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Ramalingam Kalirajan |8077 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 18, 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

Question by Somnath on May 14, 2024Hindi

I am 44 but i have only 2 sip Parag parik flexi cap monthly 4k and Nippon large cap monthly 1.5k also yearly LIC premium 60k .in ppf i have 1 lakh. I want to make 2 cr in 8 yrs.Please guide on how would i can achive this goal.I am working as a senior manager now.

Ans: Achieving a Rs. 2 Crore Corpus in 8 Years
You’ve taken some prudent steps toward your financial goals. Let’s refine your strategy to help you achieve a corpus of Rs. 2 crore in the next 8 years.

Assessing Your Current Financial Situation
At 44, you have the following investments:

Parag Parikh Flexi Cap: Rs. 4,000 monthly SIP
Nippon Large Cap: Rs. 1,500 monthly SIP
LIC Premium: Rs. 60,000 annually
PPF: Rs. 1 lakh
As a Senior Manager, you have a stable income to support your investment journey.

Setting Clear Financial Goals
1. Define Your Target:
You aim to achieve a corpus of Rs. 2 crore in 8 years. This requires a strategic and disciplined approach.

2. Evaluate Current Investments:
Assess the performance of your existing SIPs and ensure they align with your long-term goals. Both Parag Parikh Flexi Cap and Nippon Large Cap are good choices, but you need to invest more to meet your target.

Enhancing Monthly Investments
1. Increase SIP Contributions:
To reach Rs. 2 crore in 8 years, you need to increase your monthly SIPs significantly. Consider allocating Rs. 50,000 to Rs. 60,000 per month towards diversified mutual funds.

2. Diversify SIP Portfolio:
Invest in a mix of large-cap, mid-cap, and flexi-cap funds to balance risk and returns. This diversified approach can help achieve higher growth.

Optimizing Existing Investments
1. Review LIC Policy:
Evaluate the returns from your LIC policy. Traditional insurance policies often offer lower returns. Consider shifting to mutual funds for better growth, while maintaining adequate term insurance for protection.

2. PPF Contribution:
While PPF is a safe investment, its returns are lower compared to equity mutual funds. Keep your PPF for stability but focus more on equity funds for growth.

Portfolio Diversification
1. Equity Mutual Funds:
Focus on high-performing equity mutual funds. Allocate a larger portion to aggressive growth funds like mid-cap and small-cap funds.

2. Debt Funds:
Include debt funds for stability and to reduce portfolio volatility. This ensures a balanced risk-return profile.

3. Hybrid Funds:
Hybrid funds offer a mix of equity and debt. They provide moderate risk and steady returns, suitable for medium-term goals.

Regular Monitoring and Rebalancing
1. Periodic Review:
Regularly review your portfolio with your Certified Financial Planner (CFP). Make adjustments based on market conditions and your financial goals.

2. Rebalancing:
Rebalance your portfolio annually to maintain the desired asset allocation. This involves shifting funds from over-performing assets to under-performing ones.

Emergency Fund and Insurance
1. Emergency Fund:
Maintain an emergency fund covering 6-12 months of expenses. This ensures liquidity for unforeseen events without disturbing your investments.

2. Adequate Insurance:
Ensure you have adequate health and life insurance. This protects your investments from being depleted by unexpected medical or life events.

Tax Efficiency
1. Tax-Saving Investments:
Invest in tax-saving mutual funds (ELSS) to avail of Section 80C benefits. This helps in reducing your taxable income while growing your corpus.

2. Long-Term Capital Gains:
Equity mutual funds held for over a year enjoy tax benefits, with long-term capital gains taxed at 10% beyond Rs. 1 lakh per year.

Avoiding Common Investment Pitfalls
1. Chasing High Returns:
Avoid investing solely based on past high returns. Diversify to manage risk and ensure steady growth.

2. Ignoring Inflation:
Ensure your investments outpace inflation. Equity funds, despite short-term volatility, typically offer inflation-beating returns over the long term.

3. Lack of Clear Plan:
Stick to a structured investment plan. Regular reviews and adjustments help stay aligned with your goals.

Conclusion
By significantly increasing your SIPs and maintaining a diversified portfolio, you can achieve your Rs. 2 crore goal. Regular monitoring, rebalancing, and consulting with a Certified Financial Planner will ensure your investments stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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