustainable monthly income. Based on your current investments and savings rate, you may need to increase your monthly investment amount and consider higher-returning investment avenues.

Regarding your mutual fund portfolio, it's essential to ensure diversification and align your investments with your risk tolerance and financial goals. Consider consulting with a Certified Financial Planner to tailor your portfolio to meet your income objectives while managing risk effectively.

Regarding your property investment, using a combination of your savings and a home loan for the down payment seems like a prudent approach, as it reduces your debt burden while leveraging your existing assets. However, assess your cash flow and future income prospects to ensure you can comfortably manage the loan obligations.

Overall, achieving your financial goals requires a holistic approach, considering both investment strategies and asset allocation. Stay focused on your long-term objectives, and seek professional guidance to optimize your investment plan and real estate decisions. With discipline and careful planning, you can work towards building a robust financial future.

..Read more

Milind

Milind Vadjikar  |683 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 17, 2024

Listen
Money
I am 42 years old, and for the last 18 months, I have been investing ?90,000 per month in SIPs (20% in small cap, 25% in multicap, 20% in hybrid, 30% in large cap, and 5% in an IT digital fund). The total value of these funds is now ?18,00,000. I also have a PF of ?11,00,000, ?3 lakh in the stock market, and two houses with a monthly EMI of ?40,000. Currently, this is all the wealth I have. I would like to achieve a monthly income of ?2 lakh after 10 years. Could you please suggest the best steps I can take to reach this goal? Thank you in advance for your guidance. Best regards,
Ans: Existing corpus 18+11+3=32 L
Assuming modest growth @ 10% pa this corpus will grow to 83 Lakhs 10 year hence.

Also SIP of 90K will yield a corpus of 2.22 Cr after 10 years

So comprehensive corpus of 2.22 + 0.83=3.05 Cr

Considering annuity at 6 % this will yield a monthly income of 1.52 L falling short of your expectation of 2 L pm.

This can be addressed in two ways:
Either you increase SIP amount to 1.30 L or top-up current SIP amount by 10% each year.

This leads to corpus of 3.21 + 0.83=4Cr+

An annuity at 6% will yield you a monthly income of 2 L(pre-tax).

The rental income from your extra house or other fund resources are not considered.

A modest return of 13% is considered from pure equity schemes.

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

You may follow us on X at @mars_invest for updates

Happy Investing

..Read more

Latest Questions
Ravi

Ravi Mittal  |431 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 22, 2024Hindi
Listen
Relationship
A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

...Read more

Milind

Milind Vadjikar  |683 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
Listen
Money
Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x