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How can I retire early with a corpus of 10 cr?

Ramalingam Kalirajan |7163 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 31, 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

Question by karthick.sb on Jul 27, 2024Hindi

I am 48 year old male with two sons 19 and 17 studying in college. Wife is homemaker. House and car are paid up completely. Salary is 3 lacs per month. Over the past 17 years have been investing in MF regularly by SIP. Today I have 1.5 lac monthly SIP with equal amounts in large, mid and small cap. My MF corpus is 3.7 cr. Have 60 lacs in PPF and 20 lacs in PF . Wish to retire in 5 years with corpus of 10 cr. My mutual fund investments are in 19 different funds which is too much but I am afraid to merge them into lesser number of funds since I will end paying high capital gains tax. Also I am thinking of being agressive in next 5 years and invest SIP in only small cap funds . Over the past 17 years I noticed my small cap funds have increased substantially over large and mid cap. In retrospect had I invested only in small cap, I would have had over 6 crores today as corpus in MF . Will it be a good decision to go aggressive with only small cap investment? Also how do I merge my mutual fund portfolio into fewer funds since I have invested in 19 different funds by paying min capital gains tax? Or should I leave it the way it is and worry only after retiring since I don’t need that money for my monthly expenses right now..

Ans: Your situation and plans for the future are well thought out. Let's explore how you can manage your investments and reach your retirement goal of Rs. 10 crores.

Current Financial Situation
Age: 48 years

Monthly Salary: Rs. 3 lakhs

Sons: Two, aged 19 and 17, in college

Wife: Homemaker

House and Car: Fully paid

Monthly SIP: Rs. 1.5 lakhs (large, mid, and small cap)

MF Corpus: Rs. 3.7 crores

PPF: Rs. 60 lakhs

PF: Rs. 20 lakhs

Retirement Goal: Rs. 10 crores in 5 years

Reviewing Mutual Fund Strategy
1. Fund Diversification

Current Portfolio: 19 different funds. This is excessive and can be streamlined.

Rationalisation: You can merge similar funds to reduce the number without paying high capital gains tax immediately. Use the Systematic Transfer Plan (STP) to gradually merge funds.

Aggressive Investment Approach
2. Small Cap Investments

Observation: Small cap funds have shown high returns historically.

Risk Assessment: Small caps are volatile and risky. Investing solely in small caps for the next 5 years could be risky.

Balanced Approach: Continue investing in a mix of large, mid, and small cap funds. Consider increasing allocation to small caps, but not exclusively.

Tax Efficiency
3. Managing Capital Gains Tax

STP Strategy: Use Systematic Transfer Plans to transfer investments gradually into fewer funds.

Long-Term Capital Gains: If you hold investments for more than a year, the tax rate is 10% on gains exceeding Rs. 1 lakh per year.

Reviewing PPF and PF
4. Provident Fund (PF) and Public Provident Fund (PPF)

Secure Returns: Both PF and PPF offer secure, tax-free returns.

Continue Contributions: Keep contributing to these for risk-free growth.

Additional Considerations
5. Emergency Fund

Liquidity: Ensure you have an emergency fund covering 6-12 months of expenses. This should be easily accessible.
6. Education Fund for Sons

College Expenses: Set aside funds specifically for your sons’ education to ensure it doesn’t disrupt your retirement corpus.
7. Review and Rebalance

Regular Review: Periodically review and rebalance your portfolio to stay aligned with your goals.
8. Professional Guidance

Certified Financial Planner: Consult a Certified Financial Planner for tailored advice. They can help you optimise your investment strategy and tax planning.
Final Insights
Streamlining your mutual funds and balancing your investments is crucial. Going all-in on small caps is risky. Diversify wisely and use tax-efficient strategies like STPs. Regularly review your portfolio and consult a professional for optimal results.

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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I am 42. Up to now I have very little investment. One and half years back I started following SIP and lump sum investment in MF along with I have mediclaim policy for 10 lakh for my family. 1. Axis Midcap Fund regular growth: 1500 per month 2. Kotak Emerging equity fund growth (Regular): 1500 per month 3. SBI small cap fund regular growth: 2000 pre month 4. Canara robeco emerging Equities regular growth: 2000 per month 5. SBI balanced advantage fund regular growth: 1,50,000 Lump Sum 6. Kotak balanced AF Regular growth: 1,50,000 Lump Sum\ 7. Canara Robeco Ultra short term fund regular growth: 1,00,000 Lump sum 8. Kotak Saving Fund GRowth regular: 1,00,000 Lump Sum 9. UTI floater fund regular growth: 1,00,000 Lump SUm 10. Rs. 30,000 Shares Of Reliance Industries for long term 11. Rs. 25,000 Shares of Tata Motor for the long term. 12. Sukanya Samrudhi Account: 4000 per month All funds are in negative now. All this investment I have made for the long term. I want to know your expert advice if I should continue with this portfolio as all SIPs and MFs are regular and all SIPs are small cap funds.

Ans: Please continue

I have only one daughter; she is 10. So apart from this I want to invest additional 5000 per month SIP for at least 10 years for her higher education. Kindly guide me for direct SIP looking at my age and purpose.

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