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Seeking Financial Advice: What Will My Future Investments Return?

Ramalingam Kalirajan |6283 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 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

Question by sandeep on Jul 07, 2024Hindi

Sir my age is 34 yr .. in govt job .. monthly income is 1 lac ..with 2 children..I m investing 15000 per month in mutual fund and 10000 rs per month in PF nd 7000 in LIC ...what amount I will get in future and what extra I need ...??

Ans: You’re 34 years old and working in a government job, earning Rs 1 lakh per month. You have two children, which makes planning for the future even more critical. You're currently investing Rs 15,000 per month in mutual funds, Rs 10,000 per month in Provident Fund (PF), and Rs 7,000 in LIC.

Your commitment to these investments is admirable, but it’s important to ensure that they align with your long-term goals. Let’s assess where you are now and how you can plan for a secure future.

Evaluating Your Current Investments
Mutual Fund SIPs: Investing Rs 15,000 per month in mutual funds is a strong strategy for wealth creation. Mutual funds have the potential for good returns over the long term. The power of compounding will help your money grow, especially if you stay invested for a long time.

Provident Fund (PF): Your Rs 10,000 monthly investment in PF is a solid choice for safe and steady growth. PF offers a fixed return with tax benefits, making it a secure option. It is particularly beneficial for retirement planning.

LIC Policies: You’re investing Rs 7,000 per month in LIC. While LIC provides a mix of insurance and returns, it’s essential to evaluate if it meets your needs. Traditional LIC policies typically offer lower returns compared to other investment options.

Projecting Your Future Corpus
Without using specific calculations or formulas, let’s broadly estimate what you might expect from your investments:

Mutual Funds: Over a long period, mutual funds have the potential to offer returns that could multiply your investments significantly. However, these returns are not guaranteed and are subject to market risks.

Provident Fund (PF): PF offers a predictable return, which will grow steadily. This fund will be a key part of your retirement corpus, providing you with a stable income during your retirement years.

LIC Policies: The returns from LIC policies are generally lower compared to mutual funds or even PF. These policies are more about protection and security than wealth creation.

Assessing Your Financial Goals
To determine what extra you need to do, it’s important to identify your financial goals. Here are some typical goals:

Children’s Education: Providing for your children’s higher education is likely a priority. Education costs are rising, and planning early will help you avoid financial stress later.

Retirement Planning: Securing your retirement is crucial. You need to ensure that your retirement corpus is sufficient to maintain your lifestyle after you stop working.

Emergency Fund: It’s important to have an emergency fund that can cover at least 6 months of your expenses. This fund should be liquid and easily accessible in case of unexpected events.

Identifying Gaps and Additional Steps
Increase Mutual Fund Investments: You may want to increase your monthly SIP in mutual funds. This will help you build a larger corpus for long-term goals like your children’s education and your retirement. Consider actively managed funds through a Certified Financial Planner (CFP) instead of direct funds to benefit from professional expertise.

Review LIC Policies: Assess whether your LIC policies are serving your financial goals. If the returns are lower than what you could get from mutual funds or PF, you might consider surrendering the policy and reinvesting the proceeds in higher-yielding options. However, do this only after careful consideration and consultation with a CFP.

Explore Child Education Plans: Consider investing in child education plans that can offer returns aligned with the future cost of education. Look for options that provide growth potential and ensure that the funds are available when needed.

Build an Emergency Fund: If you haven’t already, start building an emergency fund. This will provide financial security and ensure that you’re not forced to dip into your investments during tough times.

Final Insights
Balanced Investment Approach: Continue your existing investments but consider increasing your mutual fund SIP. This will help you take advantage of the long-term growth potential of the market.

Insurance and Protection: Ensure that your insurance needs are adequately covered. LIC provides life coverage, but you may also want to explore term insurance for higher coverage at a lower premium.

Retirement Planning: Your PF is a good start, but it might not be enough. Consider increasing your retirement investments by either upping your PF contribution or adding to your mutual fund investments.

Consult a Certified Financial Planner: A CFP can help you align your investments with your goals. They can offer personalized advice based on your specific situation, helping you make informed decisions for your family’s future.

By taking these steps, you can ensure that your financial future is secure and that you’re on track to meet your goals.

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.