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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 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 06, 2024Hindi
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I am 43 years.. my salary is 27000 per month..how much shud i invest to get 50 lakhs after 2 years.

Ans: It's great that you're considering your financial goals. Let's discuss how much you should invest to reach ?50 lakhs in 2 years.

Your commitment to financial planning is commendable, and setting a specific goal is the first step towards achieving financial success.

Assessing the Goal
To achieve ?50 lakhs in 2 years, you need to adopt a focused and aggressive savings and investment strategy.

Evaluating Feasibility
Given your salary of ?27,000 per month, achieving a target of ?50 lakhs in just 2 years might be challenging. Let's explore the feasibility.

Analyzing Investment Requirements
To reach ?50 lakhs in 2 years, you need to calculate the monthly investment required based on your expected rate of return.

Planning for Realistic Goals
Given the short investment horizon of 2 years, aiming for a target of ?50 lakhs may not be realistic. It's essential to set achievable goals aligned with your financial capacity.

Considering Alternative Strategies
Instead of targeting a specific amount, focus on maximizing your savings and investing in avenues that offer potential growth over the long term.

Emphasizing Regular Funds Investing through MFD with CFP Credential
Engaging a Certified Financial Planner who is also a Mutual Fund Distributor (MFD) can help you develop a realistic financial plan and guide your investment decisions.

Conclusion
While achieving a target of ?50 lakhs in 2 years may be challenging with your current income, setting realistic goals and adopting a disciplined savings and investment approach can lead to financial security and growth over time.

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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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

Asked by Anonymous - Aug 14, 2024Hindi
Money
5000 investment and earn 500000 in 3 year Age 45 y
Ans: Investing Rs 5,000 and expecting to grow it to Rs 5,00,000 in three years is highly ambitious. At the age of 45, it is important to balance your financial aspirations with realistic expectations. While the desire for rapid wealth creation is understandable, it is crucial to approach your investments with caution.

Avoiding Get-Rich-Quick Schemes
Get-rich-quick schemes are often tempting, but they can lead to significant financial losses. These schemes promise extraordinary returns in a short period but often fail to deliver. Instead, they increase the risk of losing your principal investment. It’s important to recognize that there are no shortcuts to wealth creation. Sustainable wealth is built over time through disciplined and well-informed investment decisions.

Risks of High-Yield Schemes: These schemes often lack transparency and may involve unregulated markets. The high returns promised are usually unsustainable and come with hidden risks.

Stick to Regulated Investments: Focus on investments that are regulated by reputable authorities. Regulated investments offer better protection and are less likely to result in financial loss.

Understanding the Required Growth Rate
To achieve your goal, the investment needs to grow at an extraordinary rate, which is rare and risky. Such high returns require a deep understanding of the risks and market dynamics. Given this, it's important to reassess your expectations and explore more realistic investment strategies.

High-Risk Investments: Potential and Pitfalls
Achieving such high returns in a short period typically involves high-risk investments. However, these investments carry a significant risk of loss.

Equity Investments: Small-cap and mid-cap stocks can provide higher returns but come with higher volatility. It’s essential to understand that while the potential for growth is there, the risk of loss is equally high.

Speculative Assets: Investments in speculative assets, such as cryptocurrencies, can also offer rapid growth. However, their unpredictable nature makes them extremely risky and unsuitable for most investors.

Startups or Private Equity: While investing in startups or private equity can sometimes yield high returns, these markets are highly uncertain. The likelihood of losing your investment is substantial if the venture fails.

Importance of Diversification
Even when targeting high returns, diversification is key to managing risk. Concentrating your entire investment in one high-risk asset is dangerous. Diversification spreads your risk across different asset classes, reducing the impact of a poor-performing investment.

Balanced Portfolio: A balanced portfolio with a mix of high-risk and stable assets helps in managing potential losses while still aiming for growth.

Regular Monitoring: High-risk investments require close monitoring. Regular portfolio reviews allow you to make timely adjustments and reduce risk exposure.

Active Management vs Index Funds
In your pursuit of higher returns, active management plays a crucial role. Actively managed funds offer a better chance of outperforming the market compared to index funds, which are generally unsuitable for achieving such high return goals.

Disadvantages of Index Funds: Index funds simply track the market, offering average returns. They are low-cost but do not provide the kind of growth you are targeting.

Benefits of Active Management: Actively managed funds can leverage the expertise of professional fund managers to outperform the market. These funds are more suited for aggressive growth strategies.

Regular Funds vs Direct Funds
Choosing between regular and direct funds is another important decision. Regular funds offer the benefit of professional guidance, which is essential when aiming for high returns.

Disadvantages of Direct Funds: Managing direct funds requires a high level of knowledge and time. Without professional advice, the chances of making costly mistakes are higher.

Benefits of Regular Funds: Regular funds, managed through an MFD with CFP credentials, provide access to expert advice. This guidance can help you navigate complex markets and make informed investment decisions.

Assessing Your Risk Tolerance
At 45, it is crucial to assess your risk tolerance. High returns come with high risks, and it's important to consider whether you can afford to take such risks at this stage of your life.

Financial Stability: Ensure your basic financial needs are met before investing in high-risk assets. Your principal should only be invested in such assets if it is surplus to your immediate financial needs.

Time Horizon: A three-year time frame is relatively short. High-risk investments in such a short period can be highly volatile. You need to be prepared for the possibility that your investment may not grow as expected.

Exploring Alternative Strategies
Given the high risk associated with your goal, consider alternative strategies that are more realistic and sustainable.

Systematic Investment Plans (SIPs): SIPs offer a disciplined way to invest in equity markets. While they may not yield the same returns as high-risk investments in three years, they are a safer and more reliable way to grow your wealth over time.

High-Growth Mutual Funds: Some mutual funds focus on high-growth sectors and can provide better returns than average funds. However, they still carry risks, and it’s important to manage your expectations.

Compounding Over a Longer Period: Consider extending your investment horizon. A longer investment period allows compounding to work more effectively, reducing the need for excessively high annual returns.

Professional Guidance is Key
Given the complexity of your goal, professional guidance from a Certified Financial Planner (CFP) is essential. A CFP can help you craft a strategy that aligns with your financial goals and risk tolerance.

Tailored Strategy: A CFP will assess your financial situation and recommend a strategy that suits your needs. This advice can help you avoid risky schemes and focus on sustainable wealth creation.

Ongoing Support: Working with a CFP provides ongoing support, ensuring that your investment strategy remains aligned with your goals as market conditions change.

Finally
Pursuing an investment goal of turning Rs 5,000 into Rs 5,00,000 in three years is ambitious and involves significant risk. While the allure of high returns is strong, it’s important to avoid get-rich-quick schemes that promise unrealistic returns. These schemes are often shortcuts to financial loss.

Balanced Approach: Focus on a balanced investment strategy that prioritizes safety and realistic growth. High returns are possible, but they require careful planning and professional guidance.

Realistic Expectations: Set realistic expectations and be prepared for the possibility that your goal may need more time to achieve. Wealth creation is a long-term process that cannot be rushed.

Stay Disciplined: Investing requires discipline, patience, and continuous learning. Stay informed about market trends, and don’t hesitate to adjust your strategy as needed.

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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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.

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