Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |6508 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 08, 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 07, 2024Hindi

Am 48 years. Have 13L in MF. 4L in FD. 5L in PF. Own house and a site worth 30L. Also have invested in an under construction apartment which I have paid 85% of the 77 L. This will be for possession in 2027 dec. also have around 5L in Gold. I earn around 3L per month. Need 1.2L post retirement. Presently saving 73k in MF per month.

Ans: You're 48 years old and have a diversified portfolio.

You have Rs. 13L in mutual funds, Rs. 4L in fixed deposits, and Rs. 5L in provident fund.

You own a house and a site worth Rs. 30L.

You've invested in an under-construction apartment, paying 85% of Rs. 77L.

You also hold Rs. 5L in gold.

Your monthly earnings are Rs. 3L, and you're saving Rs. 73k in mutual funds each month.

Assessing Current Investments
Mutual Funds
Mutual funds are a great way to diversify your investments.

With Rs. 13L in mutual funds, you're on the right track.

Actively managed funds tend to outperform passive ones.

They adapt to market changes quickly, benefiting from expert management.

The power of compounding works best here, as returns are reinvested, creating more wealth.

Fixed Deposits
You have Rs. 4L in fixed deposits.

FDs are low-risk but offer lower returns compared to mutual funds.

They're good for short-term goals and emergency funds.

Provident Fund
Your provident fund holds Rs. 5L.

PF is a safe investment with tax benefits, good for long-term retirement planning.

Real Estate
You own a house and a site worth Rs. 30L.

You've invested in an apartment under construction, almost paying it off.

Real estate provides tangible value but lacks liquidity and might not yield regular income post-retirement.

Gold
You have Rs. 5L in gold.

Gold is a hedge against inflation but should only be a small part of your portfolio due to its price volatility.

Monthly Savings and Expenses
You save Rs. 73k in mutual funds monthly, which is commendable.

This consistent saving habit will build significant wealth over time.

Your monthly earnings are Rs. 3L, which gives you a good capacity to save and invest.

You need Rs. 1.2L post-retirement, which is achievable with proper planning.

Evaluating Financial Goals
Retirement Planning
You aim for Rs. 1.2L per month post-retirement.

This goal is realistic given your current savings and investments.

You'll need to focus on building a corpus that generates this income sustainably.

Investment in Real Estate
The apartment you're investing in will be ready by December 2027.

This will add to your real estate assets, but consider its impact on your liquidity.

Real estate is not easily convertible to cash, which might be needed for unexpected expenses.

Strategic Investment Planning
Mutual Fund Investments
Continue your Rs. 73k monthly SIP in mutual funds.

Diversify across different categories like equity, debt, and hybrid funds.

Equity funds offer high returns but come with higher risk.

Debt funds provide stable returns with lower risk, ideal for capital preservation.

Hybrid funds balance growth and stability, suitable for medium-term goals.

Benefits of Regular Funds Through Certified Financial Planner
Investing through a Certified Financial Planner (CFP) offers expert advice and personalized plans.

They help you navigate market complexities and make informed decisions.

Regular funds managed by professionals can outperform direct funds, ensuring better returns.

Power of Compounding
The power of compounding is crucial in mutual funds.

Reinvested returns generate additional returns, exponentially growing your wealth over time.

Starting early and staying consistent maximizes compounding benefits.

Risk Management and Diversification
Importance of Diversification
Diversifying your portfolio reduces risk and ensures stable returns.

Spread investments across different asset classes like equity, debt, and gold.

This protects your portfolio from market volatility and economic downturns.

Managing Risks
Equity funds carry market risks but offer high returns.

Debt funds are safer but yield lower returns.

Gold provides a hedge against inflation but can be volatile.

Balance these investments based on your risk tolerance and financial goals.

Building a Retirement Corpus
Calculating Retirement Needs
To meet your post-retirement goal of Rs. 1.2L per month, build a substantial retirement corpus.

Consider inflation and increasing medical costs.

Aim for a mix of growth-oriented and stable investments.

Investing for Retirement
Focus on equity mutual funds for growth.

Debt mutual funds and provident funds provide stability.

A diversified approach ensures consistent returns and risk management.

Regular Review and Rebalancing
Importance of Regular Reviews
Regularly review your investment portfolio to ensure alignment with goals.

Market conditions and personal circumstances change, requiring adjustments.

Rebalancing Portfolio
Rebalance your portfolio periodically to maintain the desired asset allocation.

This involves selling over-performing assets and buying under-performing ones.

It keeps your portfolio balanced and aligned with risk tolerance.

Maximizing Tax Efficiency
Tax-Advantaged Investments
Utilize tax-saving instruments like ELSS (Equity Linked Savings Scheme) for mutual funds.

They offer tax benefits under Section 80C, reducing taxable income.

Tax Planning
Plan your investments to maximize tax benefits.

Use instruments like PPF (Public Provident Fund) and NSC (National Savings Certificate).

This ensures efficient tax management and enhances returns.

Emergency Fund
Importance of Emergency Fund
An emergency fund is crucial for unforeseen expenses.

It provides financial security and peace of mind.

Building Emergency Fund
Keep at least 6 months' worth of expenses in an emergency fund.

Invest in liquid assets like debt funds or savings accounts for quick access.

This ensures you're prepared for any financial emergencies.

Final Insights
Your financial journey is on a solid path.

Diversified investments in mutual funds, real estate, and gold are commendable.

Continue your disciplined saving habit of Rs. 73k per month in mutual funds.

Focus on building a balanced portfolio to achieve your retirement goal of Rs. 1.2L per month.

Regularly review and rebalance your portfolio for optimal performance.

Utilize the power of compounding and tax-efficient investments.

Maintain an emergency fund for financial security.

With consistent effort and strategic planning, you're well-positioned for a comfortable retirement.

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.