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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 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

Question by Mystic on Jun 25, 2025Hindi

Hi Sir, I am 42 years old, I have no active income currently. I have about 60 L in FD's, 1 L in LIC Life ins, 3 L in NPS, 3 L in EPS, 5 L in PPF, 10 L in ICICI ELSS scheme. I have never invested in any SIP, MF, ETF, EGOLD or shares. I need a minimum income of 50k per month to manage. I have no debts. Live in own house. Only household family expenditure. How do i manage my portfolio? Where should i start?

Ans: You are 42 years old. You don’t have a regular income. You have Rs 60 L in FDs. You need at least Rs 50,000 per month. You own your home and have no loans. This gives you financial safety. Let’s now build on this base.

Your Current Financial Position

You have Rs 60 L in fixed deposits.

Rs 10 L in ELSS mutual fund.

Rs 5 L in PPF.

Rs 3 L in EPS.

Rs 3 L in NPS.

Rs 1 L in LIC traditional life insurance.

You have no debt. You own your home.

You need Rs 6 L annually (Rs 50,000 monthly).

Let’s now assess how to turn this into a working financial plan.

Fixed Deposit – Protect and Redeploy Slowly

FD gives stability but lower returns than inflation.

FD income is fully taxable under your slab.

Keeping all Rs 60 L in FD is not ideal long-term.

Do not break all FDs at once.

Keep Rs 12–15 L in FDs for short-term use.

This will cover 2.5 years of expenses.

Use monthly interest + partial withdrawals to meet expenses.

Start shifting the remaining Rs 45–48 L slowly into better investments.

Why You Need to Shift from FD to Other Investments

FD returns may not beat inflation.

You may outlive your savings.

Equity mutual funds can give better long-term growth.

Diversification improves safety and return potential.

Debt mutual funds can give better post-tax returns than FD.

Mutual funds are flexible and liquid.

You can redeem partially whenever needed.

You are 42. You still have 30–35 years of life expectancy. Your money must grow during this time.

Start Systematic Withdrawal Plan (SWP)

SWP allows regular income from mutual fund.

You invest in good hybrid or equity funds.

Set SWP of Rs 50,000 monthly.

This helps you avoid withdrawing all at once.

Growth in mutual fund balances supports future withdrawals.

Tax is applied only on the capital gain portion.

Set up SWP only from regular plan through a Certified Financial Planner (CFP) or MFD. Do not use direct plan.

Why You Should Avoid Direct Plans

Direct plans do not give you guidance or support.

Mistakes in fund choice or timing can reduce returns.

You may not know when to rebalance.

A qualified MFD with CFP credential provides handholding.

They help you stay invested during market corrections.

They create a customised withdrawal strategy.

Direct plans look cheaper. But wrong fund or wrong timing is costlier. Regular plans give access to human expertise.

Why Not to Consider Index Funds or ETFs

Index funds copy the market. No active decision.

They do not protect in market downturns.

They cannot outperform the market.

You need funds that manage risk actively.

ETFs require demat and market timing.

Mutual funds managed by professionals are better for retirees.

Active funds are better at beating inflation over time.

Stick to actively managed regular plans with SWP for your situation.

ELSS Mutual Funds Holding – Review and Decide

You hold Rs 10 L in ICICI ELSS fund.

If the lock-in is over, review with MFD.

Switch to diversified equity or hybrid funds gradually.

Use a step-by-step withdrawal approach to reduce tax.

Avoid withdrawing the full amount at once.

Note: If lock-in is not yet over, wait until it is.

PPF, EPS and NPS – Preserve and Build

Do not withdraw from PPF. Let it grow.

PPF is safe and tax-free.

PPF can be used for later years or legacy planning.

EPS is not withdrawable. It gives pension after 58.

NPS cannot be withdrawn fully. 60% can be used at 60.

Let NPS stay until maturity. It helps post-60 income.

Use FDs and mutual fund SWP for current needs. Let PPF, EPS, and NPS support your later years.

Your LIC Life Insurance – Reassess

You have Rs 1 L in LIC traditional policy.

These policies give low returns.

They mix insurance and investment.

You don’t need life cover if you have no dependents.

You need pure investment now.

Ask your MFD or CFP to review policy surrender value. If the surrender value is decent, shift to mutual funds.

Create 3 Income Buckets

1. Short Term Bucket (0 to 2 years)

Keep Rs 12–15 L in FD.

This is for fixed monthly income.

Use FD interest + monthly break.

Refill this bucket every 2 years.

2. Medium Term Bucket (2 to 5 years)

Invest Rs 15–18 L in hybrid mutual funds.

SWP can be started from this after 2 years.

Moderate growth with lower risk.

Check capital gain tax if redeemed.

3. Long Term Bucket (5 to 20 years)

Invest Rs 25–30 L in diversified equity funds.

Let this grow.

This will refill other buckets in future.

Keep reviewing with your MFD every year.

These buckets give stability, growth, and control.

Tax Awareness

FD interest is taxed fully as income.

Equity fund gains above Rs 1.25 L/year taxed at 12.5%.

Hybrid funds (if equity-oriented) follow same rule.

Use SWP smartly to reduce taxes.

Plan withdrawals to stay below taxable limits.

Take help of CFP for tax-aware withdrawal planning.

Do not try to avoid tax by using risky methods. Plan smartly instead.

Step-by-Step Actions You Can Take Now

Fix Rs 15 L in FD. Keep it for 2 years of expenses.

Start SIP of Rs 50,000 in hybrid funds for 6–12 months.

Then convert to SWP of same amount from 13th month.

Shift Rs 25–30 L to equity mutual funds with MFD help.

Let PPF, NPS, EPS continue till maturity.

Review LIC policy for surrender and redeploy amount.

Review the ELSS lock-in status and shift after lock-in ends.

Take annual review with CFP for adjustments.

Refill FD bucket every 2 years from mutual fund profits.

This process builds stability and growth.

Avoid These Common Mistakes

Avoid keeping full amount in FDs.

Avoid high insurance-linked investment plans.

Don’t run behind high-return schemes.

Don’t withdraw large mutual fund units in panic.

Don’t try investing on your own in direct plans.

Don’t chase returns. Focus on sustainability.

Always focus on income, not just capital.

Do You Need Emergency Fund Now?

You are already keeping Rs 12–15 L in FD.

This covers emergency and regular needs.

You can call this your emergency + income buffer.

Keep this amount intact unless absolutely needed.

No need for separate emergency fund right now.

How to Monitor Progress

Meet MFD/CFP every year.

Ask for capital growth and income check.

Rebalance every 12 months.

Keep 2 years of income in safe assets.

Review tax impact before withdrawals.

Monitoring helps your plan stay relevant.

Finally

Your current assets can support your income needs.

You need better allocation than just FDs.

Equity and hybrid funds give better long-term support.

SWP gives regular income and tax benefits.

FD is your short-term partner. Mutual fund is for long-term.

Always take guidance from a CFP through an MFD.

Direct plans, ETFs, or ULIPs may not suit your needs.

Keep reviewing and realigning every year.

You can create sustainable income for life with this approach.

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.