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Advait Arora  | Answer  |Ask -

Financial Planner - Answered on May 24, 2023

Advait Arora has over 20 years of experience in direct investing in stock markets in India and overseas.
He holds a masters in IT management from the University Of Wollongong, Australia, and an MBA in marketing from Charles Strut University, NewCastle, Australia.
Advait is a firm believer in the power of compounding to help his clients grow their wealth.... more
Rahul Question by Rahul on Feb 08, 2023Hindi
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I am 44 yr, 38 lacs ctc , two main goal : retirement and child higher education approx 3 cr total . How much should i invest and where ? Monthly

Ans: Save as much as you can and invest the most of it. live frugal for few years and then your investment returns can easily fund your retirement.

thanks


please note : Investing strategies depends on your risk appetitive, so Please consult your financial advisor and then take further decision.

Advait Arora @wealthenrich
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 Kalirajan  |6968 Answers  |Ask -

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

Asked by Anonymous - Jun 29, 2024Hindi
Money
I am 46 year old my salary is 25000, wife is house wife, have only one son 16 year old, i can invest 6000 per month now, how i should invest so i can manage my kids studies and other expenses with making some retirement fund also. In future as my salary will increase i can increase investment.
Ans: Managing your finances while planning for your son's education and your retirement is important. You’re already on the right track by wanting to invest Rs. 6,000 per month. Let's dive into a detailed plan.

Understanding Your Current Financial Situation
You're 46 years old with a monthly salary of Rs. 25,000. Your wife is a homemaker, and you have a 16-year-old son. You can invest Rs. 6,000 monthly, and you plan to increase this amount as your salary grows.

Setting Clear Financial Goals
First, let's define your financial goals:

Your Son's Education: Your son is 16, so he’ll soon need funds for higher education.

Your Retirement: Building a retirement fund to ensure financial security in your later years.

Prioritizing Your Investments
We’ll prioritize your investments based on your goals. Here’s a step-by-step approach.

Emergency Fund
Before diving into investments, ensure you have an emergency fund. This should cover at least 6 months of living expenses. This fund provides a safety net for unexpected expenses.

Target Amount: Rs. 1,50,000 (approx. Rs. 25,000 * 6)
Where to Keep: High-interest savings account or liquid mutual funds
Investing in Mutual Funds
Mutual funds are a great way to grow your investments. They offer diversification and professional management. Here’s how you can allocate your Rs. 6,000 monthly investment.

Diversifying Your Mutual Fund Investments
1. Equity Mutual Funds

Equity mutual funds invest in stocks. They offer high returns over the long term but come with higher risks. Suitable for your retirement and long-term goals.

Large-Cap Funds: Invest in well-established companies. They provide stable returns with lower risk.
Mid-Cap and Small-Cap Funds: Invest in smaller companies with high growth potential. They are riskier but offer higher returns.
2. Debt Mutual Funds

Debt mutual funds invest in fixed-income securities like bonds. They are less risky and provide regular income. Suitable for short to medium-term goals like your son's education.

Short-Term Debt Funds: Provide stability and are less volatile. Good for parking funds needed in the next few years.
Long-Term Debt Funds: Suitable for generating regular income over a longer period.
3. Balanced or Hybrid Funds

Balanced or hybrid funds invest in both equity and debt. They offer a balanced approach with moderate risk and returns. Good for medium-term goals.

Sample Investment Allocation
Given your current investment capacity, here’s a suggested allocation of your Rs. 6,000 monthly investment:

Large-Cap Equity Fund: Rs. 2,000
Mid-Cap Equity Fund: Rs. 1,000
Short-Term Debt Fund: Rs. 1,500
Balanced Fund: Rs. 1,500
Investing for Your Son’s Education
Your son is 16, and higher education expenses are imminent. Here’s how to plan:

1. Estimate Education Costs

Estimate the total cost of your son’s higher education. Include tuition fees, living expenses, books, and other costs. Adjust for inflation, as education costs tend to rise.

2. Investment Strategy

Short-Term Investments: Since your son will need the money soon, focus on less volatile investments. Short-term debt funds and balanced funds are suitable.
Systematic Investment Plan (SIP): Continue with SIPs in mutual funds to accumulate the required corpus.
Retirement Planning
Planning for retirement is crucial. Here’s a strategy to build your retirement corpus:

1. Estimate Retirement Corpus

Calculate the amount needed for a comfortable retirement. Consider your living expenses, inflation, and life expectancy.

2. Long-Term Investments

Equity Mutual Funds: Allocate a significant portion to equity funds for higher growth.
Systematic Withdrawal Plan (SWP): In retirement, use SWPs to provide a regular income from your mutual fund investments.
Increasing Investments Over Time
As your salary increases, incrementally increase your investments. Even small increases can significantly impact your long-term corpus due to compounding.

1. Regular Review

Regularly review and adjust your investment portfolio based on your goals, risk tolerance, and market conditions. Consider consulting a Certified Financial Planner (CFP) for personalized advice.

2. Stay Disciplined

Stick to your investment plan and avoid making impulsive decisions based on market fluctuations. Staying disciplined is key to achieving your financial goals.

Insurance Coverage
1. Health Insurance

Ensure you have adequate health insurance coverage for your family. Medical emergencies can deplete your savings quickly.

2. Term Life Insurance

Consider a term life insurance policy to secure your family’s financial future in case of unforeseen circumstances. It provides a large cover at a low premium.

Avoiding Real Estate and Other Options
Given your financial goals and monthly investment capacity, real estate is not recommended due to its illiquid nature and high costs.

1. Active Management vs. Index Funds

Active management in mutual funds can potentially offer higher returns than index funds. Fund managers actively choose stocks to outperform the market.

Final Insights
Shiva, your dedication to planning for your son’s education and your retirement is commendable. Here’s a recap:

Emergency Fund: Maintain a fund covering 6 months of expenses.
Diversified Mutual Fund Portfolio: Allocate Rs. 6,000 monthly across equity, debt, and balanced funds.
Short-Term Investments: Focus on less volatile funds for your son’s education.
Long-Term Investments: Prioritize equity funds for retirement.
Increase Investments: Gradually increase your investments as your salary grows.
Insurance Coverage: Ensure adequate health and life insurance.
By following this plan, you can secure your son’s education and build a comfortable retirement fund. Stay disciplined, review your investments regularly, and adjust as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 03, 2024

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Money
I am 27 years old. I want around 10 lac rupees in 31 years as well as 3 to 4 cr as retirement plan when I will be 50 years.How much should I invest per month? My current income is 70k per month. Expense is 20k. I want to also enjoy my life not want to invest all my money. Can you please suggest
Ans: Great that you're planning for your future at 27! Let's look at your goals.
Your Financial Picture

Age: 27 years
Monthly income: Rs. 70,000
Monthly expenses: Rs. 20,000
Short-term goal: Rs. 10 lakhs in 31 years
Long-term goal: Rs. 3-4 crores by age 50

Appreciating Your Foresight

Planning for retirement at 27 is very smart
You're giving yourself time to grow your money
Balancing saving and enjoying life is important

Investment Strategy for Short-term Goal

Rs. 10 lakhs in 31 years is a modest goal
You can achieve this with small, regular investments
Consider a mix of equity and debt mutual funds

Long-term Retirement Planning

Rs. 3-4 crores by 50 needs more aggressive saving
Start with 20-25% of your income for this goal
Increase this amount as your income grows

Power of Compounding

Starting early gives your money time to grow
Even small amounts can become large over time
Stay invested for the long term

Balanced Approach to Saving

Aim to save about 30-35% of your income initially
This leaves room for current expenses and enjoyment
Adjust this as your income and expenses change

Investment Options

Mutual funds can be good for long-term growth
Choose a mix of equity and debt funds
Review and rebalance your portfolio regularly

Increasing Your Investments

Try to increase your investment amount yearly
Even a small increase can make a big difference
Use salary hikes to boost your investments

Regular Review

Check your progress every 6 months
Adjust your plan if your goals or situation change
Stay committed to your long-term objectives

Enjoying Life While Saving

Set aside some money for fun and travel
This prevents feeling deprived and helps stick to your plan
Balance is key to long-term financial success

Finally
Start with investing about Rs. 20,000-25,000 per month. Increase this as your income grows. Regular review and adjustments will help you reach your goals while enjoying life.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 03, 2024

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Money
My monthly income is 1.5 lakh I have no debt I have 3 kids I want to invest 50k every month where should I invest
Ans: Great job on having no debt and wanting to invest! Let's plan your Rs. 50,000 monthly investment.
Your Financial Picture

Monthly income: Rs. 1.5 lakh
Debt-free status: Excellent financial health
Three kids: Important to plan for their future
Investment capacity: Rs. 50,000 per month

Investment Goals

Short-term goals: Emergency fund, kids' education
Long-term goals: Retirement planning, wealth building
Balance between safety and growth is key

Mutual Funds: A Smart Choice

Offer professional money management
Allow diversification across many stocks
Provide options for different risk levels

Types of Mutual Funds

Equity funds: Higher risk, potential for higher returns
Debt funds: Lower risk, stable returns
Hybrid funds: Mix of equity and debt

Benefits of Actively Managed Funds

Fund managers use their expertise to pick stocks
Can adjust to market changes quickly
May outperform the market in certain conditions

Regular vs Direct Funds

Regular funds offer guidance from financial experts
Help in choosing the right funds for your goals
Provide ongoing support and portfolio reviews

Suggested Investment Mix

60-70% in equity funds for long-term growth
20-30% in hybrid funds for balanced returns
10-20% in debt funds for stability

Additional Financial Steps

Create an emergency fund with 6 months of expenses
Get term insurance to protect your family
Start separate education funds for each child

Tax-Saving Options

Explore tax-saving mutual funds (ELSS)
They offer tax benefits under Section 80C
Have a lock-in period of just 3 years

Review and Rebalance

Check your investments every 6 months
Adjust the mix if your goals change
Stay invested for the long term

Finally
Your debt-free status is great. Investing Rs. 50,000 monthly can build significant wealth. Talk to a Certified Financial Planner for personalized advice.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

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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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