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Omkeshwar

Omkeshwar Singh  | Answer  |Ask -

Head, Rank MF - Answered on Dec 21, 2021

Mutual Fund Expert... more
Somnath Question by Somnath on Dec 21, 2021Hindi
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Money

I am 43 years old.

I am a government employee and do not have much bank balance.

I want to create wealth of Rs 1 cr in 17 years as a part of my retirement benefit.

At present, I am investing a total of Rs 5,600/month in these SIPs.

Mutual Funds Plan type Amount
1. Axis ESG Equity Fund Growth Rs 1,000/month
2. Axis MF Bluechip Fund Growth Rs 500/month
3. Axis Midcap Fund Growth Rs 500/month
4. UTI Small Cap Fund Growth Rs 1,000/month
5. UTI Flexi Cap Fund Growth Rs 500/month
6. PGIM India Flexi Cap Fund Direct, growth Rs 600/month
7. Principal Focused Multicap Fund Growth Rs 500/month
8. Aditya Birla Sun Life ESG Fund Growth Rs 500/month
9. DSP Quant Fund Growth Rs 500/month

Please tell me whether the funds I chose are the right ones to provide wealth in the long term.

Ans: The funds chosen are good and have the potential to provide decent returns in the long run.

 

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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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 30, 2024

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I have 36000 salary and investing 7500/month in SIP and every month 2000rs I'm purchasing stocks(I take own study), Total 9500/month Mutual funds are direct growth *SBI midcap fund 1000* *SBI consumption opportunity fund 1000* *Canara robeco tax saving fund 2000* *Quant small cap 2000* *Quant dynamic asset allocation fund 1000* *Digital gold 500/month* One year old portfolio 10-15 years time zone For retirement plan
Ans: Evaluating Investment Strategy for Retirement Planning
Your investment strategy, blending systematic investment plans (SIPs) in mutual funds and direct stock purchases, showcases a proactive approach to building wealth for retirement. Let's delve deeper into each component to ensure it aligns with your long-term financial goals while addressing associated risks.

SIP Investments:

Diversified Portfolio: Your allocation across various mutual funds, including mid-cap, tax-saving, small-cap, and dynamic asset allocation, offers diversification benefits, spreading risk across different asset classes and market segments.
Consistent Investing: Regular monthly investments through SIPs demonstrate discipline and harness the power of compounding over the long term, contributing significantly to wealth accumulation.
Professional Management: Mutual funds are managed by seasoned fund managers who conduct in-depth research and analysis, potentially delivering superior returns compared to individual stock picking.
Direct Stock Purchases:

Hands-on Approach: Actively purchasing stocks based on personal study reflects an engaged investment approach, potentially leading to enhanced returns through astute stock selection and market insights.
Risks of Individual Stock Selection: Direct stock investing entails specific risks, including company-specific risks such as poor management decisions, industry risks, and market volatility, which can adversely impact portfolio performance.
Lack of Diversification: Concentrating investments in a few individual stocks exposes the portfolio to higher idiosyncratic risk compared to diversified mutual funds, where risk is spread across multiple securities.
Risks of Direct Stock Investing Over Mutual Funds:

Higher Volatility: Individual stocks tend to be more volatile than diversified mutual funds, as their prices are influenced by company-specific news and events, leading to larger price fluctuations.
Lack of Professional Management: Direct stock investors bear the responsibility of conducting thorough research, monitoring stock performance, and making timely decisions, which may not always match the expertise and resources of professional fund managers.
Higher Transaction Costs: Direct stock investing often incurs higher transaction costs, including brokerage fees, taxes, and bid-ask spreads, which can erode returns, especially for small investors.
Risks of Direct Funds Over Regular Mutual Fund Distributors (MFDs):

Limited Access to Advice: Investing directly in mutual funds may limit access to personalized financial advice and guidance provided by certified financial planners or experienced mutual fund distributors, potentially leading to suboptimal investment decisions.
Lack of Portfolio Monitoring: Direct investors are responsible for monitoring their portfolios, tracking fund performance, and rebalancing asset allocations, which requires time, knowledge, and expertise.
Potential for Missed Opportunities: Without the assistance of a regular mutual fund distributor, investors may miss out on new fund offerings, market insights, and investment opportunities that could enhance portfolio returns and diversification.
Recommendations:
Review Portfolio Composition: Periodically review your portfolio to ensure it remains aligned with your risk tolerance, investment objectives, and time horizon, considering the risks associated with direct stock investing.
Risk Management: Continuously monitor individual stock performance and mutual fund returns to identify underperforming assets and take necessary actions to mitigate risks.
Asset Allocation: Rebalance your portfolio periodically to maintain an optimal asset allocation based on your risk profile and investment goals, considering the risks inherent in both direct stock investing and direct mutual fund investments.
Consult a Certified Financial Planner: Seek professional advice from a Certified Financial Planner to reassess your retirement goals, risk tolerance, and investment strategy, ensuring it remains conducive to achieving your long-term financial objectives while mitigating associated risks.
Your proactive approach towards retirement planning is commendable. By remaining disciplined, diversifying your investments, and periodically reviewing your portfolio, you're on track to build a robust financial foundation for retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2024

Money
My current age is 49 Years. I have my own house worth Rs. 90 lakhs, one Flat worth Rs, 50 L, two small Bunglows at Bolkpur worth Rs. 25 L, and 12 katthas of Land worth Rs. 40 L. Having no loan in the market. Through mutual funds I have invested Rs. 50 L. Its market value is 1.25 Cr. Presently I am running (1) SIP of Rs. 4,80, 000 p.m., (2) PPF of Rs. 1,50,000 /- p.a. (3) LIC (Market Linked) Rs. 2.25,000/- p.a. and (4) SBI Life Rs. 6,00,000 p.a. LICs are going to be matured by 2027. Would like to make a total fund og 5 Cr by 2030. So that after retirement at my age of 55, I can earn at least Rs. 3 L p.m. SIPs are : (1) SBI Blue Chip Fund Regular Plan Growth Rs. 60,000 p.a. (2) SBI Focussed Equity Fund Regular Growth Rs. 60,000 p.a. (3) SBI Magnum Global Fund Regular Plan Growth Rs. 60,000 p.a. (4) SBI Magnum Midcap Fund Regular Plan Growth Rs. 60,000 p.a. (5) SBI Nifty 50 Equal Weight Index Fund Regular Plan Growth Rs. 1,00,000 p.a.
Ans: Thank you for sharing detailed information about your current financial situation and goals. You have done an excellent job in building a diversified portfolio. Your goal of achieving Rs. 5 crore by 2030 and earning Rs. 3 lakh per month after retirement is commendable. Let’s delve into how you can achieve this.

Assessing Your Current Financial Status
You own multiple properties worth Rs. 2.05 crore, and your mutual fund investments are valued at Rs. 1.25 crore. Additionally, you are actively investing through SIPs, PPF, LIC, and SBI Life Insurance. This diversified approach is sound and sets a strong foundation for your financial goals.

Understanding Your Investment Strategy
You have allocated Rs. 4.8 lakh per month in SIPs and are contributing to PPF and insurance policies. Your current investment strategy reflects a balanced approach, combining equity, debt, and insurance products.

Evaluating Your SIP Investments
You have invested in several mutual funds, which is a good strategy. Actively managed funds can provide better returns due to professional management. However, index funds, while stable, may not offer the same level of growth as actively managed funds.

Disadvantages of Index Funds
Index funds track a specific market index and lack active management. They may not outperform the market and have limited flexibility. Actively managed funds, on the other hand, can adapt to market conditions, aiming for higher returns.

Benefits of Actively Managed Funds
Actively managed funds have experienced fund managers who make strategic decisions. They aim to outperform the market by selecting high-potential stocks. This can lead to better returns compared to index funds.

Importance of Diversification
Diversification reduces risk and enhances returns. Your portfolio should include a mix of large-cap, mid-cap, and small-cap funds. This approach balances stability with growth potential, aligning with your risk tolerance.

Regular Monitoring and Rebalancing
Regularly monitoring your investments is crucial. Rebalancing your portfolio ensures it aligns with your financial goals and risk tolerance. This helps maintain the desired asset allocation and optimizes returns.

Maximizing PPF Contributions
Your PPF contributions offer tax benefits and secure returns. Maximizing contributions to PPF can enhance your overall returns while providing safety. The tax-free interest adds to the attractiveness of PPF as a long-term investment.

Reviewing Insurance Policies
Your LIC and SBI Life policies provide insurance coverage and investment growth. However, market-linked insurance plans may have higher costs and lower returns compared to mutual funds. Considering your investment goals, it might be beneficial to surrender these policies and reinvest the proceeds in mutual funds.

Benefits of Reinvesting in Mutual Funds
Reinvesting the surrender value from your insurance policies into mutual funds can potentially offer higher returns. Mutual funds provide greater flexibility and the potential for significant growth, aligning well with your long-term goals.

Achieving Your Goal of Rs. 5 Crore by 2030
To achieve your goal of Rs. 5 crore by 2030, you need to focus on high-growth investments. Continue your SIPs in actively managed funds, maximize PPF contributions, and consider reinvesting insurance policy proceeds into mutual funds. This combined strategy should help you reach your target.

Generating Rs. 3 Lakh per Month Post-Retirement
To generate Rs. 3 lakh per month after retirement, you need a diversified income stream. This can include withdrawals from mutual funds, interest from PPF, and income from other investments. A Certified Financial Planner can help design a withdrawal strategy to meet your income needs.

Importance of Professional Guidance
Consulting a Certified Financial Planner ensures personalized advice. They can help optimize your investment strategy, align it with your goals, and manage risk. Professional guidance is invaluable in achieving financial security.

Disadvantages of Direct Funds
Direct funds require you to manage investments without professional advice. This can be challenging and risky without market knowledge. Regular funds, advised by a CFP, offer better management and informed decision-making.

Conclusion
Your current financial plan is robust and well-diversified. By continuing your disciplined investment approach, considering the surrender of insurance policies for better investment opportunities, and seeking professional advice, you can achieve your goal of Rs. 5 crore by 2030. This will ensure a comfortable retirement with a steady income.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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Money
My current age is 49 Years. I have my own house worth Rs. 90 lakhs, one Flat worth Rs, 50 L, two small Bungalows at Bolpur worth Rs. 25 L, and 12 kothas of Land worth Rs. 40 L. Having no loan in the market. Through mutual funds, I have invested Rs. 50 L.. Presently Its market value is 1.25 Cr. Presently I am running (1) SIP of Rs. 4,80, 000 p.a., (2) PPF of Rs. 1,50,000 /- p.a. (3) LIC (Market Linked) Rs. 2.25,000/- p.a. and (4) SBI Life Rs. 6,00,000 p.a. LICs are going to be matured by 2027. Would like to make a total fund og 5 Cr by 2030. So that after retirement at my age of 55, I can earn at least Rs. 3 L p.m. SIPs are : (1) SBI Blue Chip Fund Regular Plan Growth Rs. 60,000 p.a. (2) SBI Focussed Equity Fund Regular Growth Rs. 60,000 p.a. (3) SBI Magnum Global Fund Regular Plan Growth Rs. 60,000 p.a. (4) SBI Magnum Midcap Fund Regular Plan Growth Rs. 60,000 p.a. (5) SBI Nifty 50 Equal Weight Index Fund Regular Plan Growth Rs. 1,00,000 p.a.
Ans: Current Financial Status and Investment Goals

Your financial position is commendable. At 49, owning a house, a flat, two bungalows, and land showcases a solid real estate portfolio. Additionally, having Rs. 50 lakhs invested in mutual funds, now worth Rs. 1.25 crores, is impressive. The absence of loans further strengthens your financial health.

Ongoing Investments

You have a diversified investment approach. Your SIPs, PPF, and insurance policies show a well-thought-out strategy. These ongoing investments are critical for achieving your financial goals.

Assessing SIP Investments

Your SIP portfolio includes various funds. Actively managed funds can outperform index funds, especially in volatile markets. Certified Financial Planners can guide you in choosing funds that align with your risk tolerance and financial goals. Regular funds offer professional management, which can be beneficial.

Advantages of Actively Managed Funds

Actively managed funds aim to outperform the market. Fund managers adjust the portfolio based on market conditions. This can lead to better returns compared to index funds, which only mimic market performance.

Evaluating Insurance Policies

Your insurance policies, both LIC and SBI Life, provide a safety net. The market-linked LIC policy maturing in 2027 will add to your corpus. Ensure these policies align with your long-term financial goals.

Public Provident Fund (PPF)

Your PPF investment is a safe and tax-efficient option. It provides steady, risk-free returns and is a good addition to your retirement portfolio.

Targeting a Rs. 5 Crore Corpus by 2030

To reach Rs. 5 crore by 2030, reassess your investment strategy periodically. With your current assets and investments, this goal seems achievable. Keep track of market trends and adjust your investments accordingly.

Post-Retirement Income Plan

You aim for a monthly income of Rs. 3 lakhs post-retirement. Diversifying income sources, including investments, rental income, and interest from safe instruments, can help achieve this target.

Avoiding Index Funds

Index funds merely replicate market performance and might not provide superior returns. Actively managed funds, with expert fund management, can potentially deliver better returns and align with your financial goals.

Disadvantages of Direct Funds

Direct funds lack professional guidance, which regular funds offer. Certified Financial Planners provide tailored advice, helping to optimize your investment portfolio for better returns.

Regular Review and Adjustment

Regularly review your portfolio with a Certified Financial Planner. Market conditions change, and timely adjustments ensure your investments remain aligned with your goals.

Conclusion

Your financial foundation is strong, and with strategic planning, you can achieve your Rs. 5 crore target by 2030. Keep investing wisely, seek professional guidance, and review your portfolio periodically.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

Money
My current age is 49 Years. I have my own house worth Rs. 90 lakhs, one Flat worth Rs, 50 L, two small Bunglows at Bolpur worth Rs. 25 L, and 12 katthas of Land worth Rs. 40 L. Having no loan in the market. Through mutual funds I have invested Rs. 50 L. Its market value is 1.25 Cr. Presently I am running (1) SIP of Rs. 4,80, 000 p.a., (2) PPF of Rs. 1,50,000 /- p.a. (3) LIC (Market Linked) Rs. 2.25,000/- p.a. and (4) SBI Life Rs. 6,00,000 p.a. LICs are going to be matured by 2027. Would like to make a total fund og 5 Cr by 2030. So that after retirement at my age of 55, I can earn at least Rs. 3 L p.m. SIPs are : (1) SBI Blue Chip Fund Regular Plan Growth Rs. 60,000 p.a. (2) SBI Focussed Equity Fund Regular Growth Rs. 60,000 p.a. (3) SBI Magnum Global Fund Regular Plan Growth Rs. 60,000 p.a. (4) SBI Magnum Midcap Fund Regular Plan Growth Rs. 60,000 p.a. (5) SBI Nifty 50 Equal Weight Index Fund Regular Plan Growth Rs. 1,00,000 p.a.
Ans: Evaluating Your Current Financial Situation
At 49 years old, you have significant assets and investments. Your primary goals are to accumulate Rs. 5 crore by 2030 and ensure a monthly income of Rs. 3 lakh post-retirement. Let's break down your current assets and investments:

Real Estate Holdings:

House: Rs. 90 lakh
Flat: Rs. 50 lakh
Two bungalows at Bolpur: Rs. 25 lakh
12 katthas of land: Rs. 40 lakh
Financial Investments:

Mutual funds: Rs. 50 lakh invested, current market value Rs. 1.25 crore
SIPs: Rs. 4,80,000 annually
PPF: Rs. 1,50,000 annually
LIC (Market Linked): Rs. 2,25,000 annually
SBI Life: Rs. 6,00,000 annually
Financial Goals and Analysis
You aim to reach a total corpus of Rs. 5 crore by 2030. You also want to secure a monthly income of Rs. 3 lakh after retirement at age 55.

Strategic Investment Plan
To achieve your goals, it's essential to optimize your current investments and ensure they align with your risk tolerance and time horizon.

Reviewing Mutual Fund Investments
Your SIPs are well-diversified across various categories. However, it's crucial to evaluate their performance regularly and make adjustments as needed.

Current SIPs:

SBI Blue Chip Fund: Rs. 60,000 p.a.
SBI Focused Equity Fund: Rs. 60,000 p.a.
SBI Magnum Global Fund: Rs. 60,000 p.a.
SBI Magnum Midcap Fund: Rs. 60,000 p.a.
SBI Nifty 50 Equal Weight Index Fund: Rs. 1,00,000 p.a.
Suggested Adjustments:
SBI Blue Chip Fund: Increase SIP to Rs. 1,00,000 p.a.
SBI Focused Equity Fund: Maintain Rs. 60,000 p.a.
SBI Magnum Global Fund: Increase SIP to Rs. 1,00,000 p.a.
SBI Magnum Midcap Fund: Increase SIP to Rs. 1,00,000 p.a.
Add a Multi-Cap Fund: Allocate Rs. 60,000 p.a.
Add a Debt Fund: Allocate Rs. 60,000 p.a. for stability and risk mitigation.
Optimizing PPF Contributions
PPF is a safe and tax-efficient investment. Continue your annual contribution of Rs. 1,50,000. It offers steady returns and is an excellent tool for long-term wealth accumulation.

Evaluating Life Insurance Policies
Your LIC and SBI Life policies are significant commitments. Given their maturity in 2027, you can re-evaluate them to see if they meet your financial goals.

LIC Market Linked:

Annual Premium: Rs. 2,25,000
Maturity: 2027
SBI Life:

Annual Premium: Rs. 6,00,000
Consider the following:

Review Policy Performance: Evaluate if the returns are meeting your expectations.
Term Insurance: If you need life cover, a term insurance policy might be more cost-effective. This could free up funds for other investments.
Investment Strategy Post-Maturity of LIC
Once your LIC policies mature in 2027, you will have additional funds. Reinvest these into mutual funds or other high-return instruments to grow your corpus further.

Asset Allocation and Diversification
Balancing risk and return is crucial. Here’s a suggested asset allocation strategy:

Equity Funds (60-70%): Continue and increase SIPs in high-performing mutual funds.
Debt Funds (20-30%): Add debt funds for stability.
PPF (10-20%): Continue contributions for safe, tax-free returns.
Projected Growth and Future Value
Assuming an average annual return of 12% on your mutual fund investments, let's estimate the future value of your portfolio.

Mutual Funds:

Current Value: Rs. 1.25 crore
Annual SIPs: Increased to Rs. 4.80 lakh
Additional Lump Sum from LIC Maturity
Using a compound interest calculator, we can project significant growth. Regular reviews and adjustments will help stay on track.

Contingency Fund
Maintain an emergency fund equivalent to 6-12 months of expenses. This ensures financial stability in case of unexpected events.

Retirement Income Strategy
To secure Rs. 3 lakh monthly post-retirement, consider a mix of:

Systematic Withdrawal Plan (SWP): From mutual funds to provide regular income.
Debt Funds: For steady returns with low risk.
Post-Retirement Investments: Explore Senior Citizens’ Savings Scheme (SCSS) and other safe options.
Regular Review and Adjustment
Financial markets and personal circumstances change. Regularly review and adjust your portfolio to ensure it aligns with your goals and risk tolerance.

Conclusion
By optimizing your current investments and making strategic adjustments, you can achieve your goal of Rs. 5 crore by 2030 and secure a monthly income of Rs. 3 lakh post-retirement. Here’s a summary of the action plan:

Increase SIP contributions in high-performing funds.
Review and potentially replace LIC policies with term insurance.
Continue PPF contributions.
Reinvest LIC maturity proceeds into mutual funds.
Maintain an emergency fund.
Regularly review and adjust your investments.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ravi

Ravi Mittal  |431 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 22, 2024Hindi
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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  |682 Answers  |Ask -

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

Asked by Anonymous - Nov 13, 2024Hindi
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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.

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