Hi, My wife and I combined make 12.5 Lakh a month. We have 2 houses: 1 in Greater Noida worth 2 crores, 1 in Goa worth 5 crores, a parental property worth 1.25 crores. I have 2 lakhs in stocks, 5 lakhs in crypto, I have 30 lakh in Fixed deposit for working capital for my business. I want to have a corpus of 2 crores in 7 years. Any advise on how can I make it happen
Ans: It's great to see you and your wife doing well financially. With a combined income of Rs 12.5 lakh per month, you have a strong foundation. Let's work towards building a corpus of Rs 2 crores in 7 years. I appreciate your openness to planning, and I'll guide you through some steps to achieve this goal.
Assessing Your Current Financial Status
Firstly, it’s commendable that you have diversified assets. You have properties in Greater Noida and Goa, a parental property, investments in stocks, crypto, and a fixed deposit for your business. This diversification is a solid strategy. Let's focus on creating a balanced portfolio that maximizes returns while managing risks.
Setting Clear Financial Goals
Your target is to accumulate Rs 2 crores in 7 years. To achieve this, we'll need to focus on disciplined savings and strategic investments. Consistency is key here, so let's break down how you can channel your income and existing assets towards this goal.
Investment Strategy
Diversified Mutual Funds Portfolio
Actively managed mutual funds can be a great option. They offer the potential for higher returns compared to index funds. Certified Financial Planners (CFPs) can help you choose funds that align with your risk tolerance and goals. Regular funds, managed by skilled fund managers, often outperform the market, giving you an edge.
Systematic Investment Plan (SIP)
Investing in mutual funds through SIPs ensures regular investment without timing the market. SIPs inculcate discipline and can average out market volatility. Aim to allocate a significant portion of your monthly savings to SIPs. This will help you build a substantial corpus over time.
Balanced Funds
These funds offer a mix of equity and debt, providing growth potential with a cushion against market downturns. Balanced funds are less volatile compared to pure equity funds and can be a good addition to your portfolio for steady growth.
Equity Mutual Funds
Equity funds have the potential for high returns, especially over the long term. Diversify across large-cap, mid-cap, and small-cap funds to balance risk and return. Consult with your CFP to pick the right funds based on your risk appetite.
Existing Investments
Stocks and Crypto
You have Rs 2 lakhs in stocks and Rs 5 lakhs in crypto. These are high-risk, high-reward investments. Regularly review these investments with your CFP. Consider reallocating some funds from crypto to more stable investment options if it aligns with your risk tolerance.
Fixed Deposits
The Rs 30 lakh in fixed deposits is a safe option, providing stability. However, FD rates are typically lower than potential returns from mutual funds. Discuss with your CFP about gradually reallocating a portion of this amount into diversified mutual funds for better growth prospects.
Emergency Fund
Ensure you have an emergency fund equivalent to at least 6-12 months of your monthly expenses. This should be easily accessible and kept in a separate savings account or a liquid mutual fund. It provides a financial cushion in case of unforeseen events.
Retirement Planning
While focusing on your 7-year goal, don’t lose sight of long-term retirement planning. Consult your CFP to integrate retirement planning into your overall financial strategy. Diversify your investments to ensure a comfortable retirement while achieving your Rs 2 crore goal.
Insurance Coverage
Adequate insurance coverage is essential. Ensure you have sufficient life and health insurance. Life insurance should cover at least 10-15 times your annual income. Health insurance should cover your family adequately. This protects your financial plan from unforeseen events.
Tax Planning
Efficient tax planning helps you save and invest more. Utilize tax-saving instruments under Section 80C, 80D, and others. Investing in ELSS (Equity Linked Savings Scheme) mutual funds can help in tax saving while contributing to your investment goals. Consult your CFP to optimize your tax-saving strategy.
Review and Rebalance Portfolio
Regularly reviewing and rebalancing your portfolio is crucial. Markets fluctuate, and your investment allocations may drift from your original plan. Rebalancing helps in maintaining the desired risk level and aligns your portfolio with your financial goals. Your CFP can assist in this periodic review and adjustment.
Avoiding Common Pitfalls
Avoiding Index Funds
Index funds passively track market indices and may not offer the same growth potential as actively managed funds. Actively managed funds can outperform the market through strategic stock picking and risk management by professional fund managers.
Disadvantages of Direct Funds
Direct funds may seem cost-effective but lack professional advice. Investing through a Certified Financial Planner provides personalized advice, ensuring your investments align with your goals and risk profile. Regular funds, managed through an MFD with CFP credentials, can provide better guidance and performance tracking.
Final Insights
Building a corpus of Rs 2 crores in 7 years is an achievable goal with disciplined savings and smart investments. By focusing on diversified mutual funds, regular investments through SIPs, and periodic portfolio review, you can reach your target. Your current income and asset base provide a strong foundation. Utilize the expertise of a Certified Financial Planner to navigate your investment journey, ensuring your financial plan remains on track.
Stay committed to your financial plan, keep reviewing your progress, and make adjustments as needed. With consistent effort and informed decisions, you will achieve your financial goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Question by Abhishek on Nov 16, 2022Hindi
