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Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 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 - Jul 04, 2024Hindi
Money

Sir I 47 year old and am earning 3 lakhs per month. My monthly expenditure is 2 lakhs. I have the following assets: 1. 3 houses with outstanding loan amount of 8 lakhs. Net worth : 3 crores 2. 1.5 crore in Equity and Mutual Funds 3. 1 crore in ppf. 4. Have a term insurance of 2 crore till my age of 75. 5. 10 lakhs liquid cash for emergency funds. 6. 20 lakhs - for child benefit plans I am currently invested in following Mutual Funds a. UTI ELSS Tax Saver Fund - IDCW - 15000 b. ICICI prudential nifty next 50 index fund - growth - 10000 c. Axis foccused fund - growth - 10000 My wife is also working and she is invested in 75k in mutual funds and we plan to use it for our daughter's future. She has built a corpus of 55 lakhs till now and she plans to continue to work for another 8 years. Requesting your kind advise on how to go about the following: I am ready to invest in another 40k in mutual funds. My goals are the following: 1. Set up corpus for my son's higher education in 5 years time. Want to have 1.5 crore setup for him for his higher studies. 2. Plan to work for another 8 years and then plan to retire. Need to have 1 lakh per month for expenses post retirement. 3. Currently I and my family are covered by Company medical insurance. I would need a cover post retirement, pls advise on that as well. Thanks

Ans: I appreciate your detailed input. Your financial status is strong, and I can see you've done a great job managing your assets. Let's go through your situation and goals one by one. I'll provide a thorough plan to help you achieve them.

Current Financial Snapshot
You have a solid income of Rs. 3 lakhs per month and manage monthly expenses of Rs. 2 lakhs. This leaves you with a surplus of Rs. 1 lakh every month, which is great for additional investments and savings.

You have the following assets:

Three houses with an outstanding loan amount of Rs. 8 lakhs. The net worth of these properties is Rs. 3 crores.

Equity and Mutual Funds worth Rs. 1.5 crores.

PPF with Rs. 1 crore.

Term insurance of Rs. 2 crores till age 75.

Liquid cash of Rs. 10 lakhs for emergency funds.

Child benefit plans amounting to Rs. 20 lakhs.

You also have current investments in mutual funds:

UTI ELSS Tax Saver Fund - IDCW - Rs. 15,000

ICICI Prudential Nifty Next 50 Index Fund - Growth - Rs. 10,000

Axis Focused Fund - Growth - Rs. 10,000

Your wife is working and has invested Rs. 75,000 in mutual funds, building a corpus of Rs. 55 lakhs, planning to work for another 8 years.

Setting Up a Corpus for Your Son's Higher Education
Your goal is to set up a corpus of Rs. 1.5 crores for your son's higher education in 5 years. This is a substantial goal, but with disciplined investment, it is achievable.

Steps to Achieve This Goal:

Review Existing Investments: First, evaluate the performance of your current mutual fund investments. Keep the ones that have shown consistent performance.

Additional Investment: Since you can invest another Rs. 40,000 monthly, consider adding to equity mutual funds, which have the potential for higher returns over five years.

Mutual Fund Categories: Invest in a mix of large-cap, mid-cap, and multi-cap funds. Large-cap funds offer stability, while mid-cap and multi-cap funds provide growth potential.

Systematic Investment Plan (SIP): Utilize SIPs for these funds to benefit from rupee cost averaging and compound growth.

Monitor and Rebalance: Regularly monitor your portfolio and rebalance as needed to stay on track with your goal.

Planning for Retirement
You plan to retire in 8 years and need Rs. 1 lakh per month for expenses post-retirement. Here's how you can achieve this:

Steps to Achieve This Goal:

Retirement Corpus: Calculate the corpus required to generate Rs. 1 lakh per month. Assuming a safe withdrawal rate of 4%, you'll need around Rs. 3 crores.

Current Investments: You already have Rs. 1.5 crores in equity and mutual funds and Rs. 1 crore in PPF. Continue investing in these to reach your goal.

Additional Investments: With your monthly surplus and the extra Rs. 40,000, increase your investment in diversified mutual funds.

Equity Exposure: Maintain a good portion of your portfolio in equities for growth. As you near retirement, gradually shift some investments to debt funds for stability.

Medical Insurance: Post-retirement, you will need a comprehensive health cover. Consider a family floater plan with a high sum assured and critical illness cover.

Reviewing and Optimizing Your Portfolio
Let's break down your current mutual fund investments:

UTI ELSS Tax Saver Fund: ELSS funds offer tax benefits under Section 80C. Continue with this investment for tax efficiency.

ICICI Prudential Nifty Next 50 Index Fund: Index funds are passively managed and mirror the index. Consider shifting to actively managed funds for potentially higher returns.

Axis Focused Fund: Focused funds invest in a limited number of stocks. If it has performed well, continue with it. Otherwise, explore diversified funds.

Investing Through a Certified Financial Planner (CFP)
Advantages of Actively Managed Funds:

Expert Management: Actively managed funds are handled by experienced fund managers aiming to outperform the market.

Flexibility: Fund managers can adjust the portfolio based on market conditions, potentially providing better returns.

Potential for Higher Returns: Though they have higher fees, the potential for higher returns often justifies the cost.

Disadvantages of Direct Funds:

Limited Guidance: Direct funds do not offer the guidance provided by a CFP. This can lead to less informed investment decisions.

Time-Consuming: Managing direct investments requires significant time and knowledge, which might not be feasible for everyone.

Benefits of Regular Funds via CFP:

Professional Advice: A CFP can provide tailored advice based on your financial goals and risk appetite.

Portfolio Management: Regular monitoring and rebalancing of your portfolio to ensure it aligns with your goals.

Setting Up a Medical Insurance Cover Post-Retirement
Steps to Secure Health Insurance:

Family Floater Plan: Choose a family floater plan with a high sum assured to cover major medical expenses.

Critical Illness Cover: Add a critical illness rider to cover diseases like cancer, heart attack, etc.

Top-Up Plans: Consider top-up or super top-up plans to enhance your coverage at a lower premium.

Portability: Check the portability options to transfer your current health cover benefits to a new insurer without losing benefits.

Building a Comprehensive Financial Plan
Holistic Approach:

Emergency Fund: Maintain your Rs. 10 lakhs liquid cash for emergencies. It provides a safety net for unforeseen expenses.

Child Benefit Plans: Evaluate the performance of these plans. If they are underperforming, consider reallocating to better-performing funds.

Loan Repayment: Pay off the outstanding Rs. 8 lakhs on your properties to reduce debt and interest burden.

Regular Review: Conduct regular reviews of your financial plan with a CFP to stay aligned with your goals and make necessary adjustments.

Final Insights
You have a robust financial base and clear goals. By optimizing your current investments, adding to your SIPs, and managing your portfolio with the help of a CFP, you can achieve your goals.

Focus on equity mutual funds for growth, maintain a diversified portfolio, and ensure you have adequate health cover post-retirement.

Keep monitoring and rebalancing your investments to stay on track. With disciplined investment and professional guidance, your financial goals are well within reach.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

Asked by Anonymous - Feb 29, 2024Hindi
Money
Hello, I am 43 Years old and earning in-hand 2.2+ lac per month, from this year I have started investment in MF SIP(60K/month), NPS(10% basic + 50k/yrs from past 5 yrs), PPF (12500/month from past 5 yrs), Emergency fund 3lac (FD), EPF(20+lac), No EMI(Debt free - hold 2 property), Term Plan (50 lac) + 1.5 CR (Corporates cover)-> have external plan for 1.5 CR more + minimum external medical insurance plan (Currently corporate medical plan of 15 lac available) Equity investment is 0. My monthly expense is around 50k. I have two kids 5 and 10 yrs old - need to plan for education and my retirement(at 60 age). I can invest more 80-90k/month, Risk capacity is high, please suggest. Requirement - Education 2 CR for (1 CR each Kid appx) and for retirement around 5 CR liquid cash.
Ans: It's wonderful that you have a solid financial foundation and a clear vision for your future. Let's review your current investments and suggest strategies to help you achieve your goals for your children's education and your retirement.

Current Financial Situation
Monthly Income and Expenses
In-hand Income: Rs. 2.2+ lakhs per month
Monthly Expenses: Rs. 50,000
Current Investments
Mutual Fund SIP: Rs. 60,000 per month (started this year)
NPS: 10% of basic salary + Rs. 50,000 annually (contributed for the past 5 years)
PPF: Rs. 12,500 per month (contributed for the past 5 years)
Emergency Fund: Rs. 3 lakhs (in Fixed Deposit)
EPF: Rs. 20+ lakhs
Term Plan: Rs. 50 lakhs + Rs. 1.5 crore (corporate cover) + additional Rs. 1.5 crore
Medical Insurance: Corporate plan of Rs. 15 lakhs + minimum external plan
Assets
Two Properties: Debt-free
Financial Goals
Children's Education: Rs. 2 crores (Rs. 1 crore for each child)
Retirement: Rs. 5 crores liquid cash by age 60
Investment Strategy
1. Enhance Equity Exposure
Given your high-risk capacity and long investment horizon, increasing your equity exposure is prudent. Equity investments can offer higher returns compared to other asset classes.

Increase SIP Amount: You can invest an additional Rs. 80,000-90,000 per month. This can be allocated to diversified equity mutual funds, mid-cap funds, and small-cap funds for higher growth potential.
2. Optimize Existing Investments
Mutual Fund SIPs: Continue your existing SIPs. Consider adding funds with a good track record and those that align with your risk appetite.
NPS: This is a good investment for retirement savings due to its tax benefits and long-term growth potential. Ensure your allocation is optimized between equity and debt within NPS.
PPF: Continue your contributions to PPF for tax-free returns and safety. However, PPF has a lower return compared to equities, so balance your investments accordingly.
3. Diversify Investments
Diversification helps manage risk and capture opportunities across different market segments.

Equity Funds: Increase investments in equity mutual funds. Consider large-cap, mid-cap, and small-cap funds for a balanced growth portfolio.
Debt Funds: To balance the portfolio, consider debt mutual funds for stability and predictable returns.
Gold: Small allocation to Sovereign Gold Bonds (SGBs) can act as a hedge against inflation and market volatility.
Education Planning for Children
1. Systematic Investment Plan (SIP) for Education
Start dedicated SIPs in equity mutual funds targeted for your children's education. This will help in accumulating the required corpus systematically over time.

2. Child Plans
Consider investing in child-specific mutual funds or ULIPs that offer long-term growth and benefits tied to education milestones.

Retirement Planning
1. Retirement Corpus Calculation
With a target of Rs. 5 crores by age 60, let's ensure your investments align to meet this goal. A mix of equity and debt will provide growth and stability.

2. Retirement-Specific Funds
Consider investing in retirement-focused mutual funds and increasing your NPS contributions. These funds are designed to grow your savings efficiently over the long term.

3. Review and Rebalance Portfolio
Regularly review and rebalance your portfolio to align with changing market conditions and life stages. This will help in maintaining the desired asset allocation.

Risk Management
1. Adequate Insurance Cover
You already have substantial term insurance and health insurance coverage. Ensure they are sufficient to cover any unforeseen circumstances.

2. Emergency Fund
Maintain or slightly increase your emergency fund to cover 6-12 months of expenses. This provides a safety net for unexpected events.

Consultation with a Certified Financial Planner (CFP)
1. Personalized Financial Advice
A Certified Financial Planner can offer personalized advice, taking into account your specific financial situation, goals, and risk tolerance.

2. Expert Management
CFPs help in managing your investments effectively, optimizing returns while minimizing risks.

3. Comprehensive Planning
CFPs can assist with comprehensive financial planning, including tax planning, estate planning, and more, ensuring all aspects of your financial health are covered.

Example Investment Plan
Here’s a simplified example of how you might allocate your additional Rs. 80,000-90,000 monthly investment:

Equity Mutual Funds: Rs. 50,000 in diversified large-cap, mid-cap, and small-cap funds.
Debt Mutual Funds: Rs. 20,000 for stability and income generation.
Gold/SGB: Rs. 10,000 for diversification and inflation hedge.
Regular Monitoring and Adjustments
1. Annual Review
Conduct an annual review of your investments and financial goals. Adjust your SIP amounts and asset allocation as needed.

2. Stay Informed
Keep yourself informed about market trends and economic changes. Staying updated will help in making informed investment decisions.

Conclusion
Your current investments and financial strategies are commendable and align well with your goals. By increasing your equity exposure, optimizing existing investments, and consulting a Certified Financial Planner, you can confidently work towards securing your children’s education and a comfortable retirement.

Your disciplined approach and willingness to invest more monthly will significantly enhance your financial security. Continue to monitor and adjust your investments regularly to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 14, 2024

Money
Hello, I'm a 46 year old , unable to work anymore, I have no loans, own house,wife is the earning member. My investments are : Running investments: Pension Plan with fund value of 42 lakhs(current fund value) till 2037, Equity Mutual fund with fund value of 12 lakhs( Current fund value). Yearly investment emi of 1.20 lakh Monthly expenditure of 25 k Monthly rental income of 8k NO PPF Bank Balance of 26 lakh. Want to invest 10 -15 lakh to earn a sizeable corpus ( say 1 cr) in next 18 years for my child when he will become an adult, in addition to a 50 k monthly income in next 2-3 years Can you kindly guide me as to what investments I should be doing to achieve this target
Ans: You have provided valuable details about your financial situation. Let’s analyse your current standing and future goals.

Age: 46 years old
Running Investments:
Pension Plan with a current fund value of Rs 42 lakhs (maturing in 2037).
Equity Mutual Fund with a current fund value of Rs 12 lakhs.
Income & Expenditure:
Monthly rental income of Rs 8,000.
Monthly expenditure of Rs 25,000.
Yearly EMI of Rs 1.2 lakh for ongoing investments.
Savings: Bank balance of Rs 26 lakhs.
Investment Goals:
You want to invest Rs 10-15 lakh to build a corpus of Rs 1 crore in 18 years for your child.
You also need a monthly income of Rs 50,000 in the next 2-3 years.
Given these goals, let’s discuss how you can achieve them.

Income Generation for Monthly Needs (Rs 50,000)
To achieve a monthly income of Rs 50,000 in the next 2-3 years, we need to explore investment options that can generate consistent returns.

Rental Income: You already have Rs 8,000 coming in monthly. This helps reduce your income requirement.

Systematic Withdrawal Plan (SWP):

A Systematic Withdrawal Plan from your mutual funds could be useful.
You can park part of your Rs 26 lakh bank balance into a debt-oriented hybrid mutual fund.
These funds provide stability with moderate returns.
You can withdraw monthly amounts through SWP to meet your requirement.
Based on the fund's performance, you can plan to withdraw around Rs 42,000 per month to reach your target of Rs 50,000 (including Rs 8,000 from rent).
This option allows you to use your capital effectively while keeping it invested for moderate growth.

Fixed Income Options:

You may also consider some amount in fixed deposits or high-interest-bearing savings instruments.
However, they are taxed as per your income tax slab, so this may reduce post-tax returns.
Combining these with SWP ensures liquidity and some level of fixed returns.
This way, your immediate income needs can be met, keeping your capital intact.

Investment Plan for Building Rs 1 Crore for Child's Future
You aim to build Rs 1 crore in 18 years for your child. The best way to achieve this is through equity-based investments, as they tend to offer the highest long-term growth.

Equity Mutual Funds:

For long-term goals like 18 years, equity mutual funds are the most suitable.
Your existing equity mutual funds of Rs 12 lakh can continue to grow.
You can also invest Rs 10-15 lakh from your bank balance into diversified equity funds.
Actively managed equity mutual funds generally perform better over a long period compared to passive index funds, which often lack flexibility in changing market conditions.
It’s crucial to focus on mid-cap and small-cap funds as they have higher growth potential over an 18-year period.
Regular vs Direct Funds:

You might have heard about direct mutual funds, which have lower fees.
However, direct plans require deep market understanding and regular monitoring.
Investing through a Certified Financial Planner (CFP) who works with an MFD can help you manage your portfolio professionally, ensuring that your investments are regularly rebalanced to match market changes.
Regular plans, managed by CFPs, provide professional guidance, making them a better choice for individuals who do not want the stress of tracking every detail.
SIP for Consistent Growth:

You can start a SIP (Systematic Investment Plan) of Rs 50,000 monthly.
This amount will steadily build wealth over 18 years.
By investing Rs 50,000 a month in a mix of large-cap, mid-cap, and small-cap funds, you stand a good chance of achieving your target of Rs 1 crore.
A professional MFD working with a CFP can help you select funds based on your risk profile and growth expectations.
Review of Existing Pension Plan
Your pension plan with a current fund value of Rs 42 lakhs is a significant part of your retirement portfolio.

Performance Review:
It is crucial to review the performance of this pension plan periodically.
Ensure that it continues to give reasonable returns, as you have 13 more years until it matures.
Often, these plans have high charges and lower returns compared to equity mutual funds. You should evaluate if it makes sense to continue with this investment or switch to something more productive.
If the returns are lower than expected, you may want to consider redirecting future premiums into better-performing mutual funds.
Tax Implications on Your Investments
Understanding tax liabilities is essential for maximising your returns.

Capital Gains Tax on Mutual Funds:

For equity mutual funds, LTCG (Long-Term Capital Gains) above Rs 1.25 lakh is taxed at 12.5%.
Short-Term Capital Gains (STCG) on equity mutual funds are taxed at 20%.
For debt mutual funds, LTCG and STCG are taxed according to your income tax slab.
You should consult with your CFP to ensure that your withdrawals and investments are done in the most tax-efficient manner.
Tax on Rental Income:

The Rs 8,000 monthly rental income is also taxable.
Ensure you factor this into your annual tax planning.
By optimising tax strategies, you can maximise your returns while keeping your liabilities low.

Contingency and Emergency Fund
While investing for long-term goals, don’t overlook short-term financial safety.

Emergency Fund:
Out of your Rs 26 lakh bank balance, set aside at least Rs 4-5 lakh as an emergency fund.
This will help you manage any unforeseen expenses without disturbing your investments.
Keep this amount in a liquid or short-term debt fund for easy access.
Health Insurance:
Since your wife is the sole earning member now, ensure that you have adequate health insurance coverage.
This will help safeguard your family’s finances in case of medical emergencies.
Revisit Your Financial Plan Regularly
It is essential to track your financial journey.

Review Performance:

Regularly review the performance of your mutual funds and pension plans.
Make adjustments based on market conditions and your changing life circumstances.
Stay on Track with Goals:

Ensure that you are consistently investing towards your Rs 1 crore goal.
Keep in touch with your CFP to monitor if you’re on track, and take corrective actions if required.
By actively managing your investments and reviewing your goals, you can ensure financial security for your family.

Finally
Your situation is unique, and your goals are achievable with a disciplined approach.

By combining equity mutual funds, SWPs, and systematic SIPs, you can grow your wealth and generate regular income. Balancing risk and return is essential to meet your child’s future needs and your immediate income requirements.

Keep your financial plan flexible, review it often, and stay committed to your goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 29, 2025

Asked by Anonymous - Jan 29, 2025Hindi
Listen
Money
I am 49 years old and currently working with an MNC company. I started Investing very late in my life. Infact I started my career very late at the age of 28 years. Currently I own two properties at two different tier-I cities worth 55L and 50L market value. First one is loan free (repaid fully), second one having outstanding principal of 21L (monthly EMI 28k). Current EPF balance 31L, PPF & Sukanya Samridhhi balance 26L (8 yrs completed), FD of 12L, NPS 1.5L (1 year completed), Gold value 30L. My wife is also working and she is 43Y old. I have never invested in Stock and MF due to high volatility fear. I am having an annual health Insurance coverage of 19L for my family (my corporate mediclaim 8L + wife corporate mediclaim 3L + personal family mediclaim 8L). Personal Term Insurance coverage - self 1 crore, wife 1 crore. Corporate term insurance coverage - self 1.3 crore. Other life Insurance policy coverage altogether 20L. Kindly advise me how can I achieve a retirement corpus of 4 Crore (myself+wife). My daughter age is 13 years at present. I am remaining with 10 years of job, my wife with 17 years. Net Salary (myself): INR 2L per month Net Salary (wife): INR 60K per month Household expenses (all inclusive): 55k per month excluding Housing loan EMI 28k No other loan or debt.
Ans: Understanding Your Retirement Goal
You want a Rs 4 Cr retirement corpus for yourself and your wife.

You have 10 years left to work, and your wife has 17 years.

Your combined monthly income is Rs 2.6L, and your household expenses are Rs 55K.

You have valuable assets, but limited equity investments.

Your financial plan must balance wealth creation, debt repayment, and stability.

Key Priorities Before Investing
Your second property loan should be repaid faster.

Your emergency fund should be sufficient for unexpected needs.

You need to start equity investments for long-term growth.

Your insurance coverage should align with future needs.

Debt Management Strategy
Your outstanding home loan is Rs 21L with an EMI of Rs 28K.

Consider prepaying this loan within 3-5 years using your surplus savings.

Loan repayment reduces interest burden and increases cash flow for investments.

Strengthening Your Emergency Fund
You have Rs 12L in FD, which is good for emergencies.

Keep at least 6 months of expenses in liquid assets.

Any excess FD amount can be shifted to better investments.

Investment Plan for Retirement
Step 1: Start Investing in Equity
You have avoided equity due to volatility, but long-term growth is essential.

Invest in actively managed equity mutual funds for better returns.

Begin with SIPs and gradually increase your investment.

Over 10 years, equity can help you beat inflation.

Step 2: Optimising Existing Investments
Your PPF and Sukanya Samriddhi account are safe investments but low in returns.

Continue contributing but avoid over-allocating funds here.

Your EPF balance is Rs 31L, which will grow, but you need equity exposure.

NPS is still new (Rs 1.5L), but it can supplement your retirement income.

Step 3: Allocating Monthly Surplus
Your combined income is Rs 2.6L, and expenses (including EMI) are Rs 83K.

You have a monthly surplus of Rs 1.77L.

Allocate at least Rs 1L per month to investments.

Increase SIP amounts every year as your salary grows.

Planning for Your Daughter’s Future
Your daughter is 13, and higher education costs will start in 5 years.

Start a dedicated investment for her education.

Use equity mutual funds instead of traditional savings plans.

Keep a balance between safety and growth.

Insurance and Risk Management
Your health insurance coverage is Rs 19L, which is sufficient.

Your term insurance is Rs 1 Cr (self) + Rs 1.3 Cr (corporate) + Rs 1 Cr (wife).

Review your policies regularly to ensure adequate coverage.

Surrender low-return traditional insurance policies and reinvest wisely.

Final Insights
Start investing in equity mutual funds for higher long-term returns.
Prepay your home loan within 3-5 years to free up cash flow.
Allocate at least Rs 1L per month to wealth-building investments.
Ensure a strong emergency fund before aggressive investing.
Plan separately for your daughter’s education to avoid financial strain.
Review your financial plan every year and make adjustments as needed.
With the right strategy, you can achieve your Rs 4 Cr retirement goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Asked by Anonymous - May 06, 2025
Money
Hi Sir, I am confused between HDFC FMP & C2i without tax and Regular Mutual Funds plan with tax deduction. HDFC FMP & C2i is (Fixed Maturity Plan and Click to Invest including insurance of 70 lacs ) plan, per year plan is to pay 7.5 lacs for every 5 years which will gain upto 1.20 Cr tax free amount under section 10D in 15 years, is this plan good to invest or investing those money in regular way into Mutual Funds will be good? I understand it will be taxable if I invest in MF however gain will be more compared to this policy? FYI I already have term insurance since last 5 years am paying for it. am not sure what to do? can you please advice me correctly. Many Thanks PT
Ans: You have asked a very important question.

It is good that you are comparing different products before investing.

You are thinking long-term and planning in advance. That is a great habit.

Let us now look at the facts from all angles.

You mentioned HDFC FMP and C2i insurance. Let’s compare these with mutual funds clearly.

Let’s go step by step.

Understanding the Structure of Insurance-Linked Investment Plans
These insurance investment plans combine life insurance with investment.

They may promise tax-free maturity under Section 10(10D).

These plans also usually have guaranteed maturity values or bonus additions.

But the returns are fixed and capped. They mostly fall between 5% to 6%.

There is very low liquidity. You cannot exit before 5 years easily.

If you surrender early, penalties are very high.

You already have a term insurance. So, life cover in these plans is not needed.

Paying Rs. 7.5 lakhs per year for 5 years is a huge commitment.

Once you start, you must continue for full 5 years, else you lose benefits.

These policies are marketed as safe and tax-free.

But inflation can easily beat these kinds of returns over long term.

Even if maturity is tax-free, low growth means less real wealth in hand.

Evaluating Mutual Fund Investment Option (With Tax Impact)
Mutual funds, especially equity-oriented, are linked to the market.

They are not guaranteed. But historically they gave better returns over 10-15 years.

Even after tax, mutual funds can give you more real returns than insurance plans.

The new tax rule says LTCG above Rs. 1.25 lakhs is taxed at 12.5%.

Even then, if a mutual fund gives 11% to 13% CAGR, net returns are much better.

You also get liquidity in mutual funds. You can stop, start or withdraw any time.

You can also step up the SIP amount based on your income.

No lock-in, no surrender charges, and no hidden costs.

You already have term insurance. That gives you pure life cover at low cost.

Mutual funds are only for investment. No mixing of life cover and wealth building.

When life cover and investment are separated, both work efficiently.

Comparing C2i + FMP Plan with Mutual Funds
In C2i plan, you will invest total Rs. 37.5 lakhs (7.5 lakhs x 5 years).

You are promised maturity of around Rs. 1.20 crores after 15 years.

This is like 6% return yearly, assuming tax-free payout.

In mutual funds, even if you invest the same Rs. 7.5 lakhs/year for 5 years,

And you stop fresh investment after 5 years, but stay invested till 15 years,

You can expect Rs. 1.80 crore or even more, depending on performance.

Even after tax, net wealth is much higher than insurance plans.

The flexibility and higher wealth creation makes mutual funds the better option.

Do not just look at tax-free maturity. Look at total wealth creation also.

Insurance is not meant to build wealth. Its only role is to protect life.

You already have term cover. So no extra cover is needed.

Your insurance should protect your family, not your investment goals.

Tax Confusion Should Not Cloud Long-Term Returns
Many people choose insurance plans just to avoid tax.

But they ignore the very low returns of these plans.

A mutual fund taxed at 12.5% can still beat insurance maturity.

For example, if you gain Rs. 10 lakhs in MF, tax is Rs. 1.25 lakh only.

But the remaining Rs. 8.75 lakhs is still more than what insurance plans give.

Long term compounding in mutual funds creates much more wealth.

Tax saving should never be the only reason for investment.

A Certified Financial Planner will always prioritise post-tax, real returns.

That helps you achieve your goals without compromise.

Key Gaps in Insurance-Linked Plans for Long-Term Wealth
Liquidity is poor. Your money is locked.

Returns are low. Real wealth does not grow fast.

Cannot stop premiums mid-way. You lose if you do.

Surrender charges are heavy.

Product structure is complex. Not fully transparent.

Sales people pitch it as tax-free, but ignore inflation impact.

No flexibility to change based on goals.

Policy benefits may not match future needs.

It is one-size-fits-all plan. No customisation is possible.

Why Mutual Funds Remain Most Efficient and Flexible
You can build a portfolio of large cap, mid cap, small cap and multi-cap.

You can change funds if performance drops.

You can pause SIP or withdraw if needed.

You can invest regularly, lumpsum or both.

You can align investments with your goals like retirement, child education, etc.

You can start with lower amount and increase later.

You can also reduce risk slowly as you get older.

Goal-based planning is possible only with mutual funds.

You can track performance any time online.

Regular funds through Certified Financial Planner give personalised service also.

Why Direct Funds Are Not Recommended
Many investors try to save commission by going direct.

But they miss out on review, correction, and expert help.

Wrong fund selection can hurt your goal badly.

Regular funds via Certified Financial Planner ensure you get continuous guidance.

Emotional decisions can ruin returns. Regular plan helps avoid this.

Review, rebalancing and advice is more important than small saving in cost.

Direct fund cost saving is small. But loss due to wrong move can be big.

Certified Financial Planner will guide you in every stage.

That service adds much more value than the small cost of regular funds.

Insurance Policies Like C2i Are Not Designed for Wealth Creation
Their focus is on death benefit, not high returns.

They mix investment with insurance. That reduces both benefits.

The cost structure is complex and opaque.

Once you invest, you lose control for many years.

Exit before maturity brings penalties.

You are forced to stay even if performance is poor.

Sales pitch focuses on tax saving and maturity amount.

But rarely show comparison with mutual funds.

Your long-term financial goals need better growth and flexibility.

What You Should Do
Continue your existing term insurance policy. That is important.

Avoid any new insurance-linked investment. It adds burden, not benefit.

Start or increase investment in mutual funds instead.

Use a mix of multicap, midcap and small cap for long term.

Do goal-based planning – for retirement, child education and emergencies.

Avoid being trapped by tax-free maturity or fixed return offers.

Always ask – is this helping my goal? Or just giving peace of mind?

Tax can be managed. But loss in wealth due to low returns can’t be recovered.

Invest with flexibility, liquidity and guidance.

Final Insights
Your instincts are correct. Mutual funds have more long-term wealth potential.

Do not mix investment and insurance. Keep them separate always.

C2i and FMP look attractive now. But they limit future opportunities.

Tax-free is good. But only when returns are also strong.

Mutual funds, with help from Certified Financial Planner, give clarity and control.

Flexibility, better returns and goal-based investing always win in the long run.

Make your money work harder for your child’s future and your retirement.

Avoid locking large money in rigid, fixed return products.

Mutual funds give you the power to grow, adapt and win financially.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Money
Sir We bought a flat 4 yr ago with 67 lakhs with loan amount of 50 lakhs, recently we sell gold worth 25 lakhs and clear all personal loans and debts. Now we are planning another flat worth 95 lakhs with loan amount 80 lakhs...so now we have 2 home loans ..can we continue the 65 lakhs flat for rent 20 k or we sell the flat .total salary 1.6 lakhs per month . We have car loan also .
Ans: You have shown good intent by selling gold and clearing your debts.

Still, this new flat purchase needs careful review from all angles.

Let us assess your full situation and suggest a balanced, long-term approach.

This answer looks at every part of your current financial life.

Current Home and Existing Loan
Your current flat was bought for Rs.67 lakhs four years back.

Out of that, you took a loan of Rs.50 lakhs.

The current rental income is around Rs.20,000 per month.

This rent gives about Rs.2.4 lakh per year.

Rental yield is quite low in comparison to your loan EMI.

Real estate often gives rental returns of only 2–3% per year.

But your home loan interest is around 8%–9% yearly.

This gap creates a burden on your cash flow.

Keeping this flat only for rent may not be financially helpful.

Your Salary and Existing Loan Burden
Your total salary is Rs.1.6 lakh per month.

That is good, but needs proper budget management.

You already have one home loan and one car loan.

A second home loan of Rs.80 lakh will be a big load.

Two home loans and one car loan will stretch your EMI ratio.

Your EMI commitment may cross 60% of salary.

This makes day-to-day life stressful and risky.

Banks also limit eligibility if EMIs cross 50–60% of salary.

New Flat Plan – Is It Suitable Now?
You are planning a flat of Rs.95 lakh with Rs.80 lakh loan.

This is a big jump from your earlier flat price.

Loan EMI alone may be around Rs.65,000 to Rs.70,000 per month.

Managing this EMI along with old loan EMI and car EMI is difficult.

Plus, other expenses, bills, and savings will also need cash.

Property tax, maintenance, and interiors will need extra funds.

With your current salary, this may cause heavy strain.

And if job loss or emergency happens, the risk is high.

It is better to delay this second flat unless cash flow improves.

Keeping or Selling Existing Flat – What Is Better?
The rental income of Rs.20,000 is very low against the cost.

EMI, maintenance, and tax on that flat reduce actual returns.

Also, resale value after 4 years may not be very high now.

Selling the flat can help reduce your home loan burden.

You can use the sale amount to reduce new flat loan or invest.

Or, if you cancel new flat purchase, use funds for better financial goals.

Think about whether you need two flats at this stage.

A second flat gives low returns and blocks your liquidity.

Instead, one good home and mutual fund investments give better results.

Alternative to Property – What You Can Do Instead
With your surplus from salary, start investing in mutual funds.

Mutual funds are flexible, tax-efficient, and transparent.

Returns from mutual funds over long term are higher than rent.

You can start SIPs as per your risk level and goal duration.

Equity mutual funds help in wealth building.

Hybrid and debt mutual funds support safe and steady growth.

Please use regular funds through a Certified Financial Planner.

Avoid direct mutual funds. They give no review or correction support.

Direct funds also cause wrong asset mix and poor fund selection.

Gold Sale and Use of Funds – Was It Wise?
You sold gold worth Rs.25 lakh and cleared debts.

That was a good step. You have reduced bad loans smartly.

But don’t use all your assets for property again.

It is important to keep a balance across asset classes.

Use some gold money for liquid funds or emergency corpus.

Use part for mutual fund investments based on future goals.

Avoid repeating same mistake of taking high loan again.

Emergency Reserve and Liquidity Planning
Every family must keep 6–9 months of expenses as emergency fund.

This must be in liquid mutual funds or bank deposits.

If all money is in property, you can't access during emergency.

So, avoid locking all savings into the second flat.

Liquidity is safety. Not having cash causes problems even with assets.

Build an emergency fund of Rs.3–4 lakh minimum.

Car Loan – Should You Clear or Continue?
You also have a car loan now.

This is a depreciating asset. It does not grow in value.

Try to close this loan early if possible.

Paying high interest for car EMI reduces your savings.

Don't upgrade car or take new loan unless income rises.

Family and Future Needs – Are They Covered?
Property alone cannot secure your future.

You need to plan for child’s education, retirement, and emergencies.

Insurance protection is also needed for your family.

Take proper health insurance and term insurance.

Don’t rely only on property as financial backup.

Mutual fund SIPs and debt funds give support for long-term goals.

Important Financial Ratios to Watch
EMI to salary ratio should be under 40%.

Loan to asset value should not cross 60%.

Your current plan crosses both these limits.

Two home loans and a car loan may block your growth.

Keep your fixed obligations flexible and manageable.

What You Can Do Now – Practical Steps
Postpone the second flat purchase for now.

Recheck your actual need and affordability.

Consider selling the first flat if it has poor rental yield.

Reduce loan burden and improve monthly cash flow.

Build strong SIPs and liquid investments.

Don’t lock all assets in property and loans.

Close car loan if funds allow.

Keep emergency cash ready in liquid funds.

Do not buy any more real estate unless income doubles.

Finally
You are financially aware and want to grow smartly.

But growth should not come with pressure and debt risk.

A second flat may look attractive but may block your liquidity.

Wealth creation should focus on balance, not just ownership.

Mutual funds give better flexibility and higher long-term returns.

Keep reviewing your goals with a Certified Financial Planner.

Stay invested, stay liquid, and stay peaceful.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Asked by Anonymous - May 15, 2025
Money
My age 63 years total money is 2 crore ie 90 lacs mutual funds and shares 1 crore 10 lacs in annuity policies of lic and balance in deposits of bajaj sriram rbi bonds and post office schemes.i have a son who has no job last many years age 35 and has some health problems. My husband is retired .i retired from lic of india and i get a decent pension and also monthly annuities. My pension is 55000 and i fet 15000 annuities per month our mly expenses are 30000 and i put the balance in sip .i have sip and lic premiums per mobth of 45000.i also get some annuities as qly hly yly.i have put upto 45lacs in mutual funds lic single plans lic regular plans and sriram deposit in my son name.is this ok
Ans: You have shown great discipline in your retirement planning. You’ve created income from pension, annuities, and investments. This shows strong planning.

Still, some restructuring can improve safety, returns, and peace of mind. Let’s explore everything step-by-step with full clarity.

Overview of Your Financial Health
Your total assets are around Rs.2 crore. This is a strong base.

You get Rs.55,000 pension and Rs.15,000 from annuities every month.

Your family’s monthly expenses are Rs.30,000, which is quite manageable.

Your monthly savings into SIP and premiums total Rs.45,000.

You also have quarterly, half-yearly, and yearly annuities coming.

You have invested well across mutual funds, LIC plans, and deposits.

Around Rs.45 lakh is invested in your son’s name.

Your financial structure is stable but needs some rebalancing now.

Income vs Expenses – A Clear Monthly Picture
Your pension and annuity together give Rs.70,000 per month.

Your family needs Rs.30,000 monthly for expenses.

You are left with Rs.40,000 monthly surplus. This is a good habit.

But allocating Rs.45,000 monthly for SIPs and premiums may be high.

If any emergency happens, you may feel short of funds.

You need to keep a clear emergency fund of 12 months’ expenses.

This should be about Rs.3.6 lakh, kept in savings or liquid funds.

Don’t keep all surplus money in long-term SIPs without liquidity.

Assessment of Annuity Policies
You have Rs.1.10 crore in LIC annuities.

Annuities give steady income, but they lock your capital permanently.

Once bought, they cannot be changed or surrendered.

Return from annuities is not very high. Often between 5%–6%.

They also offer no growth or flexibility for future needs.

You already receive enough monthly income from pension.

So, future annuity purchases are not needed.

For income needs in future, better to use mutual fund SWP instead.

SWP gives monthly income and better returns with more tax control.

Your Mutual Fund Investments – Are They Aligned?
You have around Rs.90 lakh in mutual funds and shares.

This is a good allocation towards growth assets.

But mutual funds must be well-diversified across equity and debt.

At your age, equity must be under 40% of your mutual fund portion.

Rest 60% should go into debt mutual funds or hybrid funds.

Debt funds give better post-tax returns than fixed deposits.

Use regular mutual fund plans with help of a Certified Financial Planner.

Avoid direct mutual funds, as there’s no support during review.

Direct funds can cause wrong selection and poor asset balance.

Regular plans allow guidance, portfolio monitoring, and rebalancing every year.

About Your LIC Policies and Premiums
You are retired now. So buying new LIC policies is not useful.

LIC policies combine investment with insurance.

This results in low returns and poor flexibility.

Existing LIC policies can be continued if they are near maturity.

But do not buy any more LIC or traditional plans from now.

Future savings must be focused only on mutual funds and debt funds.

Your life insurance need is very low now. Children are grown up.

You can stop any life cover policy that has no investment value.

Investments in Your Son’s Name – Are They Safe and Useful?
You have Rs.45 lakh invested in your son’s name.

He is 35 and not employed currently, and also has health concerns.

You are caring for him financially. That’s highly responsible.

But placing large assets in his name may create future problems.

If he faces legal or health-related issues, assets in his name may get stuck.

Also, if he is not financially disciplined, the funds may not be used wisely.

Instead, keep assets in joint name or in your control.

You can always earmark funds for his use later through will or trust.

You can create a simple family trust or assign a guardian for him.

Consult a CFP and lawyer to explore this in more detail.

Protection and Health Insurance for Family
Health coverage for you, your husband, and your son is important.

At age 63, medical costs can rise fast.

Ensure you have at least Rs.5 lakh health insurance with super top-up.

Also check if your son has medical insurance coverage.

If not, buy one immediately. Even basic cover is helpful.

Avoid health plans that combine savings or return of premium.

Tax Planning and Withdrawals – What to Know
You should withdraw carefully from mutual funds.

New mutual fund tax rules are:

Equity mutual fund LTCG above Rs.1.25 lakh taxed at 12.5%

STCG is taxed at 20%

Debt fund gains are taxed as per your slab

Plan your redemptions to keep tax low.

Take guidance from CFP on when to sell and how much.

Also use SWP (Systematic Withdrawal Plan) to create monthly cash flow.

SWP is better than annuity and more tax efficient.

SIP Planning at This Stage – Is It Needed?
You are saving Rs.45,000 monthly in SIPs and LIC premiums.

That is good, but may be too high considering your age.

You already have a good asset base and income stream.

Now the focus should shift from wealth creation to wealth preservation.

Reduce equity SIP amount gradually. Shift towards hybrid or debt SIPs.

Always maintain enough liquidity and emergency money.

Don’t continue SIPs just because of habit. Check if they match your needs.

What You Should Do Now – Actionable Steps
Reduce your equity exposure if it is above 40% of total assets.

Review all your LIC plans. Don’t buy any new ones.

Do not put more money into annuities. No flexibility, low growth.

Recheck all SIPs. Reduce amount if income or liquidity needs rise.

Review your son’s investment ownership. Keep control for his safety.

Avoid direct funds. Use regular mutual funds with CFP guidance.

Plan SWP after 2–3 years for extra income, if needed.

Set aside 12-month expenses as emergency funds in liquid debt funds.

Ensure full health cover for yourself, husband, and son.

Finally
You’ve built a strong and well-spread portfolio over many years.

Now, your focus should be on simplifying and protecting your wealth.

Mutual funds and debt funds will serve better than annuities going forward.

Avoid any insurance-linked savings or pension products.

Your financial strength is already enough for a peaceful retired life.

Keep reviewing the plan once a year with a Certified Financial Planner.

Keep your son protected by holding assets in joint or trust structure.

Spend more time enjoying your retirement. You have earned it.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Money
Hi, I want to invest 3lakhs rupees for my daughter and do not need them for about 12 years. Which mutual funds should i consider for my investment. Should it be SIP or one time investment
Ans: Investing Rs. 3 lakhs for your daughter with a 12-year horizon is a smart decision. Let me guide you with a detailed 360-degree perspective as a Certified Financial Planner.

Understanding Your Investment Goal
You want to invest Rs. 3 lakhs for your daughter’s future.

The time horizon is about 12 years, which is medium to long term.

The goal is likely education, marriage, or starting capital.

Risk tolerance and return expectation need clarity.

The investment should balance growth and risk carefully.

One-Time Investment vs SIP
One-time investment means investing the whole Rs. 3 lakhs at once.

SIP means investing smaller amounts regularly (monthly or quarterly).

Both have advantages and disadvantages depending on market conditions.

SIP helps average out market volatility with rupee cost averaging.

One-time investment benefits when markets are stable or undervalued.

For 12 years, one-time can work well if market timing is good.

But market timing is difficult even for experts.

SIP reduces risk of investing at market peak.

SIP builds investment habit and discipline.

SIP can be set for 12 years or shorter period (say 5-7 years).

Lump sum investing needs some market research or advice.

Mutual Fund Categories to Consider
Since horizon is 12 years, equity funds are suitable.

Equity funds offer growth potential over long term.

Large-cap funds give stability with steady growth.

Mid-cap and multi-cap funds offer higher growth with moderate risk.

Hybrid equity funds balance equity and debt to reduce volatility.

Avoid pure small-cap funds due to higher risk for this goal.

Diversified equity funds spread risk across sectors and companies.

Avoid index funds; they lack active management benefits.

Actively managed funds can avoid bad stocks and exploit opportunities.

Select funds with consistent performance and experienced fund managers.

Fund Selection Strategy
Allocate investments across large-cap and multi-cap funds.

Consider a small allocation to mid-cap funds for growth.

Include hybrid funds to reduce portfolio risk.

Diversify among 3 to 4 funds to spread risk.

Avoid concentrating in a single fund or category.

Review fund performance over last 5-7 years before investing.

Focus on funds with good risk-adjusted returns.

Avoid chasing past high returns; consistency is key.

SIP vs Lump Sum: Which Fits Best
SIP suits those with monthly surplus and want to reduce timing risk.

Lump sum suits if you have full amount now and are comfortable with market risk.

You can also combine both: invest half as lump sum, rest via SIP.

This hybrid approach balances risk and opportunity.

For a 12-year horizon, lump sum investment with good funds can grow well.

SIP provides emotional comfort and disciplined investing.

Regularly review and adjust SIP amount based on financial changes.

Other Important Factors
Keep emergency funds separate from this investment.

Avoid liquidating this investment before 10-12 years.

Avoid chasing index funds for this goal due to lack of active management.

Regular funds through certified financial planners or MFDs ensure better advice.

Monitor the portfolio yearly for any changes or rebalancing.

Avoid frequent switching of funds to reduce costs and taxes.

Taxation: Equity mutual funds held for over 1 year attract long-term capital gains tax.

LTCG above Rs. 1.25 lakh is taxed at 12.5%.

Plan redemptions wisely to minimize tax impact.

Risks to Consider
Equity market volatility can impact short-term returns.

For 12 years, volatility evens out usually, but discipline is key.

Avoid panic selling during market downturns.

Market timing can lead to missed opportunities.

Inflation may reduce real returns if investment is too conservative.

Choosing right funds and staying invested is most important.

Monitoring and Reviewing
Track fund performance yearly or bi-annually.

Rebalance portfolio if any category exceeds 50% or falls below 20%.

Adjust SIP amount as your income changes.

Stay updated about market trends but avoid impulsive decisions.

Seek help from certified financial planners for portfolio review.

Avoid self-directing if you lack time or knowledge.

Final Insights
For Rs. 3 lakhs and 12 years, equity mutual funds suit best.

Prefer actively managed large, multi-cap, and hybrid funds.

SIP provides rupee cost averaging and disciplined investing.

Lump sum works if you have full amount and are market aware.

Combining lump sum and SIP can be ideal.

Avoid index funds due to lack of active risk management.

Regular review and portfolio rebalancing improve outcomes.

Avoid frequent fund switching to save costs and taxes.

Stay invested and avoid panic during market falls.

Keep emergency fund separate and avoid premature withdrawals.

Seek guidance from a certified financial planner for fund selection.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Money
Sir i am 44 and i have following MF as SIP..15k in Nippon India Small Cap, 5k in Nippon India Multi Cap, 2k in 6 funds namely., Mirae Asset Mid Cap, Axis MF Bluechip, Kotak MF Emerging, Quant Large & Mid Cap, Motilal Mid Cap, SBI MF Contra. Are these right way of distribution of funds or is there any correction required? Other than these i do have few savings plan like Kotak Premium Endownment, Tata AIA, ICICI Pru Future. Amongst these 2 savings plan tenure are going to be completed, so is it a good idea to start new savings plan or invest that amt too in MF? Also where to reinvest the amt that would be matured shortly from these savings plan? Hope these investments will help to lead a decent retirement life after 60...
Ans: You are doing well by taking active steps. At age 44, building a structured and disciplined portfolio is very important. You already have good habits in place.

Let’s look at your current mutual funds and savings plans carefully.

We will also explore the better way forward with complete clarity.

Review of Current SIP Mutual Fund Portfolio
You invest Rs.15,000 in a small-cap fund. That is a very high amount.

Small-cap funds are very volatile. Not good to have high allocation.

You also invest Rs.5,000 in a multi-cap fund. That is a good choice.

You further invest Rs.2,000 each in six other funds.

Those include large-cap, mid-cap, contra, and other categories.

This spread looks like too many funds with small amounts.

Investing Rs.2,000 in multiple funds creates confusion and overlap.

It becomes difficult to monitor and analyse them every year.

Some of these categories may behave similarly.

You need to consolidate your mutual funds to 4–5 only.

Keep funds from different categories – not overlapping ones.

One large-cap, one flexi-cap or multi-cap, one mid-cap, and one small-cap are enough.

This reduces clutter and helps with proper rebalancing.

Always prefer actively managed funds over index funds.

Index funds just copy the market. No expert is managing the risk.

Actively managed funds have potential to beat market returns with less downside.

Also avoid direct mutual funds. They don’t give guidance or yearly reviews.

Use regular plans through Certified Financial Planner (CFP).

You get full support and personalised rebalancing guidance.

Current Allocation Needs Balancing
Rs.15,000 to small-cap is risky. Reduce it to Rs.5,000.

Mid-cap and large & mid-cap categories are already present.

Avoid putting Rs.2,000 in too many similar funds.

Instead, choose one good mid-cap fund and invest Rs.5,000 in it.

Keep Rs.5,000 in a large-cap or contra fund.

Another Rs.5,000 can go into a multi-cap or flexi-cap fund.

Keep your small-cap allocation not more than 20% of total equity.

Small-cap works well only over very long term and high risk tolerance.

Consolidation makes it easier to review and rebalance each year.

Assessment of Traditional Savings Plans
You have 3 savings plans from insurance companies.

Two plans are about to mature.

These include endowment and future guaranteed type plans.

These plans usually give very low returns. Mostly around 4–5%.

You can check the maturity value now and plan reinvestment.

These plans combine insurance with investment. That is never efficient.

Mixing protection and returns reduces both benefits.

Avoid taking new savings plans again.

Start investing in mutual funds instead.

Mutual funds give better flexibility, liquidity, and returns.

For protection, take pure term insurance only.

It gives high cover at low premium. No investment benefit is needed here.

What to Do With the Maturing Amount From Policies
The maturity proceeds should be reinvested based on your goals.

Don’t use that money for new insurance plans or endowment.

You can use the maturity amount for either:

Building a retirement corpus

Your child’s higher education

A specific life goal like business or health buffer

Park the amount first in liquid or ultra-short debt funds.

Then start an STP (Systematic Transfer Plan) into mutual funds.

This avoids sudden lump sum investment into equity.

It reduces timing risk and improves investment safety.

Choose 60% in equity funds and 40% in debt mutual funds.

Do this only after consulting a Certified Financial Planner.

Asset allocation is the real key, not product selection.

Protection Planning – Are You Adequately Insured?
You have mentioned insurance policies but not term cover.

Please ensure you have pure term insurance with high sum assured.

Minimum cover should be 15 times your annual income.

This is needed to protect your family’s future.

Avoid mixing savings with protection ever again.

Also review your medical insurance cover for your family.

At least Rs.10 lakh cover is needed for a family of three or four.

You can consider super top-up if cost is high.

Building Retirement Corpus – Planning for Life After 60
You are 44 now. So 16 years are left for retirement.

A well-managed mutual fund portfolio can build a large corpus in this time.

Continue SIPs regularly. Increase amount when income grows.

Review portfolio every year with a CFP. Rebalance it based on market and goals.

Gradually shift part of equity to debt in your last 4 years before retirement.

That helps protect your retirement capital from sudden market fall.

After retirement, don’t use FDs for income. Use mutual fund SWP.

It gives monthly income with growth and tax efficiency.

Also gives better liquidity and control than pensions or annuities.

Start goal-based investing for your retirement, not random SIPs.

That brings clarity and peace of mind.

How to Move Forward With Confidence
First, consolidate your mutual fund SIPs to 4 or 5 only.

Maintain a healthy mix of large-cap, mid-cap, multi-cap, and small-cap.

Reduce small-cap exposure to less than 20% of total equity.

Avoid all index funds. They don’t have active risk management.

Stop buying savings-cum-insurance plans. Shift to pure investments.

Reinvest maturing amounts into mutual funds through STP route.

Keep your life and health insurance separate from your investments.

Start investing for retirement with clear targets and asset mix.

Use only regular mutual funds via Certified Financial Planner.

Get proper guidance, yearly reviews, and personalised strategy.

That brings discipline and long-term clarity to your journey.

Mutual funds offer growth, liquidity, flexibility, and better tax control.

Finally
Your investment journey has started in the right direction.

But it needs cleaning and realignment now.

You are just 16 years away from retirement.

The right choices now will give you a peaceful retirement.

Avoid insurance plans as investments.

Focus only on mutual funds with proper asset allocation.

Reinvest maturity proceeds wisely with professional help.

Create goal-specific portfolios. Don’t spread money without a reason.

Protect your family with pure insurance, not savings plans.

Keep reviewing and improving every year.

A Certified Financial Planner can give you a full 360-degree plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Money
Sir, I have loan liabilities of 17.36 Lakhs ( 2.32 Lakhs personal Loan and 15.04 Lakhs Jewel mortgage loan) and having the cash reserve of 12 Lakhs which i am using for trading in stock market. What will be the best option for me whether to close the loan with reserved cash or continuing with trading to get the profit which is used to pay the interest charges of loan amount.
Ans: Managing loans while investing or trading requires careful evaluation.

Understanding Your Current Situation
You have total loans of Rs. 17.36 lakhs: Rs. 2.32 lakhs personal loan, Rs. 15.04 lakhs jewel mortgage loan.

You have Rs. 12 lakhs cash reserve invested in stock market trading.

Your trading profits are used to pay loan interest charges.

Your question: whether to use cash to close loans or continue trading to cover interest.

Both choices have pros and cons. Let’s analyse carefully.

Loan Interest and Impact on Finances
Personal loans usually have high interest rates, often 12%-18% per annum.

Jewel mortgage loans have comparatively lower interest, but still costly.

Interest costs reduce your disposable income monthly.

High interest drains your financial power over time.

Reducing or clearing high-interest loans improves cash flow.

Loan principal repayment reduces interest outgo in future.

Evaluating Using Cash to Close Loans
Using Rs. 12 lakhs cash to partly or fully repay loans cuts interest burden.

Personal loan of Rs. 2.32 lakhs can be fully closed immediately.

Rs. 9.68 lakhs can be used to reduce jewel loan principal.

Lower loans mean lower monthly interest payments.

Improves your financial stability and reduces stress.

You lose the cash reserve invested in trading.

No guarantee stock market trading profits will exceed loan interest.

Trading is risky; market may turn against you anytime.

Using cash to pay loans is a safe, risk-free return equal to interest saved.

Evaluating Continuing Trading to Pay Interest
Trading profits are uncertain and risky.

You may earn higher returns than loan interest sometimes.

But losses can increase your burden.

Emotional stress increases when market moves against you.

Trading requires active time, skill, and discipline.

You risk losing capital which is needed to pay loan interest.

Interest on loans continues to accumulate if you don’t reduce principal.

Other Important Points to Consider
Emergency fund: After loan repayment, maintain 3-6 months expenses as cash reserve.

Trading capital: You need some capital for trading but not at the cost of high interest loans.

Loan prepayment penalties: Check if any charges apply.

Alternative income: Can you generate stable income apart from trading?

Risk tolerance: Are you comfortable risking your cash for trading profits?

Psychological impact: High debt plus trading risk can cause stress.

Recommended Approach
First, repay personal loan fully from cash reserve.

Use remaining cash to reduce jewel mortgage loan principal.

This lowers your interest burden significantly.

Keep at least 3 months of living expenses as emergency fund.

Continue trading with smaller capital only if comfortable and disciplined.

Avoid using emergency or loan repayment money for trading.

Focus on stable, low-risk investment avenues for surplus cash.

Once loans reduce, your financial position strengthens.

You can invest more consistently without high interest dragging you down.

Final Insights
Clearing high-interest personal loan first is a priority.

Reducing jewel loan principal lowers interest cost and stress.

Trading profits are uncertain and cannot replace guaranteed loan savings.

Using cash to reduce debt is safer than hoping for market profits.

Maintain emergency fund for financial stability.

Trade only with surplus money after debt control.

This balanced approach strengthens your financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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