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

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 11, 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 - May 11, 2024Hindi
Listen
Money

I AM 78 YEARS OLD AND STILL WORKING AND EARNING RS.75000.00/MONTH. MY CURRENT CORPUS IS RS.1.2 CR.IN MUTUAL FUND AND 58 LAKHS IN FDs.COMPRISING OF SCSS, AND FDs.I HAVE ON GOING SIP IN MF OF RS.01 LAKH /MONTH. I HAVE NO LIABILITIES AND SELF AND WIFE ARE COVERED UNDER MEDICAL INSURANCE. I NEED YOUR OPINION ON MY CURRENT INVESTMENTS AND IMPROVEMENTS NEEDED IF ANY. REGARD, RAMANATHAN

Ans: Dear Mr. Ramanathan,

Firstly, let me commend you on your prudent financial management and your active engagement in securing your financial future at the age of 78. It's inspiring to see your dedication towards sustaining and growing your wealth.

Your current investments reflect a balanced approach with a mix of mutual funds and fixed deposits, providing both growth potential and stability. With a corpus of Rs. 1.2 crore in mutual funds and 58 lakhs in FDs, you have built a solid foundation for your retirement.

Your ongoing SIP of Rs. 1 lakh per month demonstrates a disciplined approach towards wealth accumulation. It's an effective strategy for wealth creation over the long term.

However, it's essential to periodically review your portfolio to ensure alignment with your financial goals and risk tolerance. Given your age and financial standing, you may consider diversifying your portfolio further to mitigate risk.

While fixed deposits offer security, they may not provide optimal returns considering inflation and taxation. Exploring other investment avenues such as debt mutual funds or balanced funds could potentially enhance your returns without significantly increasing risk.

Moreover, having a portion of your portfolio allocated towards growth-oriented assets like equity mutual funds can help counteract the impact of inflation and generate higher returns over the long term.

Additionally, engaging with a Certified Financial Planner can provide personalized guidance tailored to your specific needs and goals. They can assist in optimizing your investment strategy, tax planning, and retirement planning to ensure a comfortable and secure financial future.

In conclusion, while your current investments showcase prudence and foresight, there is room for optimization to maximize returns and mitigate risk. By staying proactive and seeking professional advice, you can further enhance your financial well-being.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Asked on - May 11, 2024 | Answered on May 11, 2024
Listen
THANKS FOR UR IMMEADIATE RESPONSE. RS.1 LAKH SIP I HAVE MENTIONED IS 100PERCENT IN EQUITY MF . FURTHER I NEED TO INFORM U THAT I HAVE RS.7 LAKH IN SB.ACCT.FOR EMERGENCY PURPOSE WHICH CAN BE USED IN N. CASE OF URGENT CASH NEED. I RECEIVE AROUND RS.45000.00 PER MONTH FROM INTEREST EARNED ON FD INVESTMENTS. YOUR COMMENTS IF ANY. Regards, RAMANATHAN
Ans: Consider diversification: While equity MFs are good for growth, some debt MFs could provide stability.
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  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 07, 2024

Asked by Anonymous - Jun 03, 2024Hindi
Money
Hello Sir My age is 31 My in hand salary is 1.5 lakh per month. Below are investment I am doing 30k for Rd 5k for nps 16500 for mutual fund 20k house emi Rest if going as fd 80k I want to retire by 45 And I want corpus around 2cr Please is current investment is okay or should I modify it?
Ans: Thank you for sharing the details of your financial situation and goals. It’s commendable that you have a clear vision for your retirement and are actively investing towards it. Let's review your current investments and create a robust plan to achieve your goal of retiring by 45 with a corpus of Rs 2 crores.

Current Financial Situation Analysis

At 31 years old, you have a monthly in-hand salary of Rs 1.5 lakhs. Your current investments are as follows:

Recurring Deposit (RD): Rs 30,000 per month
National Pension System (NPS): Rs 5,000 per month
Mutual Funds: Rs 16,500 per month
House EMI: Rs 20,000 per month
Fixed Deposits (FD): Rs 80,000 per month
Your goal is to retire by 45 with a corpus of Rs 2 crores. Let's evaluate and optimize your current investment strategy.

Evaluating Current Investments

Recurring Deposit (RD)

Recurring Deposits offer guaranteed returns but have lower interest rates compared to other investment options. While they are safe, they may not help you achieve your retirement corpus due to their lower growth potential.

National Pension System (NPS)

NPS is a good retirement savings option offering tax benefits and a mix of equity and debt exposure. However, NPS has restrictions on withdrawals before retirement and mandatory annuitization at maturity.

Mutual Funds

Investing Rs 16,500 per month in mutual funds is a good strategy. Mutual funds offer diversification and potential for higher returns. Evaluating the types of mutual funds you’re investing in (equity, debt, hybrid) will help ensure proper asset allocation.

House EMI

Your house EMI of Rs 20,000 per month is a fixed commitment. While this is not an investment, it's part of your financial planning and impacts your cash flow.

Fixed Deposits (FD)

Allocating Rs 80,000 per month to fixed deposits is significant. FDs offer safety but low returns. They may not be the best option for long-term wealth creation due to their low interest rates compared to inflation.

Setting Up a Robust Financial Plan

1. Setting Clear Financial Goals

Retirement Corpus

Your goal is to accumulate Rs 2 crores by the age of 45. This requires a strategic approach to investing with a focus on growth while managing risks.

Emergency Fund

Maintain an emergency fund to cover at least 6 months of expenses. This ensures financial stability during unexpected situations.

2. Optimizing Your Investment Portfolio

Recurring Deposit Adjustment

Consider reducing your monthly RD contributions. Redirect these funds to higher-return investments like mutual funds. While RDs are safe, their low returns may not help you reach your retirement goal efficiently.

Increasing Mutual Fund Investments

Increasing your mutual fund investments will enhance your portfolio’s growth potential. Investing in equity mutual funds can provide higher returns over the long term. Diversify your mutual fund investments across different categories (large cap, mid cap, small cap, and hybrid funds).

Evaluating NPS Contributions

NPS is a good option for retirement savings due to its tax benefits and mix of equity and debt. Continue your NPS contributions but consider increasing them if possible. The equity exposure in NPS can help in achieving higher returns.

Reducing Fixed Deposit Allocations

Fixed deposits are safe but offer lower returns. Reduce your FD contributions and redirect these funds to mutual funds or other high-return investment options. This will enhance your portfolio’s growth potential.

Investment Allocation Strategy

Here’s a suggested investment allocation based on your monthly budget:

Equity Mutual Funds: Rs 50,000 (Higher growth potential but higher risk)
Debt Mutual Funds: Rs 10,000 (Stability and lower risk)
NPS: Rs 10,000 (Retirement savings with tax benefits)
Emergency Fund: Rs 10,000 (Until you reach the target amount)
3. Calculating Required Monthly Savings

To achieve your goal of Rs 2 crores in 14 years, let’s calculate the required monthly savings assuming an average annual return of 12% from your investments.

You need to invest approximately Rs 58,772 per month to achieve your goal of Rs 2 crores in 14 years with an annual return of 12%.

4. Strategic Asset Allocation

To achieve a balanced portfolio, diversify your investments across different asset classes:

Equity Mutual Funds

Allocate a significant portion to equity mutual funds for higher growth. Diversify across large cap, mid cap, and small cap funds. Actively managed funds offer potential for higher returns compared to index funds.

Debt Mutual Funds

Invest in debt mutual funds for stability and lower risk. These funds provide regular income and preserve capital.

National Pension System (NPS)

Continue and potentially increase your NPS contributions. NPS offers a balanced mix of equity and debt, which is beneficial for long-term retirement planning.

Emergency Fund

Maintain a separate emergency fund to cover unforeseen expenses. Aim for 6-12 months of expenses in a liquid, easily accessible account.

5. Regular Review and Rebalancing

Financial planning is an ongoing process. Regularly review your portfolio’s performance and make necessary adjustments. Market conditions and personal goals may change, requiring rebalancing of your investments.

Professional Guidance

Consulting with a Certified Financial Planner (CFP) will provide you with personalized advice and professional management of your investments. A CFP can help in selecting the right funds, monitoring performance, and making strategic adjustments.

Empathy and Understanding

It's understandable that managing finances can be challenging, especially with long-term goals. Your dedication to securing your financial future is commendable. Taking proactive steps and seeking professional advice will help you achieve your goals efficiently.

Final Insights

Your commitment to achieving a retirement corpus of Rs 2 crores by 45 is ambitious yet achievable. By optimizing your current investments, increasing mutual fund allocations, and maintaining regular contributions, you can reach your goal.

Remember, financial planning is a dynamic process that requires regular monitoring and adjustments. Stay focused, consult with a Certified Financial Planner, and keep your long-term goals in mind. With a strategic approach and disciplined investing, you’ll achieve financial freedom and security.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 14, 2024

Money
Dear Sir, I aman Army Veteran of 64 years snd wife aged 61. I have a monthly pension of Rs 1,8lakh pm. I have following investments. FDs 1.2 Cr @ 8pc SCSS 30 lakh @7.8pc Gold ETF 6 lakh PPF Rs 22 lakh. Rs12500 pm. Maturing in Mar 28. Equity Rs 1.5 cr. Investment through self study. MF HDFC multy cap Rs 29 lakh. Monthly contribution Rs 10K. MIRAE ASSETS Emerging Blue Chip Rs 23 Lakh. Monthly contribution Rs 12500 pm ICICI Pru bluechip Pru blue chip Rs 33 lakh. Monthly contribution Rs 50K Bandhan Multi Cap Rs 23 lakh. Monthly contribution Rs 15K. Frankin Temp Rs 1.2 lakh. No monthly contribution All MF direct schemes. I have a house to live. Choldren Son 34 married and settled. Daughter 28. Working good package. Responsibilty. Only daughter marriage House Hold expenditure Rs 50K. Covere for medical by ECHS. I have only one goal to leave a corpus of Rs20Cr or more for my children in the next 15 years. Please advise any changes in the investment. Thank you Jasbir Singh
Ans: Dear Mr. Jasbir Singh,

First, I must commend you for your disciplined approach to financial planning and your desire to secure a substantial corpus for your children. At 64 years old, with a stable pension of Rs. 1.8 lakh per month and various well-placed investments, you are in a strong financial position. Your investments are diversified across fixed deposits (FDs), Senior Citizens' Savings Scheme (SCSS), gold ETFs, Public Provident Fund (PPF), equities, and mutual funds.

Your primary goal is to leave a corpus of Rs. 20 crore or more for your children in the next 15 years. With your current financial standing, you have laid a solid foundation to achieve this.

Evaluating Your Existing Portfolio
1. Fixed Deposits (FDs)

You have Rs. 1.2 crore in FDs earning 8% interest. This provides stable, risk-free returns and liquidity, which is essential for your age. However, FDs generally offer lower returns compared to other investment options. Given your long-term horizon, consider the opportunity cost of keeping a large portion of your portfolio in FDs.
2. Senior Citizens’ Savings Scheme (SCSS)

SCSS is a safe investment with a reasonable interest rate of 7.8%, offering quarterly interest payouts. This is a good option for generating regular income, especially given the tax benefits. Keep this investment as it aligns with your risk profile and cash flow needs.
3. Gold ETFs

You have Rs. 6 lakh in gold ETFs, which provide a hedge against inflation and economic uncertainties. This is a good long-term investment, but the returns are generally moderate. Since your portfolio is diversified, maintaining this small allocation to gold is beneficial.
4. Public Provident Fund (PPF)

Your PPF investment of Rs. 22 lakh, with a monthly contribution of Rs. 12,500, will mature in March 2028. PPF is a safe and tax-efficient investment, and you should continue it as part of your retirement planning. Given the current interest rates, PPF offers attractive long-term returns.
5. Equities

You have Rs. 1.5 crore in equities, which you manage through self-study. Equities are vital for long-term growth, and your involvement shows that you are well-versed in market dynamics. However, regular portfolio review and rebalancing are crucial to mitigate risks.
6. Mutual Funds

Your mutual fund portfolio is diversified across different funds, with a significant investment in large-cap and multi-cap funds. The monthly SIP contributions demonstrate a disciplined investment approach.
Suggested Adjustments to Achieve Your Goal
1. Rebalance Your Portfolio

Increase Equity Exposure: Considering your long-term goal of Rs. 20 crore, increasing your equity exposure could enhance your portfolio’s growth potential. You might consider reallocating some funds from FDs to equities or equity mutual funds, as they typically offer higher returns over the long term.

Diversify Equity Investments: While you have a strong base in large-cap and multi-cap funds, consider adding mid-cap and small-cap funds for potentially higher returns, though they come with increased risk.

Monitor and Rebalance Regularly: Review your portfolio at least annually to ensure it remains aligned with your goals. Adjust your asset allocation based on market conditions and your risk tolerance.

2. Optimize Your Tax Efficiency

Maximize Tax Benefits: Continue maximizing tax-saving opportunities through your PPF and SCSS investments. Consider tax-efficient mutual funds under the long-term capital gains tax regime, especially for equity investments held for over a year.

Minimize Tax Liabilities: Given your high pension, you might be in a higher tax bracket. Efficient tax planning, including timing the sale of investments to optimize tax impact, is crucial.

3. Estate Planning and Wealth Transfer

Create a Will: Ensure you have a clear and legally sound will in place to avoid any legal complications for your heirs. Specify how your assets should be distributed among your children.

Trust Planning: Consider setting up a trust if you want to manage the distribution of your wealth after your demise. This can provide more control over how and when your children receive the inheritance.

Nomination and Documentation: Ensure that all your investments have proper nominations. Keep your financial documents and information organized and accessible to your family.

4. Increase SIP Contributions

Gradually Increase SIPs: As your pension and existing investments provide stability, consider gradually increasing your SIP contributions. This will help you take advantage of the power of compounding over the next 15 years.

Focus on Growth-Oriented Funds: Since you are aiming for a Rs. 20 crore corpus, growth-oriented mutual funds with a good track record should be your focus. Regularly review the performance of your current SIPs and adjust if necessary.

5. Review Your Risk Tolerance

Risk Assessment: As you age, your risk tolerance may decrease. Periodically assess your risk tolerance and adjust your equity exposure accordingly. A balanced approach that considers both growth and preservation of capital is essential.

Health Coverage: Although you are covered by ECHS, consider having additional health insurance to cover any unexpected medical expenses not covered under ECHS. This will protect your corpus from being depleted due to medical emergencies.

Final Insights
You are in a commendable financial position with a clear vision for your family's future. By making strategic adjustments to your portfolio, optimizing tax efficiency, and ensuring proper estate planning, you are well on your way to achieving your goal of leaving a substantial corpus for your children.

Keep in mind the importance of regular portfolio reviews and adjustments. The financial landscape can change, and staying informed will help you navigate your investment journey successfully.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
Listen
Money
Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...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