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Ramalingam

Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 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 15, 2024Hindi
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Hi Sir, I am 46 years old and yeI have created 30 lakh corpus. Currently my take home salary is 1.4 lakh per month. I am investing 12500 per month in ppf . 5000 in Nps tier 1 and 1000 in nps tier 2 account. 20 K SIP in Mf. Like SBI balance fund 5000,Tata digital 5000, Nippon larg cap 2000, Motilal Oswal midcap 2000,Quant small cap 5000 and recently added Quant psu 1000. And some amount in invested lic yearly. also have 65 lakh medical cover for my family's. I have plan my retirement at the age of 55 . Can i Growup my corpus 1.5 CR at the time of retirement and get atleast 1lakh monthly for expenses. My another question is I investigated 8.5 lakh in direct stock(20) since 2021 for 10 years and get arround 20% return from last 3 years. Should I continue this or exist from the direct stock and invested this amount in MF. Please guide. My wife is already working in private school and his salary is 20k pm. Please guide

Ans: It's great to see your proactive approach towards financial planning and investment. Let's delve into your retirement and investment goals to ensure you're on track to achieve financial security and growth.

Retirement Planning Analysis
Planning to retire at 55 with a target corpus of 1.5 crores and a monthly expense requirement of 1 lakh is an ambitious yet achievable goal. Let's assess your current investments and savings to determine if they align with your retirement objectives.

Current Investment Portfolio Evaluation
Your investment portfolio exhibits a diversified mix of instruments, including PPF, NPS, mutual funds, LIC, and direct stock holdings. This diversified approach spreads risk and maximizes growth potential, aligning with your long-term financial goals.

Growth Projection and Retirement Corpus Target
To achieve a retirement corpus of 1.5 crores by 55, we'll need to assess your current savings rate, investment returns, and inflation impact. Utilizing retirement calculators and financial modeling can help determine the required monthly contributions and investment growth rate to meet your target.

Investment Strategy Review
Given your successful track record with direct stock investments and the robust performance with a 20% return over the past three years, continuing this strategy can be beneficial. However, it's essential to periodically review and rebalance your portfolio to optimize returns and mitigate risk.

Asset Allocation and Risk Management
Maintaining a balanced asset allocation across equity, debt, and other asset classes is key to managing risk and achieving long-term growth. Regularly monitoring market conditions and adjusting your portfolio accordingly can help capitalize on opportunities and minimize downside risk.

Importance of Contingency Planning
While focusing on retirement planning, it's crucial to prioritize contingency planning, including emergency funds, health insurance coverage, and estate planning. Adequate medical coverage for your family and an emergency fund provide financial security during unexpected events.

Consultation with a Certified Financial Planner
Engaging with a Certified Financial Planner can provide personalized guidance and strategies tailored to your financial goals and risk tolerance. They can help optimize your investment portfolio, assess retirement readiness, and navigate any financial challenges along the way.

Conclusion
With careful planning, disciplined savings, and strategic investment decisions, achieving your retirement goal of a 1.5 crore corpus by 55 is attainable. Continuing your direct stock investments alongside mutual funds can diversify your portfolio and enhance long-term growth potential. Consulting with a Certified Financial Planner will provide valuable insights and ensure you stay on track towards financial independence.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Asked on - May 16, 2024 | Answered on May 17, 2024
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Thanks for your valuable suggestions and quick response.
Ans: Welcome :)
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  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 11, 2024

Money
Hi my age is 34 earning 1.30l per month, my saving are monthly 26k in different sips, 12.5k monthy ppf, 2 policies total amount of 15-16lakhs paying 30 and 70k premium yearly ( mature in 2035), investing montly in gold - 500 and 50,000 yearly in nps. Rest 5 to 10k in saving account. I have 2 questions 1.Should I need to invest more if i want total corpus of 3 crore? 2. I have 2 daughters so i should have enough amount for their education and their marriage
Ans: Planning for Your Financial Future: Building a Rs 3 Crore Corpus and Securing Your Daughters' Futures

Congratulations on your disciplined saving and investment habits. Your current financial strategy is commendable, and it’s clear you’re committed to securing a prosperous future for yourself and your daughters. Let’s address your questions and develop a comprehensive plan.

Understanding Your Current Financial Situation
To start, let’s review your existing financial commitments and investments:

Monthly Income: Rs 1,30,000
Monthly Savings and Investments:
SIPs: Rs 26,000
PPF: Rs 12,500
Policies: Rs 30,000 and Rs 70,000 annually (equivalent to Rs 8,333 per month)
Gold: Rs 500
NPS: Rs 50,000 annually (equivalent to Rs 4,167 per month)
Savings Account: Rs 5,000 to Rs 10,000
Your total monthly investments sum up to approximately Rs 51,500, excluding the savings account contributions.

Setting Clear Financial Goals
You have two primary goals:

Accumulating a Rs 3 Crore Corpus
Ensuring Funds for Your Daughters’ Education and Marriage
Goal 1: Accumulating a Rs 3 Crore Corpus
Calculating the Future Value of Your Investments
To determine if you need to invest more, we must project the future value of your current investments. Let’s assume an average annual return of 12% for your SIPs, considering they are likely invested in equity mutual funds.

Formula for Future Value of SIP:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 26,000)
r = Annual interest rate (0.12)
n = Number of times interest is compounded per year (12)
t = Number of years (26, assuming retirement at age 60)
Future Value Calculation for SIPs
Using the formula above:

FV = 26,000 * [(1 + 0.12/12)^(12 * 26) - 1] / (0.12/12)

FV = 26,000 * [(1 + 0.01)^(312) - 1] / 0.01

FV = 26,000 * [(1.01)^312 - 1] / 0.01

FV = 26,000 * [36.786 - 1] / 0.01

FV = 26,000 * 35.786 / 0.01

FV = 26,000 * 3,578.6

FV = 9,30,43,600

So, the future value of your SIPs after 26 years would be approximately Rs 9.3 crores.

Future Value Calculation for PPF
The PPF has a fixed rate of return. Assuming an average annual return of 7.1%:

Formula for Future Value of PPF:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 12,500)
r = Annual interest rate (0.071)
n = Number of times interest is compounded per year (1)
t = Number of years (15, due to PPF maturity period)
FV = 12,500 * [(1 + 0.071/1)^(1 * 15) - 1] / (0.071/1)

FV = 12,500 * [(1 + 0.071)^15 - 1] / 0.071

FV = 12,500 * [(1.071)^15 - 1] / 0.071

FV = 12,500 * [2.847 - 1] / 0.071

FV = 12,500 * 1.847 / 0.071

FV = 12,500 * 26.014

FV = 3,25,175

So, the future value of your PPF after 15 years would be approximately Rs 3.25 lakhs.

Future Value Calculation for NPS
NPS investments typically yield around 10% annually. Assuming the annual contribution is Rs 50,000:

Formula for Future Value of NPS:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 4,167)
r = Annual interest rate (0.10)
n = Number of times interest is compounded per year (1)
t = Number of years (26)
FV = 4,167 * [(1 + 0.10/1)^(1 * 26) - 1] / (0.10/1)

FV = 4,167 * [(1 + 0.10)^26 - 1] / 0.10

FV = 4,167 * [(1.10)^26 - 1] / 0.10

FV = 4,167 * [10.835 - 1] / 0.10

FV = 4,167 * 9.835 / 0.10

FV = 4,167 * 98.35

FV = 4,09,445

So, the future value of your NPS after 26 years would be approximately Rs 4.09 lakhs.

Additional Investments
Your existing policies (LIC, ULIP) may not offer the best returns. Consider surrendering them and redirecting the premiums into mutual funds for potentially higher growth.

Goal 2: Funding Your Daughters’ Education and Marriage
Estimating Future Expenses
Education Costs: Assume a need of Rs 20 lakhs for each daughter’s higher education.
Marriage Costs: Assume Rs 20 lakhs for each daughter’s marriage.
Let’s estimate the inflation-adjusted cost of education and marriage in the future.

Formula for Future Value of Education Costs:

FV = PV * (1 + r)^t

Where:

PV = Present value (Rs 20 lakhs)
r = Inflation rate (0.06)
t = Number of years until the expense (assume 10 years for education)
Future Value Calculation for Education
FV = 20,00,000 * (1 + 0.06)^10

FV = 20,00,000 * (1.06)^10

FV = 20,00,000 * 1.791

FV = 35,82,000

So, the future value of education costs after 10 years would be approximately Rs 35.82 lakhs.

Future Value Calculation for Marriage
Assuming marriages in 20 years:

FV = 20,00,000 * (1 + 0.06)^20

FV = 20,00,000 * (1.06)^20

FV = 20,00,000 * 3.207

FV = 64,14,000

So, the future value of marriage costs after 20 years would be approximately Rs 64.14 lakhs.

Investment Strategy for Daughters’ Future
Child Education Funds: Invest in dedicated mutual funds for child education. These funds typically offer higher returns and are tailored for education expenses.
Systematic Transfer Plan (STP): Use STP to gradually move funds from equity to debt as the expense time nears to minimize risk.
Sukanya Samriddhi Yojana (SSY): Consider SSY for long-term savings for your daughters, offering tax benefits and secure returns.
Monitoring and Adjusting Investments
Regularly review your investments to ensure they align with your goals. Rebalance your portfolio annually to maintain the desired asset allocation.

Periodic Reviews
Annual Performance Review: Evaluate the performance of your investments and adjust as necessary.
Adjusting Asset Allocation: Shift funds between equity and debt based on market conditions and your risk tolerance.
Risk Management
Diversification is crucial to minimize risks. Spread investments across various asset classes to safeguard against market volatility.

Market Risk
Equity Investments: High returns but subject to market fluctuations. Diversify across sectors and companies.
Debt Investments: Lower returns but more stable. Include high-quality debt instruments for stability.
Tax Considerations
Maximize tax efficiency by leveraging tax-saving instruments under Section 80C. Ensure investments align with your overall financial strategy.

Tax-Efficient Investments
Equity-Linked Savings Scheme (ELSS): Provides tax benefits and good returns. Suitable for long-term goals.
Public Provident Fund (PPF): Safe and tax-efficient. Ideal for conservative investors.
Professional Guidance
Consider consulting a Certified Financial Planner (CFP) for personalized advice. A CFP can help tailor your investment strategy to meet your specific goals.

Advantages of CFP
Expertise in Financial Planning: Offers professional insights and strategies.
Personalized Advice: Tailored to your financial situation and goals.
Final Insights
Achieving a Rs 3 crore corpus and securing funds for your daughters’ education and marriage requires disciplined investing and strategic planning. Your current investments are a strong foundation, but consider increasing contributions for higher returns.

Diversify your investments, monitor performance regularly, and adjust your portfolio as needed. Consulting a Certified Financial Planner can provide valuable guidance and help you stay on track.

Stay committed to your goals, and with careful planning, you can achieve financial security and ensure a bright future for your daughters.

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 Jul 15, 2024

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Hello Sir, I am a 40 yr old Zonal Sales Head in a private organisation having monthly take home salary of Rs.2.15 lakhs. I now invest Rs.81,500/month in diversified mutual funds SIP. I have a mutual fund Corpus of Rs.67.5 lakhs. I have Rs.16 lakhs in Shares in equity market & Rs.28 lakhs in PF, Rs.8 lakhs in PPF, Rs.8.5 lakhs in LIC Jivan Anand. I keep Rs.3 lakhs in Bank account. I have a 6 yr old daughter. I would like to have 2.5 Cr for my daughters' higher education in 15 yrs & i need to have a corpus of 8 crores for my retirement in 18 yrs. Please suggest, am i on the right path.
Ans: I understand that you want to ensure your daughter's higher education and a secure retirement. With a structured plan and consistent efforts, you're on the right path to achieving your financial goals. Let's dive deeper into your current investments and future needs.

Current Financial Standing
You have an impressive monthly salary of Rs. 2.15 lakhs. Out of this, you are investing Rs. 81,500 in diversified mutual funds SIPs. Your mutual fund corpus stands at Rs. 67.5 lakhs, and you have Rs. 16 lakhs in equity shares. Additionally, you have Rs. 28 lakhs in your Provident Fund (PF), Rs. 8 lakhs in Public Provident Fund (PPF), and Rs. 8.5 lakhs in LIC Jivan Anand. You also maintain Rs. 3 lakhs in your bank account for liquidity. This is a robust financial foundation.

Assessing Your Goals
Your financial goals are clear and ambitious. You aim to have Rs. 2.5 crores for your daughter's higher education in 15 years and a retirement corpus of Rs. 8 crores in 18 years. Let's break down how your current investments align with these goals and what adjustments may be necessary.

Mutual Fund Investments
Your substantial investment in mutual funds is commendable. Diversified mutual funds are a solid choice for long-term growth. Given your current SIPs, ensure that your portfolio remains balanced across large-cap, mid-cap, and small-cap funds. Diversification reduces risk and enhances growth potential.

Regular Monitoring and Rebalancing
It is crucial to monitor your mutual fund portfolio periodically. Market conditions change, and your investments may need rebalancing to maintain the desired asset allocation. Regular reviews with a Certified Financial Planner can help optimize your portfolio.

Benefits of Actively Managed Funds
Actively managed funds often outperform index funds, especially in the Indian market. Professional fund managers make strategic decisions to maximize returns, adapting to market fluctuations. This expertise can potentially provide higher returns compared to passive index funds.

Equity Shares
Your Rs. 16 lakhs in equity shares is a good investment. Direct equity investment can offer substantial returns but also comes with higher risk. Ensure that your equity portfolio is well-diversified across different sectors to mitigate risk. Consider periodically reviewing and possibly reallocating your investments based on market performance.

Provident Fund (PF) and Public Provident Fund (PPF)
Your investments in PF and PPF are prudent for long-term security. These instruments offer safety and tax benefits. Continue contributing to these funds to ensure a stable, risk-free component in your portfolio.

Life Insurance Policies
You have Rs. 8.5 lakhs in LIC Jivan Anand. While traditional insurance plans provide security, they often yield lower returns compared to mutual funds. Given your substantial investment in insurance, consider evaluating the returns and possibly reallocating to higher-yielding investments.

Surrendering Investment-cum-Insurance Policies
If the returns from LIC Jivan Anand are not meeting your expectations, consider surrendering the policy. Reinvesting the proceeds into diversified mutual funds can potentially offer better growth, aligning with your long-term goals.

Emergency Fund
Maintaining Rs. 3 lakhs in your bank account for emergencies is wise. This fund should cover at least six months of your expenses. Given your monthly salary and expenses, ensure that this emergency fund remains liquid and easily accessible.

Daughter's Higher Education Goal
To achieve Rs. 2.5 crores in 15 years for your daughter's higher education, your investments need to grow at a healthy rate. Diversified mutual funds can help achieve this target. Ensure that you regularly review and adjust your SIPs to stay on track with this goal.

Education Savings Plan
Consider setting up a dedicated education savings plan. This plan can focus on high-growth mutual funds with a mix of equity and debt to balance risk and returns. Regular contributions and compounding growth will help you reach the Rs. 2.5 crore target.

Retirement Planning
Your goal of Rs. 8 crores for retirement in 18 years is ambitious but achievable with disciplined investing. Let's evaluate how your current investments align with this goal.

Building a Retirement Corpus
Continue with your diversified mutual fund SIPs and equity investments. Additionally, consider increasing your SIP contributions periodically to match inflation and salary increments. This will help grow your corpus faster.

Role of Provident Funds
Your investments in PF and PPF will provide a stable and secure base for your retirement corpus. These funds should continue to form a core part of your retirement plan due to their safety and tax benefits.

Long-Term Investment Strategy
Adopt a long-term investment strategy focusing on equity mutual funds for growth. As you approach retirement, gradually shift to more conservative investments like debt funds to protect your corpus from market volatility.

Tax Planning
Efficient tax planning can enhance your savings and investment returns. Utilize tax-saving instruments like ELSS (Equity Linked Savings Scheme) mutual funds. They offer tax benefits under Section 80C and potential for higher returns.

Maximizing Tax Benefits
Ensure that you are fully utilizing the Rs. 1.5 lakh deduction limit under Section 80C through investments in PPF, EPF, and ELSS. Additionally, consider tax-saving options under Sections 80D for health insurance and 24(b) for home loan interest.

Health Insurance
Adequate health insurance is crucial for financial security. Ensure that you and your family are covered under a comprehensive health insurance plan. This will protect your savings and investments from unforeseen medical expenses.

Estate Planning
Consider creating a will to ensure your assets are distributed according to your wishes. Estate planning helps avoid legal complications and ensures your family's financial security.

Education and Retirement Goal Alignment
Balancing your daughter's education and your retirement goals is key. Prioritize and allocate investments towards both goals. A Certified Financial Planner can help structure a plan that aligns both objectives without compromising either.

Final Insights
You are on a commendable path with your disciplined investment approach. Your diversified portfolio and regular investments are key to achieving your financial goals. Regular reviews and rebalancing of your portfolio will ensure you stay on track.

Consulting with a Certified Financial Planner can provide tailored advice and strategies to optimize your investments. Stay focused, and your financial goals are well within reach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Milind

Milind Vadjikar  |579 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 24, 2024

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Hello Madam I am Vivek & 43 Year OLD , I have corpus of 60 Lac & SIP of 30K ,Gold Asset 10Lac ,PF : 10 Lac ,Home loan: 7 lac going on .LIC & Term Plans are there Not considered as Investment I invested 30 Lac as below Small Cap 4,00,000 13% Flexi cap 4,00,000 13% Multi Cap 5,00,000 17% Large Cap 1,50,000 5% Large MID CAP 2,00,000 7% Mid cap 3,50,000 12% Sector Fund 6,80,000 22% Value Fund 3,50,000 12% Also started SIP of 30500 As 1]Nippon Small Cap -7000 2] HSBC Multi CAp-3000 3] Mahindra Manu Mid CAp - 4000 4] Motilal Oswal Mid Cap : 3000 5] 4] Motilal Oswal Large & Mid Cap : 3000 5] HDFC Defence Fund :5000 6]ICICI Prudential PSU Equity Fund -3000 6] Axis Value Fund - 2500 7] PPF -4000 What will be corpus after 5 years ,will it be sufficient if I Quit Job by 48 ,Monthly Expenses is 60K PM
Ans: Hello;

Your monthly expenses of 60 K will be around 80 K in 5 years from now considering 6% inflation.

Further your sip sum, corpus sum, lumpsum investment, gold holding, pf holding will yield you a cumulative corpus of 2.13 Cr after 5 years.

If you use this sum to buy an immediate annuity from a life insurance company you may expect to receive a monthly income of around 90K (post-tax).

LIC policy maturity proceeds, if any, and PPF(you should continue as long as possible) will be surplus.

Hope the home loan is fully repaid over 5 yr time.

You may quit regular 9 to 5 job and keep yourself occupied in some alternate vocation or profession with flexi time maybe for another 8-10 years. This serves 2 purposes: it keeps your mind focused and active plus any income from such activities can help fund your holidays/boost retirement corpus.

Please ensure to have a good personal healthcare cover for yourself and your spouse.

Happy Investing;

..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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