51 Year Old with 18.9 Lakh Income and 1.86 Crore Investments - Is 10 Cr Target Realistic?

Ans: It sounds like you're juggling a lot, but you've got a solid foundation laid out. It's admirable how you're balancing your responsibilities towards your family's present needs and future goals. Let's address your concerns and aspirations one by one.

1. Car Purchase Consideration:
You're eyeing a new car, a shiny symbol of comfort and convenience. However, before diving in, let's assess if it aligns with your current financial trajectory:

Timing and Need:
Do you have an immediate need for the car, or is it more of a desire?
Can you postpone the purchase until you've accumulated a down payment or have more breathing room in your budget?
2. Reviewing Savings and Investments:
Your portfolio is diverse, spanning various assets from real estate to mutual funds. Let's evaluate if each piece is still working optimally for you:

Portfolio Alignment:
Are all your investments aligned with your long-term goals and risk tolerance?
Can you streamline or consolidate any holdings to reduce costs or enhance performance?
3. Exploring Additional Income Streams:
You're eager to bolster your financial stability by exploring secondary income sources. Let's brainstorm some viable options:

Leveraging Skills and Passions:
What skills or hobbies do you possess that could be monetized?
Are there freelancing opportunities or consulting gigs in your field of expertise?
4. Planning for Financial Freedom:
Your aspiration to achieve financial independence within a decade is ambitious yet attainable. Let's outline a roadmap to realize this vision:

Defining Financial Freedom:
What does financial freedom mean to you personally?
Is it early retirement, pursuing passion projects, or having more flexibility in your lifestyle?
Strategic Steps:
How can you increase your savings rate to accelerate progress towards your goals?
Are there opportunities to optimize investments or explore alternative income streams?
5. Optimizing Current Financial Plan:
Let's explore potential adjustments to your existing financial strategy to enhance its effectiveness:

Reallocating Resources:
Can you reallocate funds towards higher-performing investments or areas with greater potential?
Are there opportunities to automate savings or investment contributions for greater consistency?
Conclusion:
Your commitment to securing your family's financial future is commendable. By carefully considering each aspect of your financial situation, from major purchases to investment strategies, you're laying a strong foundation for long-term success. Remember, financial planning is a journey, and with patience, diligence, and the guidance of a Certified Financial Planner, you're well-positioned to achieve the freedom and security you desire.

Ans: You have built a solid financial foundation over the years. Your investments reflect careful planning and a long-term perspective. With a salary of Rs 18.90 lakhs per annum and expenses of Rs 10 lakhs annually, you have a good balance between income and spending. Your approach to saving and investing is commendable.

Your investments are diversified across various asset classes, including mutual funds, fixed deposits, and shares. This diversification helps reduce risk and enhances the potential for returns. Moreover, your existing investments in PPF and Sukanya Samriddhi Yojana indicate a commitment to secure savings for your children’s future.

Your current monthly SIP of Rs 72,000 in mutual funds is a proactive strategy. You've been investing in various schemes for several years, which has allowed your portfolio to grow substantially. With a total investment of Rs 65 lakhs in SIPs and a current value of Rs 1.84 crores, you’ve demonstrated remarkable discipline.

Evaluating Your Investment Strategy
Your investment strategy is multifaceted, but there are areas that could benefit from evaluation. Let’s break down your investments:

SIP Investments: You are currently investing in several mutual funds across different categories. This diversification is essential to balance risk and return. However, with multiple funds in the same category, there could be an overlap in holdings, leading to dilution of potential returns.

Dormant Units: You have several completed SIPs that are now dormant but hold units in various mutual funds. These funds need careful review to determine whether they are performing adequately. If some funds have not delivered desired returns, it may be time to redeem and reinvest in better-performing options.

Future Financial Goals: You have clear financial goals for your daughter and son regarding their higher education and marriage. Additionally, you plan to purchase a new house in Lucknow. These are significant financial commitments that require careful planning and allocation of resources.

Current Insurance Coverage: You have two term insurance plans with a cumulative sum insured of Rs 1.75 crores. This coverage is essential for your family’s financial security. However, it is crucial to ensure that this coverage is sufficient based on your family's future needs, especially considering your children’s education and marriage.

Optimizing Your Investment Portfolio
To achieve your goal of accumulating Rs 10 crore in the next 9 years, a focused investment approach is necessary. Here are strategies to optimize your portfolio:

Consolidate Your ELSS Funds
You are currently investing in multiple ELSS schemes, which offer tax benefits while providing potential for growth. However, having too many funds can dilute your investment and complicate your financial strategy.

Recommendation: Select one or two high-performing ELSS funds that have consistently demonstrated strong performance. Focus on funds managed by reputable fund houses with a proven track record. This consolidation will help simplify your portfolio and improve overall returns.
Focus on Growth-Oriented Investments
Given your 9-year investment horizon, you have the opportunity to take on more risk for potentially higher returns.

Recommendation: Consider increasing your allocation to growth-oriented mid-cap and small-cap funds. These funds often outperform large-cap funds over the long term. However, they can be volatile, so regular monitoring and rebalancing are essential.
Review Sectoral and Thematic Funds
While sectoral funds can offer high returns, they are also risky and may not provide consistent performance.

Recommendation: Evaluate the performance of your sectoral funds. If any of these funds are underperforming or not aligning with your long-term strategy, consider reducing your exposure. Redirect those investments into diversified large-cap or multi-cap funds. These funds generally offer a more balanced approach and can help reduce overall portfolio risk.
Optimize Dormant Units
Your completed SIPs have left you with units in various funds. While some of these funds may still be performing well, others might not meet your expectations.

Recommendation: Review the performance of your dormant units. If some funds have consistently underperformed, consider redeeming them and reallocating those funds into better-performing options. Ensure you are aware of the tax implications of any redemptions, particularly long-term capital gains tax.
Tax Implications of Mutual Fund Investments
Understanding the tax implications of your investments is critical in optimizing your portfolio.

Equity Mutual Funds: Long-term capital gains (LTCG) exceeding Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%. When redeeming mutual fund units, consider these tax implications, especially if you're redeeming large amounts.

Debt Mutual Funds: Both LTCG and STCG for debt funds are taxed according to your income tax slab. This means that these funds could increase your tax liability. When managing your portfolio, always factor in these tax implications to make more informed decisions.

Future Financial Goals and Their Impact
Daughter’s Higher Education and Marriage: Since your daughter is now 20, her higher education and marriage are approaching quickly. It's crucial to have a clear plan to fund these significant expenses.

Recommendation: Start earmarking specific funds for her education and marriage. You can consider redeeming some of your ELSS units after the lock-in period to provide funds for these needs. Additionally, you may want to consider a dedicated equity fund that targets these specific goals.

Son’s Higher Education and Marriage: You have a longer time frame for your son’s financial needs. This gives you a more extended period to invest in growth-oriented mutual funds, which can lead to substantial capital accumulation.

Recommendation: Keep investing in high-growth mutual funds for your son’s future needs. By the time he is ready for higher education, your investments should have appreciated significantly.

New House Purchase: Your plan to purchase a new house in Lucknow in the next 5-6 years is an important financial goal.

Recommendation: Start saving for the down payment now by allocating a portion of your current savings into liquid or short-term debt funds. This will ensure you have the necessary funds available when you sell your parental house and need to make the purchase.

Monthly Investment and Saving Strategies
To support your goal of accumulating Rs 10 crore in 9 years, here’s how to maximize your monthly investments:

Increase SIP Contributions: If possible, consider increasing your SIP contributions gradually. Even a modest increase can significantly enhance your investment corpus over time.

Emergency Fund: Maintain an emergency fund to cover at least 6-12 months of your expenses. This fund will ensure you do not need to liquidate investments during market downturns.

Reassess Monthly Expenses: Regularly review your monthly expenses to identify areas where you can cut costs. Any savings can be redirected to your investments.

Utilize Additional Income: The additional income you earn from interest and dividends should also be reinvested. Consider channeling this income into your SIPs or purchasing additional units in mutual funds that align with your long-term goals.

Insurance Coverage Assessment
Your current insurance coverage of Rs 1.75 crores is a good start, but you need to evaluate if it is adequate.

Recommendation: Assess the total future liabilities you would want to cover. This includes your children’s education and marriage expenses and any outstanding loans. If you feel the current coverage is insufficient, consider increasing your term insurance coverage.

Health Insurance: Ensure you have adequate health insurance coverage for you and your family. The medical expenses can be significant, especially in the event of emergencies.

Final Insights
Your disciplined approach to investing has positioned you well for a comfortable retirement. By making a few strategic adjustments, you can optimize your portfolio to achieve your goal of Rs 10 crore in 9 years.

Review Regularly: Conduct regular reviews of your investment portfolio. This will help you stay on track and adjust your strategy as market conditions change.

Stay Informed: Keep yourself informed about market trends and economic changes. Knowledge is a powerful tool in managing your investments effectively.

Seek Professional Guidance: If needed, consult with a Certified Financial Planner for personalized advice. They can provide insights tailored to your unique financial situation and goals.

Your existing investments, combined with a well-structured plan, can help you achieve your retirement goal while fulfilling your family obligations.

Stay committed to your financial plan, and take the necessary steps to ensure your family’s financial future is secure.

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

Ans: Hello;

Your corpus value 9 years hence will be 7.80 Cr.

This working includes sip corpus, ppf, ssy, stock holding, dividend/interest reinvestment in SIPs, dormant sips future value after 9 years and parental house current value.

You may redeem the IDCW scheme dormant SIPs and reinvest the proceeds in current sip funds equally as lumpsum.

Regarding existing SIP funds, I suggest you to remove thematic funds like HDFC defence and HDFC manufacturing funds and redirect those SIPs into PPFAS flexicap fund and HDFC Top 100 fund.

Please confirm the EPF and NPS, if any, corpus available to you which can supplement the corpus gap of 2.2 Cr.

The prospect of sip enhancement or top-up to meet target shortfall is prohibitively high hence unfeasible.

Please feel free to revert.

Happy Investing;