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Jinal

Jinal Mehta  | Answer  |Ask -

Financial Planner - Answered on Jun 24, 2024

Jinal Mehta is a qualified certified financial professional certified by FPSB India. She has 10 years of experience in the field of personal finance.
She is the founder of Beyond Learning Finance, an authorised education provider for the CFP certification programme in India.
In addition, she manages a family office organisation, where she handles investment planning, tax planning, insurance planning and estate planning.
Jinal has a bachelor's degree in management studies. She also has a diploma in in financial management from NMIMS, Mumbai.
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Sanjay Question by Sanjay on Jun 23, 2024Hindi
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Sir, I am 56 yrs old. Investing in mutual funds since 2016 , about 1.3 lakh per month. Have 2 children of about 5 yrs old . Kindly advice future investment amount so as to have good sum for their higher studies. Investment horizon about next 15 yrs.

Ans: I cannot suggest with this limited information. I need to know the tenure, current investment values, goals, risk profile to evaluate your situation and recommend.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

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Mutual Funds, Financial Planning Expert - Answered on May 04, 2024

Asked by Anonymous - Apr 24, 2024Hindi
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Hi Sir . I am a 34-year-old man with a monthly income of 1.4 Lakh. I have a 1-year-old son. I haven't invested in mutual fund investments before and seek your guidance on how much to invest and in which mutual funds. My financial goals are as follows: Accumulate atleast 6 crores before retirement (in the next 20 years). Save atleast 1 crore for my son's higher education in the next 15 years. Set aside atleast 50 lakhs for my son's marriage in the next 20-25 years. My current investments include: PPF - 1.5 Lakhs per annum for the last 5 years. NPS - 50000 per annum for the last 3 year. ULIP - 1.2 Lakh per annum for last 1 year One SBI scheme - 1.2 Lakhs per annum for last 3 years My wife is also working with monthly income of 1.4 Lakhs. I would greatly appreciate your advice on how to structure my mutual fund investments to achieve these goals. Thank You.
Ans: Given your financial goals and current investments, here's a suggested approach to structure your mutual fund investments:

Retirement Corpus (6 Crores in 20 years):
Start SIPs in diversified equity mutual funds with a focus on long-term growth. Allocate a significant portion of your investments towards equity funds to harness their wealth-building potential over the long term. Consider a mix of large-cap, mid-cap, and multi-cap funds to diversify across market segments and manage risk effectively. Review and increase your SIP amounts periodically, considering your income growth and inflation.
Son's Higher Education (1 Crore in 15 years):
Allocate a portion of your mutual fund investments specifically towards your son's education goal. Since the timeframe is relatively shorter, consider a balanced approach with a mix of equity and debt funds to balance growth potential with capital preservation. Gradually shift towards debt-oriented funds as the goal approaches to safeguard against market volatility and ensure capital protection.
Son's Marriage (50 Lakhs in 20-25 years):
Similar to the education goal, allocate a portion of your investments towards your son's marriage goal. Since the timeframe is longer, you can afford a more aggressive approach with a higher allocation towards equity funds. As the goal approaches, gradually shift towards more conservative investments to protect the accumulated corpus.
Review and Rebalance:
Regularly review your mutual fund investments and rebalance your portfolio as needed to ensure alignment with your financial goals and risk tolerance. Consider consulting with a Certified Financial Planner to periodically reassess your goals, investment strategy, and progress towards achieving them.
Remember, investing is a long-term commitment, and staying disciplined, diversified, and focused on your goals is key to achieving financial success.

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Ramalingam

Ramalingam Kalirajan  |7629 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 25, 2024

Asked by Anonymous - Apr 25, 2024Hindi
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Hi Sir . I am a 34-year-old man with a monthly income of 1.4 Lakh. I have a 1-year-old son. I haven't invested in mutual fund investments before and seek your guidance on how much to invest and in which mutual funds. My financial goals are as follows: Accumulate atleast 6 crores before retirement (in the next 20 years). Save atleast 1-2 crore for my son's higher education in the next 20 years. Set aside atleast 50 lakhs for my son's marriage in the next 25 years. My current investments include: PPF - 1.5 Lakhs per annum for the last 5 years. NPS - 50000 per annum for the last 3 year. ULIP - 1.2 Lakh per annum for last 1 year One SBI scheme - 1.2 Lakhs per annum for last 3 years My wife is also working with monthly income of 1.4 Lakhs. I would greatly appreciate your advice on how to structure my mutual fund investments to achieve these goals. Thank You.
Ans: It's commendable that you're planning ahead for your family's future. With clear financial goals and a steady income, you're already on the right path. Given your aspirations, mutual funds can play a pivotal role in achieving these milestones.

For your retirement goal of accumulating 6 crores in 20 years, systematic and disciplined investing will be key. Similarly, for your son's education and marriage funds, a structured approach can make a significant difference.

Considering your current investments in PPF, NPS, ULIP, and other schemes, mutual funds can complement these by offering diversification and potential growth opportunities. A Certified Financial Planner can help you tailor an investment strategy aligned with your goals, risk tolerance, and time horizon.

Remember, investing is a journey, not a race. It requires patience, diligence, and periodic review. By investing wisely and staying committed to your goals, you can pave the way for a secure and prosperous future for your family. Best wishes on your financial journey!

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Ramalingam

Ramalingam Kalirajan  |7629 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 25, 2024

Asked by Anonymous - Jun 17, 2024Hindi
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Sir..I am 38 yrs. old & want to invest 10 lacs in mutual funds for 2 yrs. In 2026 I want the amount for the higher education of my 2 kids.I want to invest the said amount in different funds so that by that time it grows by 12 to 15% Pls. suggest what I do to attain that goal
Ans: As a Certified Financial Planner (CFP), I understand the importance of your goals and the need to secure a good education for your children. Let's dive into how you can achieve this.

Assessing Your Investment Horizon and Goals
You have a clear goal: investing Rs 10 lacs for your children's higher education in 2026. The timeframe is relatively short, only two years. With this in mind, it's crucial to understand the risk involved in different types of investments.

Investing in mutual funds can provide growth, but the short duration requires a strategic approach. Higher returns typically come with higher risks, which might not be suitable for your short-term goal.

Risk Assessment and Time Frame Considerations
For a two-year investment period, risk management becomes paramount. Equity mutual funds, while offering higher returns over the long term, can be volatile in the short term. The market fluctuations might not align with your investment horizon. Hence, balancing risk and return is key.

Debt funds, on the other hand, offer more stability and lower returns. Considering your goal of achieving a 12-15% return, we need a blend of funds that can potentially meet your expectations while minimizing risk.

Diversification for Stability and Growth
Diversifying your investments can help manage risk better. By spreading your Rs 10 lacs across different types of funds, you can achieve a balanced portfolio. Let's explore the categories:

Short-term Debt Funds: These funds invest in securities with shorter durations. They offer stability and better returns than traditional savings accounts or fixed deposits.

Hybrid Funds: These funds combine equity and debt investments. They provide a balance of growth and stability, which is crucial for your two-year horizon.

Actively Managed Funds: These funds involve professional fund managers actively making investment decisions to outperform the market. Although they come with higher fees, they have the potential to provide better returns than index funds.

Understanding the Disadvantages of Index Funds
While index funds are popular for long-term investments due to their low costs, they might not be the best option for your two-year goal. Index funds track the market, which can be volatile in the short term. Actively managed funds, although costlier, can navigate market fluctuations better and potentially offer higher returns.

Benefits of Regular Funds Through an MFD with CFP Credential
Investing through a Mutual Fund Distributor (MFD) who is also a CFP can be advantageous. They provide personalized advice, helping you choose the right mix of funds. They also assist in managing your portfolio actively, ensuring it aligns with your goals.

Regular funds, managed by professionals, can adapt to market conditions, potentially offering better returns than direct funds. This guidance is especially valuable given your short investment horizon.

Investment Strategy: A Detailed Plan
Here’s a suggested investment strategy:

Allocate 40% to Short-term Debt Funds: These funds offer stability and decent returns, minimizing the risk of capital loss. This portion ensures that a significant part of your investment remains secure.

Allocate 30% to Hybrid Funds: These funds balance equity and debt, providing moderate growth potential with controlled risk. They can offer better returns than pure debt funds while maintaining some stability.

Allocate 30% to Actively Managed Equity Funds: Although riskier, these funds can provide the growth needed to achieve your target returns. The active management aspect aims to outperform the market and mitigate risks.

Monitoring and Rebalancing
Regular monitoring of your investments is crucial, especially with a short-term goal. Market conditions can change, affecting your portfolio's performance. Rebalancing ensures your investments stay aligned with your goals.

Potential Risks and Mitigation
Investing always involves risks. Market volatility, economic changes, and interest rate fluctuations can impact returns. However, a well-diversified portfolio mitigates these risks. By combining debt, hybrid, and equity funds, you can achieve a balanced approach.

Tax Considerations
Mutual fund investments come with tax implications. Short-term capital gains tax (STCG) applies to equity funds held for less than a year. For debt funds, holding them for over three years can provide indexation benefits, reducing tax liability. However, given your two-year horizon, STCG might apply.

Empathy and Understanding Your Concerns
I understand your concern for your children's future and the importance of making the right investment decisions. Education is a significant milestone, and ensuring you have the necessary funds is crucial. Your proactive approach to planning is commendable.

Genuine Compliments
Your dedication to securing your children's education shows your commitment and foresight. Taking the time to plan your investments reflects a responsible and thoughtful approach to financial planning.

Final Insights
Investing Rs 10 lacs for your children's education in 2026 requires a careful balance of risk and return. By diversifying your investments across short-term debt, hybrid, and actively managed equity funds, you can achieve your goal while managing risks. Regular monitoring and rebalancing are essential to stay on track.

Working with a Certified Financial Planner can provide you with personalized advice and professional management, ensuring your investments align with your objectives. Your commitment to planning for your children's future is admirable, and with the right strategy, you can achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Latest Questions
Ramalingam

Ramalingam Kalirajan  |7629 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 24, 2025

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Hello, I want a monthly withdrawal of 2lakh through SWP. Give me the amounts and expect ROI for various instruments that I should use. Also what factor to consider as I would be able to invest those amount lets say after a year.
Ans: To achieve a sustainable monthly withdrawal of Rs. 2 lakh (Rs. 24 lakh annually), we need to identify the right mix of investments and expected returns. Let us create a detailed framework.

1. Factors to Consider Before Investing
Time Horizon: You plan to start investing after a year. This delay impacts your compounding benefit, but planning ahead mitigates it.

Expected Rate of Return (ROI): Different instruments offer varied returns. Diversification ensures both growth and stability.

Withdrawal Feasibility: Sustainable withdrawals depend on balancing withdrawals with corpus growth.

Inflation Impact: Investments must generate returns above inflation to preserve corpus value.

Risk Appetite: Choose instruments aligning with your comfort towards volatility.

Tax Efficiency: Optimise your withdrawals and investments for better post-tax returns.

2. Expected ROI for Investment Options
Here is the expected ROI and rationale for different asset classes:

Actively Managed Equity Mutual Funds

Allocation: 50% of the corpus
Expected ROI: 12% annually
Rationale: These funds provide high returns and help beat inflation over the long term.
Debt Mutual Funds

Allocation: 30% of the corpus
Expected ROI: 7% annually
Rationale: These offer stability with moderate returns and are suitable for regular withdrawals.
Fixed-Income Instruments (e.g., FDs, SGBs)

Allocation: 15% of the corpus
Expected ROI: 6-7.5% annually
Rationale: Secure returns with no market risk. Ideal for stability.
Liquid Mutual Funds

Allocation: 5% of the corpus
Expected ROI: 4-5% annually
Rationale: Quick access for emergencies or interim cash flow needs.
3. Corpus Required for Rs. 2 Lakh Monthly Withdrawal
Corpus Based on ROI
At 8% ROI: A corpus of Rs. 3 crore is required.
At 9% ROI: A corpus of Rs. 2.66 crore is required.
At 10% ROI: A corpus of Rs. 2.4 crore is required.
The corpus requirement reduces with higher returns but increases risk exposure.

Building the Corpus Over One Year
If the funds are idle for a year, invest them in liquid mutual funds temporarily. These yield 4-5% with low risk.
Use Systematic Transfer Plans (STPs) to gradually move funds into equity and debt over 12-18 months.
4. Investment Plan for SWP
Equity Mutual Funds (50% Allocation)
Allocate Rs. 1.5 crore to equity funds.
Delay SWP for at least three years to allow growth.
Equity funds ensure high long-term returns, reducing inflation's impact.
Debt Mutual Funds (30% Allocation)
Allocate Rs. 90 lakh to debt funds.
Start SWP immediately from this portion.
These funds provide stable returns and low volatility.
Fixed-Income Instruments (15% Allocation)
Allocate Rs. 45 lakh to secure instruments like FDs or Sovereign Gold Bonds.
Use these funds for stability and emergencies.
Liquid Mutual Funds (5% Allocation)
Allocate Rs. 15 lakh to liquid funds.
Use these funds for interim liquidity needs and to manage cash flow gaps.
5. Steps for Efficient Withdrawal
Start withdrawals from debt and liquid funds first. Let equity funds grow for 3-5 years.
Monitor returns annually to adjust the withdrawal rate or asset allocation.
Keep a buffer of 1-2 years' expenses in liquid funds for emergencies.
Review the tax efficiency of your withdrawals and rebalance your portfolio every year.
Final Insights
A well-diversified portfolio ensures stable withdrawals of Rs. 2 lakh monthly. Focus on equity for growth, debt for stability, and liquid funds for emergencies. Starting the plan early and monitoring it regularly will ensure financial independence.

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.

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