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Ramalingam

Ramalingam Kalirajan  |4046 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 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
Asked by Anonymous - May 21, 2024Hindi
Money

Hi I am 42 year old NRI married with 10 year old kid based in Singapore and plan to retire early around 55 years with a corpus of 35-40 cr in India. Currently am putting in 1.8 lacs INR in MFs and my wife puts in 50k per month. Apart from that we invest 1.5 lakhs in equities and have a current asset of 5 cr in MFs and equities. We also have an endowment plan which has 4 cr guarantee by 2037. We expect my son’s education expense to be somewhere around 4-5 cr. Am on track for my goals or I need to invest more. We also have our term, health and critical illness fully covered

Ans: Assessing Your Current Financial Situation
Firstly, congratulations on your disciplined investment approach and clear financial goals. At 42, you and your wife have done an impressive job accumulating assets and planning for the future. You currently invest Rs. 1.8 lakhs in mutual funds and Rs. 1.5 lakhs in equities monthly. Your wife contributes an additional Rs. 50,000 in mutual funds. Your current assets total Rs. 5 crores in mutual funds and equities, along with a 4 crore endowment plan guaranteed by 2037. With full coverage on term, health, and critical illness insurance, you are well-protected.

Evaluating Your Financial Goals
Retirement Corpus
You aim to retire at 55 with a corpus of Rs. 35-40 crores in India. This goal is ambitious but achievable with disciplined saving and investment strategies. The key is to ensure that your current investments align with this target.

Son’s Education
You estimate your son's education expenses to be around Rs. 4-5 crores. This is a significant future expense that needs to be planned meticulously to avoid impacting your retirement corpus.

Investment Strategy Review
Mutual Funds
Your investment in mutual funds is substantial and diversified. Actively managed mutual funds are preferable over index funds as they can potentially outperform the market during various market cycles. Continue investing in these funds, ensuring a balance between equity and debt based on market conditions and your risk tolerance.

Equities
Investing Rs. 1.5 lakhs monthly in equities indicates a strong inclination towards high-growth potential investments. Ensure that your equity investments are diversified across sectors and geographies to mitigate risks.

Endowment Plan
The endowment plan guarantees Rs. 4 crores by 2037, providing a safety net. However, review the returns periodically to ensure they align with your overall financial goals.

Future Projections and Adjustments
Growth Projections
Assuming a conservative annual growth rate of 10-12% for your mutual funds and equities, your current investment strategy appears robust. Regular reviews and adjustments based on market performance are essential to stay on track.

Education Fund
Set up a dedicated education fund for your son. Consider investing in a mix of equity and debt mutual funds to balance growth and stability. Starting early allows compounding to work in your favor, reducing the financial burden closer to his college years.

Risk Management
Insurance Coverage
Your comprehensive insurance coverage for term, health, and critical illness is commendable. Regularly review these policies to ensure they keep pace with inflation and changing healthcare costs.

Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of your household expenses. This fund should be in liquid assets like savings accounts or liquid mutual funds to handle unforeseen expenses without disrupting your investment strategy.

Investment Review and Rebalancing
Regular Reviews
Conduct an annual review of your portfolio with a Certified Financial Planner. This review should include performance analysis, risk assessment, and alignment with your financial goals. Adjustments based on these reviews will keep your investment strategy on track.

Rebalancing
Periodically rebalance your portfolio to maintain the desired asset allocation. This process involves selling overperforming assets and buying underperforming ones to ensure your portfolio remains aligned with your risk tolerance and investment goals.

Maximizing Tax Efficiency
NRI Tax Benefits
As an NRI, you have specific tax benefits and obligations. Optimize your investments to take advantage of these benefits. Consult a tax expert to ensure compliance with both Indian and Singaporean tax laws.

Tax-efficient Investments
Consider tax-efficient investment options like ELSS funds for mutual funds, which provide tax deductions under Section 80C. This approach helps maximize returns by reducing taxable income.

Conclusion
You are on a strong path toward achieving your financial goals. By continuing your disciplined investment strategy and making necessary adjustments, you can reach your target of Rs. 35-40 crores by retirement. Establish a dedicated fund for your son's education to ensure his future expenses do not impact your retirement corpus. Regular reviews with a Certified Financial Planner and adjustments based on market conditions will keep you on track. Your comprehensive insurance coverage and emergency fund further secure your financial stability.

Keep focusing on maintaining a diversified portfolio, and regularly review and adjust your investments. By doing so, you can enjoy a financially secure and 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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Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

Asked by Anonymous - Apr 11, 2024Hindi
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Hi Vivek, We are 43 y/o couple without kids, and plan to retire by 55. I want to aggressively invest for our retirement. I earn 4.5L p/m and our expenses are 75K. We have 9L in shares, 10L in Gold Bonds, 20L in corporate FDs, 40L in EPF, a paidup house and 10L in NPS. We have 1.2Cr in bank account earning 7% interest. Can you help us invest better, we can aggressively invest aroud 2L, which MF should we further invest in to comfortably retire?
Ans: Hi Vivek,
It's fantastic to see your proactive approach to retirement planning. With a clear goal of retiring by 55 and a solid financial foundation, you're well-positioned to achieve your aspirations. Let's explore how we can optimize your investments to support your retirement plans:
1. Assessing Your Current Portfolio: You've built a diverse portfolio with investments in shares, gold bonds, corporate FDs, EPF, NPS, and bank deposits. This demonstrates a prudent approach to wealth accumulation and risk management.
2. Identifying Investment Opportunities: Given your goal of aggressive investing, we can consider allocating a portion of your investable surplus to equity mutual funds. Equity funds have the potential for higher returns over the long term, although they come with higher volatility.
3. Choosing Suitable Mutual Funds: When selecting mutual funds, it's essential to consider factors such as your risk tolerance, investment horizon, and financial goals. We can explore options across different categories like large-cap, mid-cap, and multi-cap funds to diversify your portfolio effectively.
4. Setting Realistic Expectations: While investing aggressively can potentially accelerate wealth accumulation, it's crucial to remain mindful of market risks and volatility. A disciplined approach to investing and periodic portfolio reviews are key to staying on track towards your retirement goals.
5. Monitoring and Reviewing: Regularly monitor the performance of your investments and reassess your financial plan as needed. Adjustments may be necessary based on changes in market conditions, economic outlook, or personal circumstances.
Remember, achieving financial independence requires patience, discipline, and a long-term perspective. By working together to craft a tailored investment strategy, we can help you navigate towards a comfortable retirement.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Ramalingam

Ramalingam Kalirajan  |4046 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Asked by Anonymous - Apr 15, 2024Hindi
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Money
Hi Dev, We are 43 y/o couple without kids, and plan to retire by 55. I want to aggressively invest for our retirement. I earn 4.5L p/m and our expenses are 75K. We have 9L in shares, 10L in Gold Bonds, 20L in corporate FDs, 40L in EPF, a paidup house and 10L in NPS. We have 1.2Cr in bank account earning 7% interest. Can you help us invest better, we can aggressively invest aroud 2L, which MF should we further invest in to comfortably retire?
Ans: Given your aggressive retirement goal, let's optimize your investment strategy:

Asset Allocation: Review your current asset allocation to ensure it aligns with your retirement timeline and risk tolerance. Since retirement is your primary goal, consider gradually shifting towards a more conservative allocation as you approach retirement age.
Equity Investments: With a 12-year horizon until retirement, you can afford to have a significant allocation to equity mutual funds. Focus on diversified equity funds across large-cap, mid-cap, and small-cap segments to maximize growth potential.
Debt Investments: While equity provides growth potential, consider debt funds for stability and regular income. Short to medium-term debt funds or dynamic asset allocation funds can be suitable for this purpose.
Systematic Investment Plans (SIPs): Since you have a monthly surplus of 2L, consider starting SIPs in mutual funds to harness the power of compounding. Allocate a portion of this surplus to equity SIPs and another portion to debt SIPs based on your risk appetite.
Tax Planning: Evaluate tax-saving investment options like Equity Linked Savings Schemes (ELSS) to optimize tax efficiency while also contributing towards your retirement corpus.
Regular Review: Periodically review your investment portfolio to ensure it remains aligned with your retirement goals, risk tolerance, and market conditions. Adjust your asset allocation and investment strategy as needed.
Professional Advice: Consider consulting with a Certified Financial Planner to develop a personalized retirement plan tailored to your specific financial situation, goals, and risk profile.
Remember, achieving your retirement goal requires disciplined investing, regular review, and staying focused on your long-term objectives. By making informed investment decisions and staying committed to your financial plan, you can work towards a comfortable retirement.

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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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