Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 18, 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 08, 2024Hindi
Listen
Money

Hi Sir, i am 55, earning around 14L PM , am the single earner in my family. I have a daughter who is 14 year and doing her higher Secondary. I hold the following assets MF- 1.7 cr Shares - 1.6cr Two properties worth - 1.6 cr + land worth - 35 L in cr mkt value. Getting a rental income of 25K from one property and the other one 20K which i give to my monther for her exp ( she lives with me only) still i give her Insurance in HDFC Life which will give a guaranteed return of 27 L when my daughter gets into graduation. + life cover of 1.25 cr which am servicing. + gold and few liquid assets worth 15L . With monthly expenses of around 75K hardly saving much - managing some 20K pm in MF . how to plan for my child studies and a cushion as retirement corpus. As am working in a pvt co, don't see any retirement age as of now.

Ans: Assessing Your Current Financial Situation
You have a robust portfolio with diversified assets. Let's look at your current holdings:

Mutual Funds: Rs 1.7 crore
Shares: Rs 1.6 crore
Properties: Rs 1.6 crore
Land: Rs 35 lakh
Rental Income: Rs 45,000 per month (Rs 25,000 and Rs 20,000)
Guaranteed Return from Insurance: Rs 27 lakh
Life Cover: Rs 1.25 crore
Gold and Liquid Assets: Rs 15 lakh
Monthly Expenses: Rs 75,000
Monthly Savings: Rs 20,000 in Mutual Funds
Planning for Your Child’s Education
Your daughter is 14 years old, and higher education expenses are approaching. Here's a structured plan:

Guaranteed Insurance Return: The Rs 27 lakh guaranteed return will be a significant help when she starts her graduation. This ensures you have a secured fund for her education.

Mutual Funds and Shares: Continue to monitor and adjust your investments in mutual funds and shares to ensure they align with her education timeline. You can consider a systematic withdrawal plan (SWP) from mutual funds when required.

Building a Retirement Corpus
To ensure a comfortable retirement, let's outline your strategy:

Rental Income: Continue to utilize the Rs 45,000 monthly rental income. Consider renting both properties if selling is not a viable option. The rental income can supplement your monthly expenses post-retirement.

Mutual Funds and Shares: With a total of Rs 3.3 crore in mutual funds and shares, ensure a balanced allocation between equity and debt. As you near retirement, gradually increase the proportion of debt to reduce risk.

Monthly Savings: Increase your monthly savings if possible. If you can increase your investment in mutual funds from Rs 20,000 to Rs 50,000 per month, it will significantly boost your retirement corpus.

Liquid Assets and Gold: Keep a portion of your assets liquid for emergencies. You can also leverage gold if needed during retirement.

Insurance and Risk Management
Your current life cover of Rs 1.25 crore is substantial, but review your insurance needs periodically to ensure it remains adequate. Health insurance is also crucial, especially as you age.

Investment Strategy
Mutual Funds: Continue investing in diversified mutual funds. Consider consulting a Certified Financial Planner (CFP) to evaluate the performance of your current funds and explore better-performing options.

Equity Investments: Stay invested in high-quality stocks. Periodically review your portfolio to ensure it is well-diversified and aligned with your risk tolerance.

Key Recommendations
Increase Savings: Aim to save and invest more than Rs 20,000 monthly if possible. This will help you reach your retirement goals faster.

Rental Income: Consider renting out both properties if feasible. This can provide a stable income stream during retirement.

Education Fund: Utilize the guaranteed return from your insurance policy for your daughter's education expenses.

Balanced Portfolio: Gradually shift from equity to debt as you approach retirement to reduce risk.

Final Insights
Your financial foundation is strong. With careful planning and adjustments, you can achieve your retirement goals and provide for your daughter's education. Regularly review and rebalance your portfolio to stay on track.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2024

Asked by Anonymous - Feb 19, 2024Hindi
Listen
Money
I am 53 with 1 cr corpus , invested in MF( lump sum - equity and SIP of 85 k month for last 2 years) PPF, NSC, stocks, FD . I have 2 children one is working and the daughter is in 12 would like to pursue medicine . I want to know the following A. How do I plan my finances ahead ? B. My daughters education ? My pension ? C. A medical policy is there for 26 lakhs for a family of 4 . Is that enough or I need to take another policy ? D. What amount should I have to lead a decent and comfortable life . Without depending on kids .( have a house of my own ) Kindly help / advice .
Ans: Hello Mr. Kumar Shashi Raj,

It's great that you're actively planning for your financial future and your children's education. Let's address your concerns step by step:

A. Planning your finances ahead:

With a corpus of 1 crore and diversified investments like MFs, PPF, NSC, stocks, and FDs, you're on the right track.
Consider reviewing your investment portfolio periodically to ensure alignment with your financial goals and risk tolerance.
Continue your SIPs and monitor the performance of your equity investments.
Explore options for retirement planning to secure a steady income post-retirement. You can consider instruments like NPS or annuities for this purpose.
B. Your daughter's education:

Since your daughter aims to pursue medicine, it's crucial to plan for the substantial expenses associated with her education.
Estimate the cost of her medical education and explore education loans, scholarships, or other funding options to supplement your savings.
Consider investing in instruments like mutual funds or fixed deposits specifically earmarked for her education expenses.
C. Medical insurance:

Your existing medical policy covering 26 lakhs for a family of four is a good start.
However, considering rising healthcare costs and the possibility of unforeseen medical emergencies, it's advisable to assess if this coverage is adequate.
Evaluate the premium versus coverage benefits and consider topping up your existing policy or purchasing an additional policy for enhanced coverage.
D. Retirement planning and leading a comfortable life:

Determine your desired post-retirement lifestyle and estimate your retirement expenses, including healthcare, travel, and other essentials.
Calculate the corpus required to generate a steady income stream post-retirement, considering factors like inflation and life expectancy.
Aim to build a retirement corpus that can sustain your lifestyle without relying on your children's financial support.
Maximize contributions to retirement-oriented schemes like NPS or voluntary provident fund to boost your retirement corpus.
Regularly reassess your financial plan and make adjustments as needed to stay on track towards your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

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

Asked by Anonymous - Jul 08, 2024Hindi
Money
Hi Sir am 54 years old, working in a pvt co with annual income of 14 L. having a child who is 15 year and in higher secondary. with todays Cost of living hardly saving some 20k pm > Have the following corpus MF -1.7 cr Shares - 1.5 cr house - 1.35 cr ( 2 house Both on rent , getting 45k pm- give parents 25K) insurance cover - 1.25 cr hdfc life policy - will get 27 lacs in 2027 guaranteed scheme ( to cover education ) other liquid assets (FD/GOLD/RD/ )- 20L need to plan atleaast a monthly pay our of 1 lac after 5-6 years so i can take it a bit easy .Kindly advice
Ans: Firstly, congratulations on building a substantial financial portfolio. Managing Rs. 1.7 crores in mutual funds, Rs. 1.5 crores in shares, and Rs. 1.35 crores in real estate while raising a child is commendable. Your financial discipline and foresight are evident.

Overview of Assets
You have significant investments across various asset classes. Let’s break down your current assets and cash flows:

Mutual Funds: Rs. 1.7 crores
Shares: Rs. 1.5 crores
Real Estate: Rs. 1.35 crores (two houses, Rs. 45,000 rental income, Rs. 25,000 given to parents)
Insurance Cover: Rs. 1.25 crores
HDFC Life Policy: Rs. 27 lakhs in 2027
Liquid Assets: Rs. 20 lakhs
Monthly Cash Flows
Income: Rs. 45,000 (rent) + Rs. 1.16 lakhs (salary after taxes and deductions)
Expenses: Rs. 45,000 (cost of living) + Rs. 25,000 (parents) + Rs. 20,000 (savings)
Goal: Rs. 1 Lakh Monthly Payout After 5-6 Years
Now, let's plan how to achieve a monthly payout of Rs. 1 lakh after 5-6 years.

Investment Strategy
Mutual Funds: Power of Compounding
Mutual funds are a strong pillar of your portfolio. The power of compounding can significantly grow your investments.

Advantages of Mutual Funds:

Diversification: Spread risk across various sectors and companies.
Professional Management: Fund managers handle your investments.
Liquidity: Easy to buy and sell units.
Systematic Investment Plans (SIPs): Regular investment helps in rupee cost averaging.
Categories of Mutual Funds:

Equity Funds: High returns but higher risk.
Debt Funds: Lower risk, stable returns.
Hybrid Funds: Mix of equity and debt.
Recommendation:

Continue investing in equity mutual funds for long-term growth.
Consider allocating some funds to hybrid funds for balanced growth and stability.
Regularly review and rebalance your portfolio.
Shares: Active Management
Your investment in shares is significant. Actively managing your stock portfolio can yield high returns.

Advantages of Direct Stocks:

Potential for High Returns: Direct exposure to company performance.
Dividend Income: Additional cash flow from dividends.
Recommendation:

Regularly review your stock portfolio.
Diversify across sectors.
Consider blue-chip stocks for stability and growth.
Stay updated with market trends and company performance.
Real Estate: Rental Income and Appreciation
Your real estate investments provide steady rental income and potential appreciation.

Advantages:

Stable Income: Regular rental income.
Capital Appreciation: Potential increase in property value over time.
Recommendation:

Maintain properties well to ensure consistent rental income.
Consider periodic rent reviews to keep up with market rates.
Keep a portion of rental income for property maintenance and unexpected expenses.
Insurance and Guaranteed Schemes
Your insurance cover of Rs. 1.25 crores is crucial for financial security. The HDFC Life policy maturing in 2027 provides a guaranteed corpus for your child’s education.

Advantages:

Financial Security: Protects against unforeseen events.
Guaranteed Returns: Assured maturity amount for planned goals.
Recommendation:

Continue with your current insurance plans.
Ensure coverage is adequate to meet family needs.
Liquid Assets: Emergency Fund
Your liquid assets (FD, gold, RD) of Rs. 20 lakhs provide an emergency fund.

Advantages:

Liquidity: Easily accessible in emergencies.
Security: Safe investment options.
Recommendation:

Maintain an emergency fund equivalent to 6-12 months of expenses.
Invest surplus liquid assets in mutual funds or stocks for higher returns.
Financial Planning for Monthly Payout
Estimating Future Needs
You aim for a monthly payout of Rs. 1 lakh after 5-6 years. Let’s plan accordingly.

Systematic Withdrawal Plans (SWP)
SWPs from mutual funds can provide regular income post-retirement.

Advantages:

Regular Income: Monthly payouts.
Tax Efficiency: Lower tax on long-term capital gains.
Recommendation:

Invest a portion of your corpus in mutual funds with SWP options.
Choose funds with a good track record and stable returns.
Dividend Income
Your stock portfolio can generate regular dividend income.

Recommendation:

Invest in dividend-paying stocks.
Reinvest dividends for compounding benefits.
Rental Income Management
Continue leveraging rental income from your properties.

Recommendation:

Ensure timely rent collection.
Regularly review rental agreements.
Additional Income Streams
Explore additional income streams to supplement your monthly payout.

Options:

Consulting: Use your expertise for consulting roles.
Part-Time Work: Explore flexible, part-time opportunities.
Risk Management and Diversification
Diversifying Investments
Diversify across asset classes to manage risk.

Recommendation:

Balance between equity, debt, and real estate.
Regularly review and rebalance your portfolio.
Risk Assessment
Assess and manage risks associated with your investments.

Recommendation:

Stay informed about market trends.
Consult with a Certified Financial Planner (CFP) for regular reviews.
Final Insights
Your disciplined approach and diversified portfolio are impressive. With careful planning, you can achieve your goal of Rs. 1 lakh monthly payout after 5-6 years. Continue leveraging mutual funds, stocks, and rental income. Regularly review your portfolio with a Certified Financial Planner to ensure you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Nayagam P

Nayagam P P  |3668 Answers  |Ask -

Career Counsellor - Answered on Sep 09, 2024

Listen
Career
Hello Sir, I want to become a businesswoman and have ideas for a startup. I know that for a business, having skills is more important than a degree. However, my parents want me to go to university. I have shortlisted two courses and have been selected for them at MIT WPU- BBA LLB and BSc Economics. LLB because I also have an inclination towards civil services. I had discussed with a teacher who said that Bsc Economics will give me a business understanding better than BBA, however, the career opportunities in that are lesser than that of BBA LLB and my initial preference was BBA LLB itself. What will be suitable for me, I am not able to make up my mind? Thank you.
Ans: Please keep in mind that, according to a recent report in the 'Times of India', most law graduates prefer to work in corporations rather than practice law in courts. You can pursue a BBA LLB and prepare for Civil Services as you wish (or) work as an assistant to any senior in any of the organizations to obtain expertise. Please keep in mind that you will need to choose your specialization for your LLB, whether it is Civil, Labour, Taxation, Business, Corporate, or any other. Also, you should stay up with the latest amendments. If you want to appear for Civil Services Exam, you should conduct extensive research before beginning your preparations. If Civil Services does not work out, you should have a backup plan A & Plan B. All the BEST for Your Bright Future.

To know more on ‘ Careers | Education | Jobs’, ask / Follow Us here in RediffGURUS.

...Read more

Aasif Ahmed Khan

Aasif Ahmed Khan   |151 Answers  |Ask -

Tech Career Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 09, 2024Hindi
Listen
Career
Hello Sir, Currently I am carrying 13+ years of experience in software industry and leading a team of 10 software developers. I would like to transition into leadership/project management roles in software industry. Could you please share your recommendations on the list of courses/certifications to upskill myself that would help me transition to the leadership roles? Thanks in advance!
Ans: These certifications and courses can help you build the necessary skills and knowledge to transition into leadership roles.

1-Agile and Scrum Certifications
Certified ScrumMaster (CSM): Offered by Scrum Alliance, this certification is ideal if you’re working in an Agile environment.
PMI Agile Certified Practitioner (PMI-ACP): This certification covers various Agile methodologies and is offered by PMI.
SAFe Agilist Certification: For those working in large-scale Agile environments.

2-IT Management and Leadership Certifications
Certified Information Technology Manager (CITM): This certification focuses on IT management and leadership skills.
Certified Software Development Professional (CSDP): Offered by IEEE, this certification is for experienced software development practitioners.
ITIL Foundation Certification: This certification covers IT service management and is widely recognized.

3-General Management and Leadership Courses
AMA Certified Professional in Management: This certification covers professional effectiveness, relationship management, business acumen, and analytical intelligence.
Leadership and Management Courses on Udemy: Courses like “Software Engineering: From Developer to Tech Lead” can be very useful.
edX: Provides courses from institutions like MIT and Harvard on management and leadership.
LinkedIn Learning: Offers a wide range of courses on leadership, project management, and technical skills.

...Read more

Nitin

Nitin Narkhede  |3 Answers  |Ask -

MF, PF Guru - Answered on Sep 09, 2024

Listen
Money
Can Investment in Gold and Mutual Funds Give High Returns??
Ans: Dear Sumukh,
Thank you for your question about investing in gold and mutual funds. Both of these investment options have their merits, but they work differently and suit different financial goals. Let's explore how they can potentially deliver returns.
1. Gold as an Investment
• Potential Returns: Historically, gold has been seen as a hedge against inflation and currency fluctuations. Over the long term, gold prices tend to rise, but the growth is usually moderate compared to equity-based investments. In the last decade, gold has provided returns averaging 6-8% per year. However, in times of economic uncertainty (like during the pandemic), gold prices surged due to its status as a safe-haven asset.
• Volatility: While gold is a relatively stable investment during periods of economic distress, its prices can be volatile in the short term. It's best suited for long-term portfolios or when you want to diversify and protect your investments from inflation.
• Forms of Gold Investment:
o Physical Gold (Jewelry, Coins, Bars): This involves storage and making charges.
o Gold ETFs or Sovereign Gold Bonds (SGBs): These are better options for investment, offering ease of trading, tax benefits, and interest on SGBs.
2. Mutual Funds as an Investment
• Potential Returns: Mutual funds, especially equity mutual funds, can offer much higher returns than gold over the long term. Over the last 10-15 years, equity mutual funds have provided average returns of 10-15% per annum, depending on the market conditions and the type of mutual fund.
o Equity Mutual Funds have higher growth potential but come with greater risk. These funds invest in stocks of companies, and their performance is directly linked to the stock market.
o Debt Mutual Funds are safer and provide more stable returns (typically 6-8%) but with less growth potential compared to equity funds.
• SIP (Systematic Investment Plan): One of the most popular ways to invest in mutual funds is through SIPs. This method helps mitigate risk through rupee-cost averaging and can lead to substantial returns if done consistently over the long term.
Which One Offers Higher Returns?
• Short-Term Perspective: Gold might offer stability in the short term, but mutual funds, especially equity funds, generally outperform gold when it comes to growth over the long term.
• Long-Term Perspective: Mutual funds, particularly equity mutual funds, are more likely to deliver higher returns over time. Gold can be a good hedge and part of a diversified portfolio, but it's less likely to deliver substantial returns by itself.
Ideal Strategy:
• Diversification: It’s a good idea to diversify your investments between mutual funds and gold. You could allocate a portion of your portfolio (e.g., 10-15%) to gold for safety, while the majority can be invested in mutual funds to maximize growth.
• Risk Profile: If you’re comfortable with market fluctuations, equity mutual funds could be a better choice for high returns. If you prefer safety, a combination of debt mutual funds and gold might be a better strategy.
Conclusion:
• Mutual Funds have the potential to give higher returns than gold, particularly over the long term, thanks to the growth of equity markets. In Mutual funds with High Risk you can earn up to 40% returns, where as at low risk you can get 6 to 9 % returns at debt funds. At Moderate risk you can achive up to 15 to 25% returns.
• Gold, on the other hand, is a safer, long-term investment that can protect against inflation but typically offers moderate returns. Golds can give you on and average of 10 to 15 % return over long horzons.
It’s essential to align your investments with your financial goals, risk tolerance, and investment horizon. You might consider consulting a financial advisor to help create a balanced investment plan.
Best regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 09, 2024Hindi
Money
Hi sir, I have net salary of 2.7L per month and am 46 year old with 2 children aged 12 and 6. I have a EPF+PPF corpus of 65 lakhs , NPS 5 lakhs, 1CR in MF portfolio, invest 50k monthly (Which is on Hold currently) in MF SIPs. I own a house 65L(loan free) & another house 2CR have outstanding loans of 1CR. I have family floater medical insurance with 20L coverage and life cover for 1Cr. I wish to retire by age of 55 - pls advise how much corpus do I need at hand to retire. Consider my monthly expense as 1L
Ans: You are 46 years old with a net salary of Rs. 2.7 lakh per month. You have two children, aged 12 and 6, and a current corpus of Rs. 65 lakh in EPF and PPF, Rs. 5 lakh in NPS, and Rs. 1 crore in your mutual fund portfolio. Additionally, you own two properties, one valued at Rs. 65 lakh (loan-free) and another valued at Rs. 2 crore, with an outstanding loan of Rs. 1 crore. Your current monthly expenses are Rs. 1 lakh, and you have paused your monthly SIP of Rs. 50,000. You also hold a life insurance cover worth Rs. 1 crore and a family floater medical insurance with Rs. 20 lakh coverage.

You plan to retire by the age of 55, which gives you approximately nine years to build a sufficient corpus. Let's explore how much you need to comfortably retire while sustaining your current lifestyle.

Estimating Your Retirement Corpus
To determine your retirement corpus, we need to consider several factors:

Current monthly expenses: Rs. 1 lakh
Retirement age: 55
Post-retirement years: Assuming life expectancy of 85 years, you need to plan for 30 years post-retirement.
Inflation rate: An assumed inflation rate of 6% per year is a reasonable estimate for the future.
Growth rate of investments: Typically, diversified equity mutual funds have delivered around 10-12% returns over the long term.
Based on these factors, your current monthly expenses will increase due to inflation, and you need a corpus that generates enough to cover these rising costs. Since your expenses are Rs. 1 lakh today, they could double or triple over time. Your corpus should be able to sustain this without depleting prematurely.

Breakup of Current Assets
EPF & PPF (Rs. 65 lakh): These are stable, low-risk assets that will help you post-retirement but won't generate high returns.

NPS (Rs. 5 lakh): Provides tax benefits and is specifically designed for retirement savings. It will grow over time but is not highly flexible for withdrawals until retirement age.

Mutual Funds (Rs. 1 crore): This is an excellent foundation for your retirement plan. Equity mutual funds, in particular, have the potential to grow at a faster rate and combat inflation.

Real Estate (Rs. 65 lakh + Rs. 2 crore): While real estate holds value, its liquidity is limited. The house you live in does not contribute to your retirement corpus unless you plan to downsize. The second house has a loan of Rs. 1 crore, and the EMIs for this property must be factored into your pre-retirement cash flows.

Life Insurance (Rs. 1 crore): While it’s important for your family’s protection, this doesn’t contribute to your retirement corpus.

Estimating Your Future Monthly Expenses
Your current monthly expense is Rs. 1 lakh, but due to inflation, this figure will increase. Let’s assume the inflation rate remains at 6%. By the time you retire at 55, your monthly expenses will likely double or triple, reaching anywhere between Rs. 1.7 lakh to Rs. 2 lakh per month. Your retirement corpus should be large enough to generate this amount without running out of funds.

In addition, you’ll have to account for:

Healthcare costs: As you age, medical expenses tend to rise. Even though you have Rs. 20 lakh family floater insurance, post-retirement medical costs not covered by insurance should be factored in.

Educational expenses: Your children’s education could be a significant expense over the next 10 to 15 years.

Corpus Required for Comfortable Retirement
To maintain your current lifestyle, you would need a corpus that generates at least Rs. 2 lakh per month during retirement. Based on a withdrawal rate of 4%, which is commonly used to ensure the corpus lasts for the entirety of your retirement, you’ll need a retirement corpus of approximately Rs. 6 to 7 crore.

This corpus will ensure that you can comfortably cover your rising living expenses, healthcare, and other unforeseen costs without depleting your savings.

Recommendations to Achieve the Corpus
Here’s a detailed plan to help you achieve your target of Rs. 6 to 7 crore before retirement:

1. Resume Your SIP Investments
Restart your monthly SIP of Rs. 50,000 immediately. This is crucial, as equity mutual funds can provide the high returns needed to meet your retirement goal.

Consider increasing your SIP contribution each year in line with salary increments. This will accelerate your corpus growth and help you fight inflation more effectively.

2. Focus on Equity Mutual Funds
Given your long-term horizon (9 years until retirement), equity mutual funds remain the best investment option to grow your wealth. These funds have historically provided higher returns (10-12% CAGR), which will be essential for building your retirement corpus.

Ensure your portfolio is diversified across large-cap, mid-cap, and multi-cap mutual funds for balanced growth and risk.

3. Debt Repayment Strategy
You currently have an outstanding home loan of Rs. 1 crore. It’s advisable to clear this debt as early as possible. Carrying such a large debt into retirement can strain your finances.

Use a portion of your liquid assets, such as your mutual fund corpus or any bonuses, to reduce the loan burden gradually. This will free up cash flow and allow you to focus more on building your retirement fund.

4. Maximize Your EPF & PPF Contributions
Continue contributing to your EPF and PPF accounts. While the returns from these are modest, they are low-risk and provide tax-free returns, making them ideal for post-retirement stability.

As PPF matures, consider reinvesting the proceeds into equity mutual funds to capitalize on higher returns.

5. Increase Contributions to NPS
Your NPS balance is currently Rs. 5 lakh. Increase your contributions to this as it provides excellent tax benefits and is tailored for retirement.

NPS is also one of the few products where withdrawals are partially tax-free. Increasing contributions now will give you a more substantial corpus in the future.

6. Prioritize Children’s Education
Plan separately for your children’s education expenses. You might want to use specific child education funds or a combination of mutual funds for this.

Avoid dipping into your retirement savings for education purposes. Set clear boundaries between these two financial goals.

Final Insights
At 46, you are well-positioned financially, but pausing your SIP investments and holding onto a large loan could hinder your retirement plans. Restart your investments and focus on paying off your loan as soon as possible. By maintaining discipline and increasing your contributions to SIPs, NPS, and PPF, you should comfortably achieve your retirement corpus of Rs. 6 to 7 crore. Prioritize growth-oriented investments like equity mutual funds, and continue evaluating your portfolio annually to ensure it aligns with your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 03, 2024Hindi
Money
Hello Mr. Ramalingam Good morning. I'm 47 years old, my wife is at 40 and one daughter studying in 8th std. I have an investement in MF worth of 1.8 cr, ULIP of 20 lakhs, Direct equity of 5 lakhs, 1 cr term insurance, 5 lakhs LIC, 30 lakhs FD. Monthly SIP of 65 k in different MF's, accumulated EPF of 40 lakhs, 10 lakhs super annuatation fund. Invested in plot worth of 1 cr and farm land worth of 1.5 cr. No house and no loan. Would like retire by 55 years with monthly income of 2 lakhs / month from investment. Kindly suggest how I can make my finanical plan. Thanks
Ans: Based on your current financial situation and your goal of retiring at 55 with a monthly income of Rs. 2 lakhs, we need to assess your existing investments, future requirements, and how to bridge any gaps in your retirement plan.

Assets You Already Have
You have built a solid foundation of investments, which is impressive. Let’s break down your current assets:

Mutual Fund portfolio: Rs. 1.8 crore
ULIP: Rs. 20 lakhs
Direct equity: Rs. 5 lakhs
Term Insurance: Rs. 1 crore (sufficient for family protection)
LIC: Rs. 5 lakhs (Could be better allocated elsewhere)
Fixed Deposit: Rs. 30 lakhs
EPF: Rs. 40 lakhs
Superannuation Fund: Rs. 10 lakhs
Real Estate Investments: Plot (Rs. 1 crore) and farmland (Rs. 1.5 crore)
Your current SIP of Rs. 65,000 monthly in mutual funds is a good strategy for wealth accumulation.

Assessing Your Retirement Goal
You wish to have Rs. 2 lakhs per month as retirement income starting at 55. Considering inflation, your future expenses will likely be higher than Rs. 2 lakhs, which we must account for in your financial plan. Assuming you retire at 55 and live till 85, your investments need to generate returns for 30 years.

Evaluating Existing Investments
1. Mutual Funds:
Your current MF portfolio of Rs. 1.8 crore is a major asset. Continue with your SIPs to grow this corpus.
You might consider reviewing your fund allocations to ensure diversification across large-cap, mid-cap, and debt funds for stability and growth. Ensure these are actively managed funds, as they typically perform better than index funds over time.
2. ULIP:
ULIPs often have high charges and offer lower returns compared to mutual funds. It would be wise to surrender this policy and reinvest the Rs. 20 lakhs into mutual funds. This will offer better long-term growth for retirement.
3. Direct Equity:
Direct equity investments, while rewarding, are risky, especially as you approach retirement. It’s advisable to either reduce exposure to individual stocks or move to safer large-cap funds or balanced funds to ensure stability.
4. Fixed Deposit:
Rs. 30 lakhs in FD is a safe bet, but it yields lower returns. Consider using a portion of this for debt mutual funds, which offer slightly better returns and are tax-efficient.
5. LIC:
The Rs. 5 lakhs in LIC should be reconsidered, as insurance-based investment products are typically low-yielding. It’s better to surrender and reinvest this in mutual funds or safer investment options that offer higher returns.
6. Real Estate:
Your plot and farmland, though valuable, are illiquid assets. Real estate cannot generate a regular retirement income unless sold or rented out. Ideally, you should not rely on these for monthly income during retirement. Focus on liquid investments that can generate steady cash flow.
Plan for Retirement Income
Here’s how you can plan to generate Rs. 2 lakhs per month during retirement:

1. Continue Your SIPs:
Your monthly SIP of Rs. 65,000 is a good practice. If you can increase this slightly over the next few years, it will help you build a larger corpus for retirement. Aim to have at least Rs. 5-6 crore in liquid assets by the time you retire.
2. Shift to More Conservative Funds Closer to Retirement:
As you approach retirement, gradually move some of your equity-heavy investments into safer debt funds or balanced funds to preserve capital and reduce market risk.
3. Utilize the EPF and Superannuation Fund:
Your Rs. 40 lakhs in EPF and Rs. 10 lakhs in superannuation fund will continue to grow. Do not withdraw this early; allow it to accumulate till your retirement for a sizeable corpus that can act as a fixed-income generator.
4. Create an Income Stream with SWP:
Systematic Withdrawal Plan (SWP) from mutual funds will help you generate a monthly income after retirement. This is tax-efficient and can provide you with the Rs. 2 lakhs you desire. You can gradually withdraw from your mutual fund corpus post-retirement, ensuring your capital lasts for 30 years.
5. Review and Increase Insurance:
Your current term insurance of Rs. 1 crore is adequate for now. Ensure you have it in place till your retirement to protect your family in case of any unforeseen events. No need for further investment in insurance-based products like ULIPs or LIC.
Things to Keep in Mind
Inflation Protection: Rs. 2 lakhs per month today will not hold the same value in the future due to inflation. Plan to increase your SIP amounts and grow your corpus to account for this.

Healthcare Costs: As you age, healthcare expenses might rise. Ensure that your health insurance coverage is sufficient, or consider top-up plans to enhance your coverage.

Reassess Regularly: Financial planning is not a one-time activity. Review your portfolio annually to ensure you are on track and make adjustments based on changing market conditions or personal goals.

Final Insights
You are in a strong financial position and well on your way to a comfortable retirement. However, small changes like surrendering low-return policies and enhancing your mutual fund portfolio can make a significant difference. Focus on building a larger liquid corpus by continuing your SIPs and shifting towards income-generating assets as you near retirement.

Stay disciplined with your investments, and you will likely achieve your retirement goal of Rs. 2 lakhs monthly without financial stress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Listen
Money
Sir, I have both Mirae asset Large and Mid cap fund with sip + Mirae asset Large cap fund (sip stopped) Can I make STP or complete SWITCH from Mirae asset large cap fund to Mirae asset large and Mid cap fund. ? is it advisable
Ans: Switching or making a Systematic Transfer Plan (STP) from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be considered based on your financial goals, risk tolerance, and investment strategy.

Factors to Consider:
1. Portfolio Diversification:
Large Cap Fund: Primarily invests in the top 100 companies, which are considered stable and less volatile. It is ideal for those seeking steady returns with relatively lower risk.
Large and Mid Cap Fund: Combines both large-cap (safer, stable) and mid-cap (higher growth potential but riskier) stocks. This offers a balanced approach, with more room for growth but with a bit more risk.
If your goal is to increase exposure to mid-cap stocks for potentially higher growth, an STP or switch to the Large and Mid Cap Fund makes sense. This fund offers a more diversified approach while still having a safety net of large-cap investments.

2. Investment Time Horizon:
Large and mid-cap funds tend to perform better in the long term (5+ years), as mid-caps may take time to realize their full growth potential. If your investment horizon is shorter, sticking with a large-cap fund may be preferable.
3. Risk Appetite:
Mid-cap stocks have higher growth potential but come with increased volatility. If you are comfortable with short-term fluctuations for long-term gains, an STP into the large and mid-cap fund could align with your goals.
4. Performance Track Record:
Both funds from Mirae Asset have strong reputations, but large-cap funds offer more consistent returns with lower downside risks during market corrections. You may want to assess the historical performance and volatility of both funds to see which fits your strategy better.
Why Use STP Instead of a Lump Sum Switch?
Tax Efficiency: An STP allows you to move funds gradually, spreading out tax implications and avoiding a large one-time exit load or capital gains tax.
Risk Mitigation: Instead of moving all your funds at once, an STP reduces the risk of entering at a high point in the market.
Consistent Investment: You continue investing in a disciplined manner, benefiting from rupee cost averaging.
Final Insight:
If your risk profile supports it, and your goal is long-term wealth creation, a STP from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be a good option. This allows you to diversify your portfolio while retaining some stability through large-cap exposure.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x