Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 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
Asked by Anonymous - Jun 18, 2024Hindi
Money

Hi , I am 44 yrs old and having working wife and two son of 17 yrs & 5 yrs... elder son is down syndrom.. joint monthly take home is 2 lacs.. having 85 lacs of mutual fund.. 18 lacs in PPF, 32 lacs in EPF, & around 25 lacs in others like FD, saving, shares etc.. monthly saving around 1.2 lacs including 75K SIP, 18K PPF, 25K EPF etc... Having Own home at my native place.... Want to know that should I go for new Flat purchase at location where I am residing in rented house of monthly 14K excluding electricity or continue my investment in place of Home loan... I hv opted new tax slab and my wife is in old tax... my target to have 15 CR at the age of 60

Ans: Assessing Your Current Financial Situation
Income and Savings
Your combined monthly take-home income is Rs. 2 lakhs. Your current savings include:

Mutual Funds: Rs. 85 lakhs
Public Provident Fund (PPF): Rs. 18 lakhs
Employees’ Provident Fund (EPF): Rs. 32 lakhs
Other Investments (FD, Savings, Shares): Rs. 25 lakhs
Your monthly savings distribution is as follows:

SIP in Mutual Funds: Rs. 75,000
PPF: Rs. 18,000
EPF: Rs. 25,000
You live in a rented house with a rent of Rs. 14,000 per month.

Evaluating the Decision to Buy a New Flat
Current Housing Situation
Living in a rented house at Rs. 14,000 per month is relatively affordable, especially given your high monthly income. Renting provides flexibility and lower maintenance costs compared to owning.

Financial Impact of Buying a New Flat
Purchasing a new flat would involve a significant financial commitment, including a home loan, maintenance costs, property taxes, and other associated expenses. This would reduce your investable surplus and potentially impact your ability to meet your financial goals.

Comparative Analysis: Rent vs. Buy
Renting: Offers flexibility, lower upfront costs, and avoids long-term debt.
Buying: Provides stability and potential appreciation in property value but requires a large financial commitment and ongoing expenses.
Long-term Financial Goals
Target: Rs. 15 Crores by Age 60
To achieve your target of Rs. 15 crores by age 60, you need to focus on maximizing your investments' growth while maintaining a balanced risk profile.

Current Investments and Growth Potential
Mutual Funds: Your Rs. 85 lakhs in mutual funds can grow substantially with continued SIPs and market performance.
PPF and EPF: These provide stable, long-term growth with tax benefits, contributing to your retirement corpus.
Other Investments: FDs, savings, and shares add diversification but should be reviewed for optimal growth potential.
Investment Strategy
Enhancing SIP Contributions
Continuing and potentially increasing your SIP contributions will leverage the power of compounding. Focus on a mix of equity and debt funds to balance growth and risk.

Recommendation: Consider increasing your SIP by a percentage each year to keep pace with inflation and maximize returns.
Diversification and Rebalancing
Ensure your portfolio is diversified across various asset classes to minimize risk and optimize returns. Periodically review and rebalance your portfolio to stay aligned with your financial goals.

Recommendation: Include large-cap, mid-cap, and multi-cap funds for equity exposure. Balance with debt funds for stability.
Utilising Tax-efficient Investments
Maximize your contributions to tax-efficient instruments like PPF and EPF. These not only provide stable returns but also offer significant tax benefits.

Recommendation: Continue maximizing your PPF contributions and ensure your EPF contributions are optimized.
Emergency Fund Management
Maintaining a robust emergency fund is crucial. Your current Rs. 25 lakhs in FD and savings can be used to cover unexpected expenses.

Recommendation: Keep at least 6-12 months of living expenses in easily accessible liquid assets.
Estate Planning and Insurance
Life and Health Insurance
Ensure adequate life and health insurance coverage for your family, especially considering your elder son's needs. This will protect your family's financial stability in case of unforeseen events.

Recommendation: Opt for a comprehensive health insurance plan and term insurance for sufficient coverage.
Estate Planning
Create a comprehensive estate plan, including a will, to ensure your assets are distributed according to your wishes and your family is taken care of.

Recommendation: Consult a legal expert to draft a will and set up any necessary trusts.
Education and Future Planning for Children
Special Needs Planning
Given your elder son's Down syndrome, consider creating a financial plan that ensures his long-term care and support.

Recommendation: Look into setting up a special needs trust and explore government schemes and benefits available for children with disabilities.
Education Fund for Younger Son
Start a dedicated investment plan for your younger son's education. This can include child-specific mutual funds or education-focused investment plans.

Recommendation: Allocate a portion of your monthly savings towards an education fund.
Final Insights
Given your strong financial position and disciplined saving habits, you are well on your way to achieving your long-term goals. However, buying a new flat at this stage might not be the best financial decision if it significantly impacts your investment capacity.

Focusing on growing your investment portfolio and maintaining a balanced, diversified approach will help you accumulate the desired Rs. 15 crores by age 60. Ensuring adequate insurance coverage and planning for your elder son's special needs will further secure your family's future.

Stay disciplined with your investments, periodically review your portfolio, and make adjustments as needed to stay on track. Consulting with a Certified Financial Planner can provide personalized advice and help optimize your financial strategy.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

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

Asked by Anonymous - Apr 27, 2024Hindi
Listen
Money
Hi Sir, I am 48 yrs old and living in rented flat having 16k rent per month. Now I am buying same flat of 50 lakhs. I am earning 2L per month. Please suggest should I go for buying or remain in rent.
Ans: It's great that you're considering your options regarding your living situation. Here are some factors to consider when deciding whether to buy or continue renting:
1. Financial Stability: Assess your financial stability and ability to afford the down payment, monthly mortgage payments, property taxes, maintenance costs, and other homeownership expenses. Ensure that buying a flat won't strain your finances or impact your ability to meet other financial goals.
2. Long-Term Plans: Consider your long-term plans and whether buying a flat aligns with your lifestyle and future goals. If you plan to stay in the same location for the foreseeable future and prefer the stability of homeownership, buying may be a good option.
3. Rent vs. Buy Analysis: Conduct a rent vs. buy analysis to compare the costs of renting versus buying over the long term. Consider factors such as appreciation potential, tax benefits of homeownership, and the opportunity cost of tying up your capital in a property.
4. Market Conditions: Evaluate the current real estate market conditions, including property prices, interest rates, and housing market trends. If property prices are high or interest rates are unfavorable, it may be more cost-effective to continue renting for now.
5. Lifestyle Preferences: Consider your lifestyle preferences and whether homeownership aligns with your needs and preferences. Owning a home offers autonomy and the opportunity to customize your living space, but it also comes with responsibilities such as maintenance and repairs.
6. Consult with a Certified Financial Planner: Consider consulting with a Certified Financial Planner (CFP) to assess your financial situation, evaluate your options, and make an informed decision. A CFP can provide personalized advice tailored to your unique circumstances and help you weigh the pros and cons of buying versus renting.
Ultimately, the decision to buy or continue renting depends on your individual circumstances, financial goals, and lifestyle preferences. Take the time to carefully evaluate your options, consider the factors mentioned above, and make a decision that aligns with your long-term financial well-being.

..Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 12, 2024

Asked by Anonymous - Jun 03, 2024Hindi
Money
I am currently employed in a leading airline company in Ahmedabad, with a monthly take-home salary of Rs.200,000. Current Investments: Equity-based mutual fund SIP: Rs. 530,000 Yearly investment in NPS: Rs. 55,000 Yearly investment in PPF: Rs. 5,000 Loans: Home loan: Rs. 3,000,000 for investment purpose in hometown Car loan: Rs. 650,000 for a duration of 5 years Family resides in hometown, owning a house and property there. Considering purchasing a housing flat in Ahmedabad due to its rapid economic growth, despite skyrocketing prices in the past 5 years. Conflicted between buying a flat or continuing to rent in Ahmedabad. Request: Seeking practical advice whether to buy a housing flat in Ahmedabad or continue renting. Additionally, suggestions for further investments, considering current financial standing and investments, would be appreciated.
Ans: First, let's review your current financial status. You have a monthly take-home salary of Rs. 200,000. Your existing investments include equity-based mutual fund SIPs worth Rs. 530,000 annually, yearly investments in NPS of Rs. 55,000, and PPF contributions of Rs. 5,000. Additionally, you have a home loan of Rs. 3,000,000 and a car loan of Rs. 650,000. Your family resides in your hometown, where you own a house and property. Given this context, you're considering buying a flat in Ahmedabad due to its economic growth, but you're unsure whether to buy or continue renting.

Evaluating the Ahmedabad Housing Market
Ahmedabad has seen rapid economic growth in recent years, leading to increased property prices. Buying a home here could be a sound investment, but it's essential to weigh the pros and cons.

Pros of Buying a Flat in Ahmedabad:

Capital Appreciation: Property values in Ahmedabad are likely to rise due to economic growth.
Stability: Owning a home provides a sense of stability and security.
Customization: You can customize your home to your liking.
Cons of Buying a Flat in Ahmedabad:

High Costs: Property prices have skyrocketed, making it a significant financial commitment.
Maintenance: Owning a home comes with maintenance costs and responsibilities.
Liquidity: Real estate is less liquid than other investments, making it harder to convert into cash quickly.
Considering Renting in Ahmedabad
Renting could be a more flexible option, especially given the high property prices.

Pros of Renting:

Flexibility: Renting allows you to move easily if your circumstances change.
Lower Upfront Costs: Renting requires less upfront money compared to buying a property.
No Maintenance Worries: The landlord typically handles maintenance.
Cons of Renting:

No Ownership: Rent payments do not build equity.
Rent Increases: Rent can increase over time, affecting your budget.
Less Stability: Renting may not provide the same stability as owning a home.
Financial Assessment: Buying vs. Renting
To decide whether to buy or rent, consider the following factors:

Financial Readiness: Can you afford the down payment and ongoing EMIs for a flat in Ahmedabad?
Long-Term Plans: How long do you plan to stay in Ahmedabad? Buying makes more sense if you plan to stay for a long time.
Market Conditions: Are property prices expected to rise further, or is there a risk of a market correction?
Given your monthly salary and current loans, it's crucial to ensure that buying a flat won't overextend your finances. Renting might offer more flexibility, allowing you to invest the difference in more liquid assets.

Investment Recommendations
Given your current investments, let's explore ways to diversify and grow your portfolio.

1. Diversify Your Mutual Fund Portfolio:

Your SIPs in equity-based mutual funds are a good start. However, consider diversifying across different types of funds to balance risk and return.

Large Cap Funds: Provide stability and moderate returns.
Mid Cap Funds: Offer higher growth potential but with increased risk.
Small Cap Funds: High risk but potentially high returns.
Flexi Cap Funds: Balanced approach, investing in companies of various sizes.
Sector Funds: Focus on specific sectors like technology or healthcare.
2. Increase NPS Contributions:

NPS is a great tool for retirement planning, offering tax benefits and long-term growth. Consider increasing your yearly contribution from Rs. 55,000 to the maximum allowable limit to take full advantage of the tax benefits.

3. Boost PPF Contributions:

PPF offers tax-free returns and is a secure investment. Increasing your annual contribution from Rs. 5,000 to the maximum limit of Rs. 150,000 can provide a safe, long-term investment option.

4. Explore Active Mutual Funds:

Actively managed funds often outperform index funds in the Indian market. Consider allocating a portion of your investments to actively managed funds to potentially achieve higher returns.

5. Avoid Direct Funds:

While direct funds have lower expense ratios, they lack professional guidance. Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential ensures you get expert advice and personalized investment strategies.

6. Gold Investments:

Adding gold to your portfolio can hedge against inflation and provide diversification. Consider investing in gold funds or Sovereign Gold Bonds (SGBs).

7. Emergency Fund:

Ensure you have an emergency fund covering at least six months of expenses. This fund should be easily accessible, preferably in a high-interest savings account or liquid fund.

Managing Existing Loans
Your home and car loans are significant financial commitments. It's crucial to manage them effectively to avoid undue financial stress.

1. Prioritize Loan Repayments:

Focus on repaying your home loan as it has a higher principal amount. Making extra payments can significantly reduce the loan tenure and interest burden.

2. Avoid Taking Additional Loans:

Until your current loans are more manageable, avoid taking on new loans. This will help maintain financial stability and ensure you can meet your repayment obligations comfortably.

Final Insights
Given your situation, both buying a flat and renting in Ahmedabad have their merits. Buying a flat can provide long-term stability and potential capital appreciation. However, it requires significant financial readiness and commitment. Renting offers flexibility and lower upfront costs, allowing you to invest more in liquid assets.

Evaluate your long-term plans and financial readiness carefully. Ensure that buying a flat won't overextend your finances, considering your existing loans and investment goals. Renting might be a better option if you prioritize flexibility and liquidity.

To further enhance your financial standing, diversify your investments across different mutual fund categories, increase contributions to NPS and PPF, and consider gold investments. Managing your existing loans effectively and avoiding new ones will help maintain financial stability.

It's essential to make informed decisions aligned with your long-term goals. Seeking advice from a Certified Financial Planner can provide personalized guidance tailored to your financial situation and aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 2024

Asked by Anonymous - Jul 14, 2024Hindi
Listen
Money
Hi I am 35 year old doing govt. Job in railway Getting 49k in hand having fixed expenditure of 30K think for taking home loan for 20lac Having 2.5 lac in stocks and mutual fund Is it good to go for better home as i sold my 2bhk home for new 3bhk home Or else take low amt loan and settled with other 2bhk as previous one was not in good society. But being new good society increase my other expenses like maintenance I have one son 7 year old
Ans: Evaluating Home Loan Options and Financial Impact
Current Financial Situation

Income: Your monthly take-home pay is Rs 49,000.
Fixed Expenditure: Your monthly expenses are Rs 30,000.
Savings: You have Rs 2.5 lakh invested in stocks and mutual funds.
Family: You have a 7-year-old son.
Home Loan Considerations
Loan Amount and Monthly EMI

Loan Amount: Considering a home loan of Rs 20 lakh.
EMI Calculation: Ensure the EMI fits within your budget. Typically, a Rs 20 lakh loan over 20 years may have manageable EMIs. However, calculate the exact EMI based on the loan tenure and interest rate.
Affordability Assessment

Existing Expenditure: With Rs 30,000 spent monthly, assess how the EMI will affect your finances.
Additional Costs: New maintenance costs in a better society can increase your expenses.
Current Savings: Your Rs 2.5 lakh investments provide a financial cushion but may not be enough for large emergencies or unexpected expenses.
Evaluating New Home vs. Existing 2BHK
New Home Benefits

Better Society: A new 3BHK home in a better society offers improved living conditions.
Space: Additional space can be beneficial for your growing family.
Existing 2BHK Considerations

Lower Loan Amount: Opting for a smaller loan may be financially safer.
Maintenance Costs: Consider the potential rise in monthly maintenance charges in a better society.
Financial Implications of Each Option
High Loan Amount for New Home

Increased EMI: A higher loan amount will result in higher EMIs.
Impact on Budget: Ensure your monthly budget can comfortably handle this increase.
Maintenance Costs: Factor in increased maintenance charges.
Low Loan Amount for Existing Home

Reduced EMI: Lower loan amount leads to lower EMIs.
Financial Cushion: Less strain on monthly budget and better financial flexibility.
Maintenance Costs: Lower costs may be manageable within your current expenditure.
Financial Health and Future Planning
Emergency Fund

Current Savings: Rs 2.5 lakh is a good start, but ensure you have an emergency fund equivalent to at least 6 months of expenses.
Investment Growth

Long-Term Planning: Invest any surplus wisely to build wealth and cover future expenses like your child’s education.
Professional Advice

Certified Financial Planner: Consult with a Certified Financial Planner to get a detailed analysis of your financial situation and best loan options.
Final Insights
Loan Suitability: Evaluate the loan amount based on your budget and future expenses.
Existing vs. New Home: Weigh the benefits of a new home against the financial strain of a larger loan.
Financial Cushion: Ensure you have a robust emergency fund to handle unexpected costs.
Taking a calculated approach will help you make a well-informed decision. Consulting a Certified Financial Planner can provide additional insights tailored to your specific situation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

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

Listen
Money
Hello Sir,I am 38 yrs now & wife 34. We are having a 9 years old daughter. My salary is 80K & wife's salary is 85K.My SIP is 19,000 (10 years) per month & wife 35,000 for (20 years) .NPS-50K PA. LIC-1.5L PA,Shares 6L,Gold-7L We are having a home loan of 55L for 15 years where our target is to close it by 2033.(EMI-55K). This flat we have given it on rent (16,000) rent. My target is to get retire by 50 with a corpus of 3Cr.
Ans: Current Financial Situation
Monthly Income and Expenses
Your salary: Rs. 80,000 per month.
Wife's salary: Rs. 85,000 per month.
Total monthly income: Rs. 1,65,000.
EMI on home loan: Rs. 55,000.
Rent received from flat: Rs. 16,000.
Investments
SIPs: Rs. 19,000 per month (10 years) and Rs. 35,000 per month (20 years).
NPS: Rs. 50,000 per annum.
LIC: Rs. 1.5 lakhs per annum.
Shares: Rs. 6 lakhs.
Gold: Rs. 7 lakhs.
Goals
Retire at age 50 with a corpus of Rs. 3 crores.
Close home loan by 2033.
Retirement Planning
SIP Contributions
Continue your SIPs diligently.
Your 10-year SIP and wife's 20-year SIP are crucial.
Consider increasing SIP amount with salary hikes.
National Pension System (NPS)
NPS is a good retirement tool.
Rs. 50,000 per annum contribution helps with tax savings and retirement corpus.
Consider increasing NPS contributions over time.
Life Insurance
LIC premiums of Rs. 1.5 lakhs per annum.
Ensure that you have adequate term insurance coverage.
If LIC policies are not term plans, evaluate their returns and consider switching to mutual funds.
Direct Equity Investments
Current investment in shares: Rs. 6 lakhs.
Review the performance of your stock portfolio.
Diversify to reduce risk.
Gold Investments
Current gold investments: Rs. 7 lakhs.
Gold is a good hedge against inflation.
Do not allocate more than 10% of your portfolio to gold.
Home Loan Strategy
Early Loan Repayment
Aim to close the loan by 2033 as planned.
Use rental income and any surplus funds to prepay the loan.
Prepayment reduces interest burden and loan tenure.
Rental Income Utilization
Use Rs. 16,000 rent received to support EMI payments.
This helps in managing cash flow.
Education Planning for Your Daughter
Systematic Investment Plan (SIP)
Start a dedicated SIP for your daughter's higher education.
Estimate future education costs and invest accordingly.
Equity mutual funds are suitable for long-term education goals.
Review and Adjust
Review your investment strategy annually.
Adjust SIP amounts based on market performance and financial goals.
Building Retirement Corpus
Diversified Mutual Funds
Focus on diversified mutual funds for better risk management.
Actively managed funds can offer better returns than index funds.
Avoid index funds due to their passive nature and lack of active management.
Regular Review
Regularly review your mutual fund portfolio.
Consult with a Certified Financial Planner (CFP) for adjustments.
Alternative Investments
Consider debt mutual funds for stability.
These funds offer safer returns and help balance your portfolio.
Tax Planning
Utilise Tax Benefits
Maximise Section 80C deductions with investments in ELSS funds.
Continue NPS contributions for additional tax benefits under Section 80CCD(1B).
Final Insights
SIPs: Continue and increase SIP contributions over time.

NPS: Maintain and enhance contributions for retirement savings.

Insurance: Ensure adequate term insurance; review LIC policies.

Equity and Gold: Maintain diversified investments; review regularly.

Home Loan: Aim for early repayment using surplus funds and rental income.

Education Planning: Start SIPs for your daughter's education.

Tax Planning: Maximize tax-saving investments.

Regular Review: Consult with a CFP for portfolio adjustments and goal tracking.

By following this comprehensive strategy, you can achieve your retirement and financial goals, ensuring a secure future for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Nitin

Nitin Narkhede  |3 Answers  |Ask -

MF, PF Guru - Answered on Sep 09, 2024

Listen
Money
Can Investment in Gold and Mutual Funds Give High Returns??
Ans: Dear Sumukh,
Thank you for your question about investing in gold and mutual funds. Both of these investment options have their merits, but they work differently and suit different financial goals. Let's explore how they can potentially deliver returns.
1. Gold as an Investment
• Potential Returns: Historically, gold has been seen as a hedge against inflation and currency fluctuations. Over the long term, gold prices tend to rise, but the growth is usually moderate compared to equity-based investments. In the last decade, gold has provided returns averaging 6-8% per year. However, in times of economic uncertainty (like during the pandemic), gold prices surged due to its status as a safe-haven asset.
• Volatility: While gold is a relatively stable investment during periods of economic distress, its prices can be volatile in the short term. It's best suited for long-term portfolios or when you want to diversify and protect your investments from inflation.
• Forms of Gold Investment:
o Physical Gold (Jewelry, Coins, Bars): This involves storage and making charges.
o Gold ETFs or Sovereign Gold Bonds (SGBs): These are better options for investment, offering ease of trading, tax benefits, and interest on SGBs.
2. Mutual Funds as an Investment
• Potential Returns: Mutual funds, especially equity mutual funds, can offer much higher returns than gold over the long term. Over the last 10-15 years, equity mutual funds have provided average returns of 10-15% per annum, depending on the market conditions and the type of mutual fund.
o Equity Mutual Funds have higher growth potential but come with greater risk. These funds invest in stocks of companies, and their performance is directly linked to the stock market.
o Debt Mutual Funds are safer and provide more stable returns (typically 6-8%) but with less growth potential compared to equity funds.
• SIP (Systematic Investment Plan): One of the most popular ways to invest in mutual funds is through SIPs. This method helps mitigate risk through rupee-cost averaging and can lead to substantial returns if done consistently over the long term.
Which One Offers Higher Returns?
• Short-Term Perspective: Gold might offer stability in the short term, but mutual funds, especially equity funds, generally outperform gold when it comes to growth over the long term.
• Long-Term Perspective: Mutual funds, particularly equity mutual funds, are more likely to deliver higher returns over time. Gold can be a good hedge and part of a diversified portfolio, but it's less likely to deliver substantial returns by itself.
Ideal Strategy:
• Diversification: It’s a good idea to diversify your investments between mutual funds and gold. You could allocate a portion of your portfolio (e.g., 10-15%) to gold for safety, while the majority can be invested in mutual funds to maximize growth.
• Risk Profile: If you’re comfortable with market fluctuations, equity mutual funds could be a better choice for high returns. If you prefer safety, a combination of debt mutual funds and gold might be a better strategy.
Conclusion:
• Mutual Funds have the potential to give higher returns than gold, particularly over the long term, thanks to the growth of equity markets. In Mutual funds with High Risk you can earn up to 40% returns, where as at low risk you can get 6 to 9 % returns at debt funds. At Moderate risk you can achive up to 15 to 25% returns.
• Gold, on the other hand, is a safer, long-term investment that can protect against inflation but typically offers moderate returns. Golds can give you on and average of 10 to 15 % return over long horzons.
It’s essential to align your investments with your financial goals, risk tolerance, and investment horizon. You might consider consulting a financial advisor to help create a balanced investment plan.
Best regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 09, 2024Hindi
Money
Hi sir, I have net salary of 2.7L per month and am 46 year old with 2 children aged 12 and 6. I have a EPF+PPF corpus of 65 lakhs , NPS 5 lakhs, 1CR in MF portfolio, invest 50k monthly (Which is on Hold currently) in MF SIPs. I own a house 65L(loan free) & another house 2CR have outstanding loans of 1CR. I have family floater medical insurance with 20L coverage and life cover for 1Cr. I wish to retire by age of 55 - pls advise how much corpus do I need at hand to retire. Consider my monthly expense as 1L
Ans: You are 46 years old with a net salary of Rs. 2.7 lakh per month. You have two children, aged 12 and 6, and a current corpus of Rs. 65 lakh in EPF and PPF, Rs. 5 lakh in NPS, and Rs. 1 crore in your mutual fund portfolio. Additionally, you own two properties, one valued at Rs. 65 lakh (loan-free) and another valued at Rs. 2 crore, with an outstanding loan of Rs. 1 crore. Your current monthly expenses are Rs. 1 lakh, and you have paused your monthly SIP of Rs. 50,000. You also hold a life insurance cover worth Rs. 1 crore and a family floater medical insurance with Rs. 20 lakh coverage.

You plan to retire by the age of 55, which gives you approximately nine years to build a sufficient corpus. Let's explore how much you need to comfortably retire while sustaining your current lifestyle.

Estimating Your Retirement Corpus
To determine your retirement corpus, we need to consider several factors:

Current monthly expenses: Rs. 1 lakh
Retirement age: 55
Post-retirement years: Assuming life expectancy of 85 years, you need to plan for 30 years post-retirement.
Inflation rate: An assumed inflation rate of 6% per year is a reasonable estimate for the future.
Growth rate of investments: Typically, diversified equity mutual funds have delivered around 10-12% returns over the long term.
Based on these factors, your current monthly expenses will increase due to inflation, and you need a corpus that generates enough to cover these rising costs. Since your expenses are Rs. 1 lakh today, they could double or triple over time. Your corpus should be able to sustain this without depleting prematurely.

Breakup of Current Assets
EPF & PPF (Rs. 65 lakh): These are stable, low-risk assets that will help you post-retirement but won't generate high returns.

NPS (Rs. 5 lakh): Provides tax benefits and is specifically designed for retirement savings. It will grow over time but is not highly flexible for withdrawals until retirement age.

Mutual Funds (Rs. 1 crore): This is an excellent foundation for your retirement plan. Equity mutual funds, in particular, have the potential to grow at a faster rate and combat inflation.

Real Estate (Rs. 65 lakh + Rs. 2 crore): While real estate holds value, its liquidity is limited. The house you live in does not contribute to your retirement corpus unless you plan to downsize. The second house has a loan of Rs. 1 crore, and the EMIs for this property must be factored into your pre-retirement cash flows.

Life Insurance (Rs. 1 crore): While it’s important for your family’s protection, this doesn’t contribute to your retirement corpus.

Estimating Your Future Monthly Expenses
Your current monthly expense is Rs. 1 lakh, but due to inflation, this figure will increase. Let’s assume the inflation rate remains at 6%. By the time you retire at 55, your monthly expenses will likely double or triple, reaching anywhere between Rs. 1.7 lakh to Rs. 2 lakh per month. Your retirement corpus should be large enough to generate this amount without running out of funds.

In addition, you’ll have to account for:

Healthcare costs: As you age, medical expenses tend to rise. Even though you have Rs. 20 lakh family floater insurance, post-retirement medical costs not covered by insurance should be factored in.

Educational expenses: Your children’s education could be a significant expense over the next 10 to 15 years.

Corpus Required for Comfortable Retirement
To maintain your current lifestyle, you would need a corpus that generates at least Rs. 2 lakh per month during retirement. Based on a withdrawal rate of 4%, which is commonly used to ensure the corpus lasts for the entirety of your retirement, you’ll need a retirement corpus of approximately Rs. 6 to 7 crore.

This corpus will ensure that you can comfortably cover your rising living expenses, healthcare, and other unforeseen costs without depleting your savings.

Recommendations to Achieve the Corpus
Here’s a detailed plan to help you achieve your target of Rs. 6 to 7 crore before retirement:

1. Resume Your SIP Investments
Restart your monthly SIP of Rs. 50,000 immediately. This is crucial, as equity mutual funds can provide the high returns needed to meet your retirement goal.

Consider increasing your SIP contribution each year in line with salary increments. This will accelerate your corpus growth and help you fight inflation more effectively.

2. Focus on Equity Mutual Funds
Given your long-term horizon (9 years until retirement), equity mutual funds remain the best investment option to grow your wealth. These funds have historically provided higher returns (10-12% CAGR), which will be essential for building your retirement corpus.

Ensure your portfolio is diversified across large-cap, mid-cap, and multi-cap mutual funds for balanced growth and risk.

3. Debt Repayment Strategy
You currently have an outstanding home loan of Rs. 1 crore. It’s advisable to clear this debt as early as possible. Carrying such a large debt into retirement can strain your finances.

Use a portion of your liquid assets, such as your mutual fund corpus or any bonuses, to reduce the loan burden gradually. This will free up cash flow and allow you to focus more on building your retirement fund.

4. Maximize Your EPF & PPF Contributions
Continue contributing to your EPF and PPF accounts. While the returns from these are modest, they are low-risk and provide tax-free returns, making them ideal for post-retirement stability.

As PPF matures, consider reinvesting the proceeds into equity mutual funds to capitalize on higher returns.

5. Increase Contributions to NPS
Your NPS balance is currently Rs. 5 lakh. Increase your contributions to this as it provides excellent tax benefits and is tailored for retirement.

NPS is also one of the few products where withdrawals are partially tax-free. Increasing contributions now will give you a more substantial corpus in the future.

6. Prioritize Children’s Education
Plan separately for your children’s education expenses. You might want to use specific child education funds or a combination of mutual funds for this.

Avoid dipping into your retirement savings for education purposes. Set clear boundaries between these two financial goals.

Final Insights
At 46, you are well-positioned financially, but pausing your SIP investments and holding onto a large loan could hinder your retirement plans. Restart your investments and focus on paying off your loan as soon as possible. By maintaining discipline and increasing your contributions to SIPs, NPS, and PPF, you should comfortably achieve your retirement corpus of Rs. 6 to 7 crore. Prioritize growth-oriented investments like equity mutual funds, and continue evaluating your portfolio annually to ensure it aligns with your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 03, 2024Hindi
Money
Hello Mr. Ramalingam Good morning. I'm 47 years old, my wife is at 40 and one daughter studying in 8th std. I have an investement in MF worth of 1.8 cr, ULIP of 20 lakhs, Direct equity of 5 lakhs, 1 cr term insurance, 5 lakhs LIC, 30 lakhs FD. Monthly SIP of 65 k in different MF's, accumulated EPF of 40 lakhs, 10 lakhs super annuatation fund. Invested in plot worth of 1 cr and farm land worth of 1.5 cr. No house and no loan. Would like retire by 55 years with monthly income of 2 lakhs / month from investment. Kindly suggest how I can make my finanical plan. Thanks
Ans: Based on your current financial situation and your goal of retiring at 55 with a monthly income of Rs. 2 lakhs, we need to assess your existing investments, future requirements, and how to bridge any gaps in your retirement plan.

Assets You Already Have
You have built a solid foundation of investments, which is impressive. Let’s break down your current assets:

Mutual Fund portfolio: Rs. 1.8 crore
ULIP: Rs. 20 lakhs
Direct equity: Rs. 5 lakhs
Term Insurance: Rs. 1 crore (sufficient for family protection)
LIC: Rs. 5 lakhs (Could be better allocated elsewhere)
Fixed Deposit: Rs. 30 lakhs
EPF: Rs. 40 lakhs
Superannuation Fund: Rs. 10 lakhs
Real Estate Investments: Plot (Rs. 1 crore) and farmland (Rs. 1.5 crore)
Your current SIP of Rs. 65,000 monthly in mutual funds is a good strategy for wealth accumulation.

Assessing Your Retirement Goal
You wish to have Rs. 2 lakhs per month as retirement income starting at 55. Considering inflation, your future expenses will likely be higher than Rs. 2 lakhs, which we must account for in your financial plan. Assuming you retire at 55 and live till 85, your investments need to generate returns for 30 years.

Evaluating Existing Investments
1. Mutual Funds:
Your current MF portfolio of Rs. 1.8 crore is a major asset. Continue with your SIPs to grow this corpus.
You might consider reviewing your fund allocations to ensure diversification across large-cap, mid-cap, and debt funds for stability and growth. Ensure these are actively managed funds, as they typically perform better than index funds over time.
2. ULIP:
ULIPs often have high charges and offer lower returns compared to mutual funds. It would be wise to surrender this policy and reinvest the Rs. 20 lakhs into mutual funds. This will offer better long-term growth for retirement.
3. Direct Equity:
Direct equity investments, while rewarding, are risky, especially as you approach retirement. It’s advisable to either reduce exposure to individual stocks or move to safer large-cap funds or balanced funds to ensure stability.
4. Fixed Deposit:
Rs. 30 lakhs in FD is a safe bet, but it yields lower returns. Consider using a portion of this for debt mutual funds, which offer slightly better returns and are tax-efficient.
5. LIC:
The Rs. 5 lakhs in LIC should be reconsidered, as insurance-based investment products are typically low-yielding. It’s better to surrender and reinvest this in mutual funds or safer investment options that offer higher returns.
6. Real Estate:
Your plot and farmland, though valuable, are illiquid assets. Real estate cannot generate a regular retirement income unless sold or rented out. Ideally, you should not rely on these for monthly income during retirement. Focus on liquid investments that can generate steady cash flow.
Plan for Retirement Income
Here’s how you can plan to generate Rs. 2 lakhs per month during retirement:

1. Continue Your SIPs:
Your monthly SIP of Rs. 65,000 is a good practice. If you can increase this slightly over the next few years, it will help you build a larger corpus for retirement. Aim to have at least Rs. 5-6 crore in liquid assets by the time you retire.
2. Shift to More Conservative Funds Closer to Retirement:
As you approach retirement, gradually move some of your equity-heavy investments into safer debt funds or balanced funds to preserve capital and reduce market risk.
3. Utilize the EPF and Superannuation Fund:
Your Rs. 40 lakhs in EPF and Rs. 10 lakhs in superannuation fund will continue to grow. Do not withdraw this early; allow it to accumulate till your retirement for a sizeable corpus that can act as a fixed-income generator.
4. Create an Income Stream with SWP:
Systematic Withdrawal Plan (SWP) from mutual funds will help you generate a monthly income after retirement. This is tax-efficient and can provide you with the Rs. 2 lakhs you desire. You can gradually withdraw from your mutual fund corpus post-retirement, ensuring your capital lasts for 30 years.
5. Review and Increase Insurance:
Your current term insurance of Rs. 1 crore is adequate for now. Ensure you have it in place till your retirement to protect your family in case of any unforeseen events. No need for further investment in insurance-based products like ULIPs or LIC.
Things to Keep in Mind
Inflation Protection: Rs. 2 lakhs per month today will not hold the same value in the future due to inflation. Plan to increase your SIP amounts and grow your corpus to account for this.

Healthcare Costs: As you age, healthcare expenses might rise. Ensure that your health insurance coverage is sufficient, or consider top-up plans to enhance your coverage.

Reassess Regularly: Financial planning is not a one-time activity. Review your portfolio annually to ensure you are on track and make adjustments based on changing market conditions or personal goals.

Final Insights
You are in a strong financial position and well on your way to a comfortable retirement. However, small changes like surrendering low-return policies and enhancing your mutual fund portfolio can make a significant difference. Focus on building a larger liquid corpus by continuing your SIPs and shifting towards income-generating assets as you near retirement.

Stay disciplined with your investments, and you will likely achieve your retirement goal of Rs. 2 lakhs monthly without financial stress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Listen
Money
Sir, I have both Mirae asset Large and Mid cap fund with sip + Mirae asset Large cap fund (sip stopped) Can I make STP or complete SWITCH from Mirae asset large cap fund to Mirae asset large and Mid cap fund. ? is it advisable
Ans: Switching or making a Systematic Transfer Plan (STP) from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be considered based on your financial goals, risk tolerance, and investment strategy.

Factors to Consider:
1. Portfolio Diversification:
Large Cap Fund: Primarily invests in the top 100 companies, which are considered stable and less volatile. It is ideal for those seeking steady returns with relatively lower risk.
Large and Mid Cap Fund: Combines both large-cap (safer, stable) and mid-cap (higher growth potential but riskier) stocks. This offers a balanced approach, with more room for growth but with a bit more risk.
If your goal is to increase exposure to mid-cap stocks for potentially higher growth, an STP or switch to the Large and Mid Cap Fund makes sense. This fund offers a more diversified approach while still having a safety net of large-cap investments.

2. Investment Time Horizon:
Large and mid-cap funds tend to perform better in the long term (5+ years), as mid-caps may take time to realize their full growth potential. If your investment horizon is shorter, sticking with a large-cap fund may be preferable.
3. Risk Appetite:
Mid-cap stocks have higher growth potential but come with increased volatility. If you are comfortable with short-term fluctuations for long-term gains, an STP into the large and mid-cap fund could align with your goals.
4. Performance Track Record:
Both funds from Mirae Asset have strong reputations, but large-cap funds offer more consistent returns with lower downside risks during market corrections. You may want to assess the historical performance and volatility of both funds to see which fits your strategy better.
Why Use STP Instead of a Lump Sum Switch?
Tax Efficiency: An STP allows you to move funds gradually, spreading out tax implications and avoiding a large one-time exit load or capital gains tax.
Risk Mitigation: Instead of moving all your funds at once, an STP reduces the risk of entering at a high point in the market.
Consistent Investment: You continue investing in a disciplined manner, benefiting from rupee cost averaging.
Final Insight:
If your risk profile supports it, and your goal is long-term wealth creation, a STP from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be a good option. This allows you to diversify your portfolio while retaining some stability through large-cap exposure.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Nitin

Nitin Narkhede  |3 Answers  |Ask -

MF, PF Guru - Answered on Sep 09, 2024

Asked by Anonymous - Sep 07, 2024Hindi
Listen
Money
I. Have 1 crore where can i invest for 2 yrs to get bigger returns, that amt is for ur daughter marriage
Ans: Dear Friend,
Thank you for your query. It's great that you're planning ahead for your daughter's marriage. With ?1 crore available for investment over a two-year period, you’ll want to balance growth with a moderate level of risk, since the time horizon is relatively short.
Key Considerations:
Since the investment horizon is only two years, it's important to prioritize capital preservation while seeking returns higher than traditional savings accounts or fixed deposits. Investments in high-risk options like equities are not advisable for such a short duration, as markets can be volatile. Instead, a mix of low to medium risk instruments will be more suitable.
Suggested Investment Options for Two Years:
1. Debt Mutual Funds - Short-Term Debt Funds or Corporate Bond Funds can offer returns in the range of 6-8% per annum. These funds invest in government securities, corporate bonds, and other fixed-income instruments. They are safer than equity investments and are suited for a 2-year investment period.
- Dynamic Bond Funds can also be considered, as they adjust their portfolios according to interest rate fluctuations, potentially offering better returns than fixed deposits.
2. Fixed Deposits (FDs) - Though FDs offer lower returns (typically 6-7% per annum), you can opt for Corporate FDs from highly rated companies which offer slightly higher interest rates. FDs provide safety and guaranteed returns, but they may not grow your wealth significantly.
3. Arbitrage Mutual Funds - Arbitrage funds take advantage of the price difference between the cash and futures markets. They are relatively low-risk and provide returns similar to short-term debt funds but with better tax efficiency if held for more than one year. These can be a good option for a two-year horizon, offering returns of around 5-6%.
4. High-Quality Non-Convertible Debentures (NCDs) - NCDs from reputed companies offer fixed interest rates, usually ranging from 7-9%. They can be a good option for someone seeking stable returns. However, be cautious about the credit ratings of the issuing company.
5. Ultra Short-Term Mutual Funds - These funds invest in short-term debt instruments and are suitable for a two-year horizon. They generally offer returns slightly higher than savings accounts, around 6-7%.
6. Post Office Monthly Income Scheme (MIS) - If you prefer absolute safety, this government-backed scheme offers around 6.6% interest per annum, with monthly interest payouts. You can park part of your investment here for assured returns.
7. Liquid Funds or Short-Term Gilt Funds - Liquid funds invest in money market instruments and offer stable returns with high liquidity. For a two-year period, liquid funds can yield around 5-6%. Gilt funds are another option, which invest in government securities and are suitable for low-risk investors. These funds may provide returns in the range of 6-7%.
For Example, you can plan a Portfolio Allocation for ?1 Crore as follows
1. Debt Mutual Funds (40% - ?40 Lacs) : Short-term debt or corporate bond funds for capital appreciation and safety.
2. Fixed Deposits or Post Office MIS (30% - ?30 Lacs) : Secure investments with guaranteed returns.
3. Arbitrage Funds or Dynamic Bond Funds (20% - ?20 Lacs) : To benefit from moderate growth with tax efficiency.
4. Liquid Funds (10% - ?10 Lacs) : For high liquidity and short-term needs.
It’s highly recommended to consult with a certified financial advisor to fine-tune this plan according to your exact goals and risk tolerance.
Best regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub
https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar
https://bit.ly/m/PLH-Links

...Read more

Radheshyam

Radheshyam Zanwar  |823 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Sep 09, 2024

Listen
Career
My son completed his BSC aviation how can I find job
Ans: Hi BAB
Congratulations to you and your son for completing B.Sc. Aviation. I hope during graduation, your son will have participated in extracurricular activities and might have completed some additional courses related to the aviation field. Yet, to get a job or to apply for a job, here are a few points:
(1) Try to get additional certifications (pilot training, aviation safety) for specialized roles.
(2) Look for roles in airlines, airports, and aviation companies in operations, safety, or logistics.
(3) Connect with industry professionals through aviation events and social media
(4) Use platforms like Naukri, Indeed, and LinkedIn to search for aviation roles/jobs
(5) Expertise skills in aviation management, safety, and flight operations.

Keep an eye on the following government/private job portals for notifications and eligibility criteria.
(1) Air Traffic Control (ATC): Jobs in the Airports Authority of India (AAI).
(2) Indian Air Force: Roles as Ground Duty Officers or Pilot through AFCAT.
(3) Airport Management: Positions in AAI for airport operations.
(4) Civil Aviation Department: Jobs related to aviation safety and regulations.
(5) Public Sector Airlines: Positions in Air India or similar public airlines.

You can check job listings and updates on the official AAI website aai.aero

If you are dissatisfied with the reply, pl ask again without hesitation. If satisfied, pl like and follow me.
Thanks a lot.
(Radheshyam)

...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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x