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

Sunil Lala  |203 Answers  |Ask -

Financial Planner - Answered on Feb 28, 2024

Sunil Lala founded SL Wealth, a company that offers life and non-life insurance, mutual fund and asset allocation advice, in 2005. A certified financial planner, he has three decades of domain experience. His expertise includes designing goal-specific financial plans and creating investment awareness. He has been a registered member of the Financial Planning Standards Board since 2009.... more
K Question by K on Feb 22, 2024Hindi
Listen
Money

Am of 55 years. Pvt job since 1990. No investment till now. want to earn money additionally. Pls. suggest.

Ans: What suggestion you want ?
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

Dev

Dev Ashish  | Answer  |Ask -

MF Expert, Financial Planner - Answered on Apr 26, 2023

Asked by Anonymous - Apr 24, 2023Hindi
Listen
Money
How do I earn monthly income of 2 lakhs post retirement which is 15 years away? Please suggest options
Ans: If we calculate using a few assumptions, like post-retirement life of 25 years; average inflation of 6% pa during that period, and portfolio returns of about 8% (assuming a judicious mix of equity and debt with a higher allocation to the latter), then you need to have a corpus of about Rs 4.8 Cr. This is to ensure that starting at Rs 2 lakh monthly (after 15 years), your monthly income from there on increases by at least 6% assumed inflation. And starting from zero, you need to invest about Rs 1.1 lakh per month assuming equity:debt 50:50 and this monthly investment amount should increase by at least 5% every year.

To reach this target corpus, you have a sufficiently long runway of 15 years. So you should be willing to invest a major chunk in equities via equity funds if your risk appetite allows for it. You may also have some of the existing assets, which too can be earmarked towards this retirement corpus.

As mentioned, for equity allocation, choose diversified equity funds categories like passive largecap funds, flexicap funds, and large&midcap funds (and if you have a sufficiently high-risk appetite, then mid-and-small cap funds as well). For debt, your EPF+VPF alongwith PPF should be sufficient.

When the time comes for retirement (in 15 years), you may have to divide your portfolio into 2 buckets. One to take care of income needs (via SCSS, debt funds, PPF withdrawals, bonds, etc.) and the other for growth (via equity funds and ETFs)

..Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 2024

Asked by Anonymous - Jun 01, 2024Hindi
Money
I am 57 years old. After 5 years I want income 5 lakh per month. How and where to invest to get 5 lakh income per month.
Ans: Planning for a secure and comfortable future is essential, especially as you approach retirement. Ensuring a monthly income of Rs. 5 lakh within five years is an ambitious goal, but achievable with the right strategy. Below, we’ll explore various investment options and strategies to help you reach this goal.

Understanding Your Financial Goals
To achieve Rs. 5 lakh per month, you need a clear understanding of your financial goals. This involves assessing your current financial situation, expected expenses, and desired lifestyle post-retirement. It’s important to determine the total corpus required to generate this income through careful planning and projections.

Risk Assessment and Investment Horizon
At 57, your risk tolerance is likely moderate. Balancing risk and returns is crucial. Your investment horizon is five years, meaning you need to invest in options that provide substantial growth without exposing you to excessive risk.

Importance of Diversification
Diversification reduces risk by spreading investments across various asset classes. This ensures that poor performance in one area doesn’t drastically impact your overall portfolio. A well-diversified portfolio is key to achieving stable returns.

Equities: The Growth Engine
Equities can be a significant part of your investment portfolio. They offer the potential for high returns, which is essential to meet your goal. Actively managed equity mutual funds, where a professional fund manager makes investment decisions, can be a good choice. These funds have the potential to outperform the market, providing higher returns than passive index funds.

Benefits of Actively Managed Funds
Professional Management: Fund managers use their expertise to select high-performing stocks.
Potential for Higher Returns: Active funds aim to beat the market, unlike index funds that just track it.
Flexibility: Managers can adjust the portfolio in response to market changes.
Debt Instruments: Stability and Safety
Debt instruments provide stability and lower risk. They should form a significant part of your portfolio to ensure capital preservation and steady income. Examples include government bonds, corporate bonds, and debt mutual funds.

Benefits of Debt Mutual Funds
Regular Income: Debt funds provide regular interest income.
Lower Risk: They are less volatile compared to equities.
Liquidity: Debt funds offer easy liquidity, allowing access to your money when needed.
Systematic Withdrawal Plans (SWP)
Systematic Withdrawal Plans from mutual funds can provide regular income. You can invest a lump sum in a mutual fund and withdraw a fixed amount monthly. This ensures a steady cash flow while your investment continues to grow.

Benefits of SWPs
Regular Income: Provides a fixed monthly income.
Tax Efficiency: Capital gains are taxed favorably compared to interest income.
Flexibility: You can adjust the withdrawal amount as needed.
Balancing Equity and Debt
A balanced approach is crucial. Typically, a 60:40 or 50:50 equity-to-debt ratio is advisable for someone close to retirement. This provides growth potential while ensuring stability and safety.

Mutual Funds: A Closer Look
Mutual funds offer a range of options suitable for different risk profiles and investment goals. Actively managed funds, including equity and balanced funds, can provide the growth needed to achieve your goal. Debt funds offer the stability and regular income required for retirement.

Benefits of Mutual Funds
Professional Management: Fund managers have the expertise to make informed investment decisions.
Diversification: Mutual funds invest in a variety of securities, spreading risk.
Flexibility: They offer different schemes to suit various investment needs and risk appetites.
Importance of Regular Reviews
Regularly reviewing your investment portfolio ensures it remains aligned with your goals. Markets and personal circumstances change, and your portfolio should be adjusted accordingly. This involves assessing the performance of your investments and rebalancing the portfolio if necessary.

Tax Planning
Effective tax planning is essential to maximize your returns. Different investment options have different tax implications. Understanding these can help you make tax-efficient investment decisions.

Tax-Efficient Investment Strategies
Equity Mutual Funds: Long-term capital gains (LTCG) up to Rs. 1 lakh are tax-free. Gains above this are taxed at 10%.
Debt Mutual Funds: LTCG from debt funds are taxed at 20% with indexation benefits, reducing the tax liability.
SWPs: Provide regular income while being tax-efficient due to favorable treatment of capital gains.
Contingency Planning
Having an emergency fund is crucial. It ensures you have access to funds in case of unexpected expenses without disrupting your investment plan. Typically, an emergency fund should cover 6-12 months of expenses.

Professional Guidance
Working with a Certified Financial Planner (CFP) can provide personalized advice tailored to your financial situation and goals. A CFP can help create a comprehensive financial plan, select appropriate investments, and provide ongoing support.

Conclusion
Achieving a monthly income of Rs. 5 lakh in five years requires careful planning, disciplined investing, and regular reviews. By understanding your financial goals, assessing your risk tolerance, and diversifying your investments, you can create a robust investment strategy.

Key Takeaways
Diversify Your Portfolio: Spread investments across equities and debt.
Opt for Actively Managed Funds: Leverage professional expertise for higher returns.
Utilize SWPs: Ensure regular income through systematic withdrawals.
Regularly Review Your Portfolio: Adjust investments as needed.
Plan for Taxes and Contingencies: Maximize returns through tax-efficient strategies and maintain an emergency fund.
Action Plan
Assess Your Financial Situation: Understand your current assets, liabilities, and income needs.

Set Clear Goals: Define your desired monthly income and the total corpus required.

Create a Diversified Portfolio: Invest in a mix of equities and debt instruments.

Opt for Actively Managed Funds: Choose funds managed by professionals for better returns.

Implement SWPs: Set up systematic withdrawals to ensure regular income.

Review and Adjust Regularly: Monitor your portfolio and make necessary adjustments.

Seek Professional Advice: Work with a Certified Financial Planner for personalized guidance.

By following these steps, you can work towards achieving your goal of Rs. 5 lakh monthly income. Stay committed to your plan, make informed decisions, and adjust as needed. Your financial future can be secure and comfortable with the right approach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 01, 2024

Asked by Anonymous - Jun 01, 2024Hindi
Money
Helo sir I'm 28 rights now and I have 6 lac liability my monthly income 30k sir plz suggest me a way for investment and short term earning
Ans: Understanding Your Financial Situation
You're doing well by seeking financial advice at 28. Your monthly income of Rs. 30,000 is a good starting point. A liability of Rs. 6 lakhs can seem daunting, but with the right strategy, you can manage it effectively.

Setting Financial Goals
First, let's define your financial goals. Short-term goals could include clearing your Rs. 6 lakhs liability. Long-term goals might involve savings for retirement or a house.

Budgeting Your Income
Create a budget to manage your Rs. 30,000 monthly income. Allocate funds for essential expenses like rent, groceries, and utilities. Ensure you save a portion of your income each month.

Clearing Your Liability
Prioritise clearing your Rs. 6 lakhs liability. High-interest debt can hinder financial progress. Aim to pay more than the minimum amount due each month to reduce the principal faster.

Emergency Fund
Establish an emergency fund. Aim to save at least three to six months' worth of expenses. This fund will act as a safety net during unexpected financial situations.

Investment Options for Short-Term Earnings
For short-term earnings, consider options that offer liquidity and low risk. Fixed deposits and savings accounts with good interest rates are stable choices. These provide moderate returns with low risk.

Actively Managed Funds
Investing in actively managed funds can be beneficial. These funds are managed by experts who aim to outperform the market. They might offer higher returns compared to index funds, which only track the market.

Regular Funds with Certified Financial Planner
Consider regular funds managed through a Certified Financial Planner (CFP). CFPs provide professional guidance and tailored advice, ensuring your investments align with your financial goals.

Diversifying Investments
Diversify your investments to reduce risk. Don't put all your money into one type of investment. Consider a mix of debt and equity funds to balance risk and return.

Short-Term Investment Strategies
For short-term goals, focus on investments that mature in a few years. Look for options with low volatility and stable returns. These investments will help you meet your immediate financial needs.

Regular Review and Adjustment
Regularly review and adjust your investment portfolio. Market conditions change, and your financial goals might evolve. Ensure your investments remain aligned with your objectives.

Benefits of Professional Guidance
Working with a Certified Financial Planner can provide significant benefits. They offer expertise, personalised advice, and help navigate complex financial decisions. Their guidance ensures your investments are well-structured.

Building a Financial Plan
Develop a comprehensive financial plan. Include your income, expenses, liabilities, and investment goals. A well-structured plan will guide your financial decisions and keep you on track.

Importance of Discipline
Financial discipline is key to success. Stick to your budget, avoid unnecessary expenses, and consistently invest. Discipline ensures steady progress towards your financial goals.

Learning and Growing
Educate yourself about personal finance and investment options. Knowledge empowers you to make informed decisions. Stay updated on financial trends and market conditions.

Benefits of Diversification
Diversifying your investments spreads risk. By investing in various assets, you protect yourself from market volatility. A diversified portfolio offers stability and potential for growth.

Evaluating Risk Tolerance
Understand your risk tolerance before investing. Some investments carry higher risk but offer higher returns. Align your investment choices with your comfort level and financial goals.

Tax Implications
Consider the tax implications of your investments. Different investment options have varying tax treatments. Aim to minimise tax liability while maximising returns.

Long-Term Financial Goals
While focusing on short-term goals, keep long-term objectives in mind. Retirement planning should start early. Consistent investments over time will build a substantial corpus for the future.

Balancing Life and Finances
Achieve a balance between enjoying life and managing finances. Allocate funds for leisure and personal growth. A balanced approach ensures financial well-being and personal satisfaction.

Seeking Professional Advice
Consulting a Certified Financial Planner can provide clarity and direction. Their expertise helps navigate financial complexities. Professional advice ensures your financial journey is smooth and successful.

Conclusion
You're on the right track by seeking financial advice at a young age. With a structured plan, disciplined approach, and professional guidance, you can achieve financial stability and growth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Asked by Anonymous - Dec 21, 2024Hindi
Money
Hi Sir, I follow your articles regularly and your detailed assessment is really awesome.I am 47yrs Male with wife, 20&18 years kids, elder one is in B.Tech and younger one is 12th. My wife is a home maker. Coming to financials. I have 4 houses including the one residing worth 10cr(total) and getting rental income of 70k per month, invested in stocks and MFs worth 60L, have foreign stocks of worth 1.7cr, accumulated pf around 1.3cr. I have farm lands worth 5cr. Have 1.2cr loan and salary of ~4L (net). current sips in equity 70k/month, have 5Cr term plan, health insurance for family 50L. How do I plan my retirement at 52-53years assuming 80 years life expectancy. Don't want to depend on kids and need regular income ~3-4L per month.
Ans: Asset Evaluation
Real Estate:
You own four houses worth Rs 10 crore, generating Rs 70,000 monthly rental income. This is a solid base for passive income. However, real estate can have fluctuating maintenance costs, tenant issues, and varying rental yields over time.

Stocks and Mutual Funds:
Your Rs 60 lakh investment in stocks and mutual funds is a commendable step. Active mutual funds offer professional fund management and can outperform index funds over time.

Foreign Stocks:
Your Rs 1.7 crore portfolio in foreign stocks adds geographical diversification. Monitor currency exchange fluctuations and global market trends.

Provident Fund (PF):
With Rs 1.3 crore in PF, this is a reliable retirement corpus. The fund provides fixed returns and tax benefits, adding stability.

Farm Lands:
Farm lands worth Rs 5 crore are an illiquid but valuable asset. They might not generate consistent income unless leased or developed.

Loans:
A loan liability of Rs 1.2 crore needs prioritised repayment. Focus on loans with higher interest rates first.

Insurance Coverage:
A Rs 5 crore term plan is robust. Your Rs 50 lakh health insurance is sufficient for unexpected medical emergencies.

Retirement Goals
You need Rs 3–4 lakh monthly for 27–28 years post-retirement.
The portfolio must generate steady, inflation-adjusted returns.
Action Plan for Retirement
Debt Management
Prepay High-Interest Loans:
Use a portion of your surplus income to prepay loans. This reduces interest outflow and increases your cash flow.

Avoid New Loans:
Focus on reducing existing liabilities instead of taking on new ones.

Portfolio Restructuring
Real Estate:
Retain essential properties. Sell underperforming or non-essential properties to reduce concentration in real estate. Invest proceeds in mutual funds or debt instruments for diversification.

Mutual Funds (MFs):
Increase SIPs in actively managed funds. They outperform direct funds due to guidance from Certified Financial Planners and MFDs. Regular funds offer better tracking and professional assistance.

Stocks:
Monitor direct equity investments closely. Consider reallocating underperforming stocks to mutual funds for better management.

Debt Instruments:
Invest in high-quality debt funds or fixed-income securities for stability. These instruments balance equity volatility and ensure steady returns.

SIP Strategy
Increase SIPs from Rs 70,000 to Rs 1 lakh/month.
Allocate 70% to equity funds for long-term growth.
Invest 30% in debt funds for stability and liquidity.
Emergency Fund
Maintain a 12-month expense reserve in liquid funds or fixed deposits.
This covers unexpected expenses without disturbing investments.
Income During Retirement
Systematic Withdrawal Plan (SWP)
Use SWPs in mutual funds to generate regular income.
Withdraw 6–8% annually from your mutual fund portfolio for a steady income stream.
Rental Income Optimisation
Review property rents regularly.
Invest part of rental income in equity or debt mutual funds for compounding.
Dividend Stocks
Retain high-dividend-yield stocks for regular income.
Reinvest surplus dividends for long-term growth.
Tax Efficiency
Equity Funds Taxation:
Long-term gains above Rs 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.

Debt Funds Taxation:
Both short- and long-term gains are taxed per your income slab.

Real Estate Capital Gains:
Use exemptions under Sections 54 or 54F to save tax on property sales.

Inflation Protection
Allocate 60–70% of your portfolio to equity investments.

Equity provides inflation-adjusted returns over time.

Debt funds and fixed instruments safeguard against equity market volatility.

Estate Planning
Draft a will to allocate assets transparently among family members.
Use nomination and joint ownership to avoid legal complications.
Consider a family trust for farm lands to avoid disputes.
Periodic Review
Review your financial plan every six months.
Adjust investments based on market conditions, goals, and needs.
Consult a Certified Financial Planner regularly for updates.
Finally
A well-diversified portfolio ensures financial independence post-retirement. Focus on debt repayment, portfolio balance, and tax-efficient withdrawals. Your assets can comfortably generate Rs 3–4 lakh monthly income, adjusted for inflation.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Kanchan

Kanchan Rai  |444 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Dec 21, 2024

Listen
Relationship
I am the eldest sibling in our families and aged 51. Normally, whenever anyone in the family has a problem - financial, mental, psychological, issue with people or anything else, they come up to discuss with me and share. Well, many would say I am lucky as people look up to me when they are in any kind of a problem. But that is not the case. Sadly no one is around with whom I can discuss or even think to share my issues, my problems. I do not have any friends. Sadly, yes, that is a fact and at my age, I dont expect that here we have a culture where we can get to making friends, at least the kind of friends with whom you can confide, share your feelings, problems. I tried and failed. Maybe because I am introvert or maybe I am too cautious. To make it more complicated, I dont work in the regular kind of job. I am a lone person who works as a freelance from home. This limits my outreach when it comes to interacting with real people. I have clients, business contacts, but I cannot get personal with them. It will never be a good choice. My wife is busy with her job + we do not have any relation beyond the daily matters related to household and it has been more than 10 years now that we live this way. Tried to sort out things with her but she just does not have time and interest (after all who wants to add on to tensions, stress). My daughter is after all my daughter - I cannot share these with her, and definitely at 10 she is too young to be one to discuss such stuff. I am not sure how far this issue can be fixed but I am hopeful to find some path here.
Ans: Dear Kevin,
Starting small can be helpful. Consider connecting with people through shared interests or hobbies, either online or in person, where the pressure to immediately open up is minimal. Online communities, local meetups, or volunteer activities can create low-stakes opportunities to connect with like-minded individuals. The goal isn’t to instantly find someone to confide in but to slowly build a sense of belonging and companionship.

Your relationship with your wife appears to be another significant source of emotional distance. While her lack of interest in deep conversations may seem like a barrier, it’s worth exploring other ways to reconnect—perhaps by spending time together in shared activities or revisiting moments that once brought you closer. Sometimes, relationships stuck in routines benefit from new experiences or even professional counseling to navigate the underlying dynamics.

Regarding your daughter, while it’s clear she cannot shoulder your emotional burdens, she can still be a source of joy and connection. Investing time in activities with her can provide a sense of fulfillment and grounding that counters loneliness.

Above all, remember that reaching out for professional support, such as therapy, is not a sign of weakness but an act of self-care. A therapist can provide a safe space to express your feelings and help you develop strategies to foster deeper connections and manage emotional isolation.

You deserve to feel supported and connected, and even if the journey to finding that seems long, every step you take toward opening up or seeking out others is a move toward a more fulfilling and less lonely existence.

...Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Listen
Money
Top4 sips with 15k amount suggest me
Ans: Here’s an updated strategy for your Rs. 15,000 SIP allocation, replacing the sectoral/thematic fund with a small-cap fund for better long-term growth potential.

Suggested SIP Allocation (Rs. 15,000)
Large-Cap Fund

Allocation: Rs. 4,000/month
Objective: Stability and steady growth by investing in India’s top 100 companies.
Why Choose: Provides consistent returns and low volatility in your portfolio.
Flexi-Cap Fund

Allocation: Rs. 4,000/month
Objective: Diversified exposure across large, mid, and small-cap stocks.
Why Choose: Offers balanced risk and returns with flexibility during market cycles.
Mid-Cap Fund

Allocation: Rs. 3,500/month
Objective: Tap into the growth potential of medium-sized companies.
Why Choose: Higher returns with manageable risk compared to small caps.
Small-Cap Fund

Allocation: Rs. 3,500/month
Objective: Focus on fast-growing small-cap companies.
Why Choose: High-growth potential over the long term, though with higher volatility.
Why Include Small-Cap Funds?
Long-Term Growth: Small-cap companies have immense potential to grow significantly over time.
Diversification: Adds exposure to an underrepresented segment, complementing large and mid-caps.
High Returns: Potential for higher returns compared to other categories, albeit with higher risk.
Key Considerations
Investment Horizon: Stay invested for at least 7-10 years to mitigate short-term volatility.
Active Fund Management: Avoid direct or index funds to leverage professional expertise.
Regular Monitoring: Review fund performance periodically with a Certified Financial Planner.
Tax Implications
Equity Funds:
LTCG above Rs. 1.25 lakh/year taxed at 12.5%.
STCG (held less than 1 year) taxed at 20%.
Final Insights
This updated allocation ensures a mix of stability, moderate risk, and high growth. With consistent SIPs and periodic reviews, you can achieve robust wealth creation over the long term. A Certified Financial Planner can assist in optimising your investment strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Asked by Anonymous - Dec 20, 2024Hindi
Money
Hi Sir I come from a middle class family and my parents have dedicated everything they have into my education and upbringing. Now they plan to retire and i am finally at 30 in a stanle career where i make approximately 1,20,000 per month. I have a savings of approximately 2,00,000 that i want to invest into my parents retirement. We are NRI's and my parents will be returning back to India soon. I have 0 kmowledge about investments. As per what my friends advised, I have come to the following solutions: 1. Open an FD for both my parents seperately of 50000 Rs each for 5 years with their respective banks 2. Choose the Bajaj Allianz Smart Wealth Goal V SIP and invest approximately 24000 annually for 5 years, withdrawing it at 7 years. 3. Choose the TATA AIA Smart SIP wealth secure and invest 60000 Rs annually for 10 years, withdrawing it at the end of the same duration. Along with the above, I also plan to invest 40000 Rs annually into their Medical health insurance. Now as an NRI, and not having any knowledge about investing or TAX, could you help me with the above investments and how i would have to go about with TAX policies in India. Thank you
Ans: Your dedication to supporting your parents’ retirement is truly admirable. As an NRI with limited investment knowledge, making informed decisions will ensure financial stability for your parents. Let's assess and optimise your proposed plan while incorporating better strategies.

Evaluating the Current Plan
Fixed Deposit for Both Parents
Strengths: Fixed deposits (FDs) are safe and offer guaranteed returns.
Limitations: FD returns in India often fail to outpace inflation. Senior citizens get slightly higher interest rates.

Bajaj Allianz Smart Wealth Goal SIP
Overview: Likely a ULIP (insurance cum investment product). Combines life insurance with investments.
Limitations: ULIPs have high charges (administration and premium allocation fees). Returns are often lower compared to mutual funds.
Taxation: ULIPs are tax-efficient but lack transparency and flexibility.
TATA AIA Smart SIP Wealth Secure
Overview: Another ULIP-based product with insurance and investment components.
Limitations: Similar to the Bajaj Allianz plan, it has high costs and lower returns.
Taxation: Tax benefits under Section 80C but limited withdrawal flexibility.
Medical Health Insurance for Parents
Strengths: Investing in health insurance for your parents is a wise decision.
Suggestions: Opt for a plan with sufficient coverage, including critical illness and cashless claims.
Suggested Optimised Financial Plan
Step 1: Replace ULIPs with Equity Mutual Funds
Reason: Equity mutual funds provide higher returns compared to ULIPs.
Benefits: Actively managed funds offer better growth, diversification, and lower charges.
SIP Strategy: Start a SIP for Rs. 5,000 monthly (Rs. 60,000 annually) for 10 years.
Taxation: Equity LTCG above Rs. 1.25 lakh taxed at 12.5%; STCG taxed at 20%.
Step 2: Invest in Debt Mutual Funds
Reason: Debt funds offer better returns than FDs and are tax-efficient.
Allocation: Invest Rs. 1 lakh in short-duration or dynamic bond funds.
Taxation: LTCG and STCG on debt funds are taxed as per the income tax slab.
Step 3: Build an Emergency Fund
Importance: Allocate Rs. 50,000 to a liquid fund or short-term FD.
Purpose: This fund will cover unexpected medical or living expenses.
Step 4: Continue Health Insurance for Parents
Annual Premium: Rs. 40,000 annually is reasonable for comprehensive coverage.
Suggestions: Include riders like critical illness and hospital cash benefits.
Step 5: Diversify Using Sovereign Gold Bonds (SGBs)
Reason: SGBs are low-risk, inflation-proof, and provide 2.5% annual interest.
Allocation: Invest Rs. 50,000 into SGBs.
Taxation: Interest is taxable, but capital gains on redemption are tax-free.
SGBs are not available for NRIs.

Tax Implications for NRIs
Better Returns: Shift to equity and debt mutual funds for inflation-beating growth.
Tax Efficiency: Use tax-saving instruments and avoid high-tax liabilities on ULIPs.
Flexibility: Mutual funds and SGBs provide better liquidity and transparency.
Secure Future: Health insurance ensures medical expenses are not a financial burden.
Final Insights
Your proposed plan can be significantly improved with better investment choices. Focus on mutual funds, health insurance, and SGBs for long-term financial stability. Avoid ULIPs as they come with high costs and limited returns. With these steps, you can ensure a secure and comfortable retirement for your parents.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Asked by Anonymous - Dec 20, 2024Hindi
Money
I am a 40 year old male married with no kids working in an IT company, my current portfolio consist of 1 apartment in Bangalore (home loan is completed), 1 site in my hometown worth 1 Cr, 8 lakh in SGB, 6 lakh in stocks, 6 lakh in ppf, 26 lakh in PF, 3.5 lakh in NPS In order to retire comfortably at the age of 50 i want to invest in such a way that my monthly income/pension should be 2.5 lakh Please provide some financial advice to me to achieve my goal.
Ans: You have a solid starting point with your existing portfolio. However, achieving your goal of Rs. 2.5 lakh monthly income at retirement will require meticulous planning and disciplined investing. Here's a detailed roadmap tailored to your needs.

Assessing Your Current Portfolio
Real Estate Assets

One apartment (home loan cleared) provides potential rental income.
A site in your hometown worth Rs. 1 crore is currently a non-productive asset.
Financial Assets

Sovereign Gold Bonds (SGB): Rs. 8 lakh, offering stable interest and appreciation.
Stocks: Rs. 6 lakh in equities for long-term growth.
PPF: Rs. 6 lakh, offering safe and tax-free returns.
Provident Fund (PF): Rs. 26 lakh, providing stability and regular growth.
NPS: Rs. 3.5 lakh, adding to your retirement corpus.
Your total financial assets stand at Rs. 49.5 lakh.

Retirement Goal Analysis
Desired Income: Rs. 2.5 lakh per month or Rs. 30 lakh per year.
Investment Horizon: 10 years until age 50.
Inflation Impact: Adjust the target corpus for inflation to sustain your lifestyle.
Risk Profile: Balance between growth-focused and stable investments.
Recommended Investment Strategy
Step 1: Determine Your Retirement Corpus
For a Rs. 2.5 lakh monthly income, your corpus should sustain withdrawals for 30+ years.
Factor in inflation-adjusted growth to ensure purchasing power.
Step 2: Allocate Current Portfolio Effectively
Utilise Non-Performing Real Estate Assets

Sell the site worth Rs. 1 crore in your hometown.
Invest proceeds into a diversified portfolio for growth.
Avoid retaining illiquid assets without income generation.
Maximise Equity Investments

Increase equity exposure for long-term growth.
Invest in actively managed funds for better performance over index funds.
Regular funds through an MFD with CFP credentials offer professional oversight.
Leverage PPF and PF Contributions

Continue contributions to PPF for safe, tax-free returns.
Retain PF contributions to build a stable retirement corpus.
Optimise NPS Investments

Shift to a higher equity allocation within NPS for better growth.
NPS provides tax-efficient returns and retirement income options.
Step 3: Start a Systematic Investment Plan (SIP)
Monthly SIP Amount: Invest aggressively over the next 10 years.
Fund Selection: Choose equity mutual funds with a proven track record.
Taxation: Equity LTCG above Rs. 1.25 lakh taxed at 12.5%; STCG taxed at 20%.
Step 4: Create a Diversified Portfolio
Equity Mutual Funds

Allocate 60%-70% to actively managed equity funds.
Focus on large-cap, flexi-cap, and mid-cap funds for diversification.
Debt Instruments

Allocate 20%-30% to debt funds for stability.
Include corporate bonds and dynamic bond funds for better yields.
Gold Investments

Retain existing SGBs for stability and hedge against inflation.
Emergency Fund

Maintain 6-12 months of expenses in liquid funds or fixed deposits.
Step 5: Increase Income Generation from Existing Assets
Rental Income
Rent out your apartment in Bangalore for additional cash flow.
Use rental income to supplement SIP investments.
Key Considerations
Taxation and Efficiency
Keep your tax liability in mind while planning withdrawals.
Diversify investments to optimise post-tax returns.
Periodic Review of Investments
Monitor portfolio performance regularly.
Rebalance asset allocation based on market conditions.
Seek guidance from a Certified Financial Planner for fine-tuning.
Final Insights
Your goal of Rs. 2.5 lakh monthly income is ambitious but achievable. Selling non-performing assets and investing aggressively will create a strong retirement corpus. Maintain discipline in SIP contributions and periodically review your investments. With this approach, you can enjoy financial freedom at 50.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |7290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Asked by Anonymous - Dec 20, 2024Hindi
Money
I have a debt of 1 crore 15 lakhs with rate of interest 8.6 % and I can pay 10 lakh yearly in addition to my EMI's. Is it better to invest those 10 lakhs in SIP or Pre-pay my loan and clear debt or wait till the SIP matures and use that lump sum to pay the loan?
Ans: You are in a financially challenging yet manageable situation. The right decision will depend on a careful assessment of your goals and circumstances. Here's a detailed evaluation of the two options: prepaying your loan versus investing in SIPs.

Key Factors to Consider
Interest Cost on Loan

Your loan interest rate of 8.6% is substantial.
The interest cost accumulates if the loan tenure is long.
Prepaying can save interest and reduce loan tenure.
Potential SIP Returns

SIPs in actively managed equity mutual funds can yield 10%-12% annually over the long term.
The returns are market-linked and not guaranteed.
Market volatility impacts short-term results.
Liquidity Needs

Prepaying reduces debt but locks funds.
SIPs provide liquidity for emergencies or goals.
Tax Implications

No tax benefit for loan prepayment beyond the Rs. 2 lakh interest deduction in housing loans (if applicable).
SIP investments in equity mutual funds have specific capital gains tax rules.
Benefits of Loan Prepayment
Lower Interest Burden

Immediate reduction in the interest portion of EMI.
Reduces overall debt faster.
Psychological Relief

Eliminates financial stress of a high loan.
Provides peace of mind with reduced liabilities.
Guaranteed Savings

Savings on interest is assured and risk-free.
Benefits of SIP Investment
Potential Wealth Creation

Long-term equity SIPs can outpace loan interest rates.
Compounding benefits enhance returns over time.
Flexibility

SIPs offer systematic withdrawal plans for liquidity.
Funds remain accessible during emergencies.
Diversification

Investments grow alongside other assets, increasing net worth.
Assessing the 360° Perspective
Debt and Emotional Comfort

A Rs. 1.15 crore debt can cause financial and emotional strain.
If reducing stress is your priority, prepayment is preferable.
Investment Risk Appetite

SIPs suit those willing to accept market volatility for higher returns.
If you dislike risk, prioritize prepayment.
Long-Term Financial Goals

Use SIPs for retirement, children’s education, or other life goals.
Prepaying helps if clearing debt is your primary focus.
Income Stability

Regular income supports SIPs without disrupting EMI payments.
Uncertainty in earnings favors prepayment.
Tax Considerations in Detail
Loan Prepayment

Offers no additional tax benefits after claiming the Rs. 2 lakh housing loan interest deduction.
SIP Investment

Gains above Rs. 1.25 lakh in equity funds are taxed at 12.5% (LTCG).
Short-term gains are taxed at 20%.
Debt funds are taxed as per your income slab.
Hybrid Approach: The Best of Both Worlds
Split the Rs. 10 lakh yearly allocation into two parts.

Use Rs. 5 lakh to prepay the loan.
Invest the remaining Rs. 5 lakh in SIPs.
This strategy balances debt reduction and wealth creation.

Reduces debt steadily.
Allows market participation for higher returns.
When to Prioritise Loan Prepayment?
If you prefer guaranteed savings over potential market returns.
When nearing retirement and aiming for a debt-free life.
If financial stress is affecting your well-being.
When to Prioritise SIP Investments?
If you are comfortable with market fluctuations.
When your income can comfortably handle EMIs.
If long-term wealth creation is a key goal.
Key Recommendations for SIP Investments
Actively Managed Equity Funds

Seek funds with a consistent track record.
Regular plans via an experienced CFP provide expert guidance.
Avoid Index Funds

Actively managed funds outperform index funds in volatile markets.
Index funds lack flexibility and personalization.
Use Regular Funds Through an MFD

Avoid direct plans as they lack personalized advice.
MFDs with CFP credentials help in fund selection and monitoring.
Benefits of Splitting Investments
Balances debt reduction and growth.
Provides flexibility if circumstances change.
Reduces risk from overexposure to one strategy.
Final Insights
The decision depends on your priorities and risk tolerance. If reducing debt quickly offers peace of mind, prepay the loan. If long-term wealth creation aligns with your goals, consider SIPs. A hybrid approach balances these objectives effectively.

You are taking proactive steps toward financial freedom. Your disciplined approach ensures a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...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