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How can I grow my 1 crore investment into 5 crores in 10 years with low risk?

Ramalingam

Ramalingam Kalirajan  |6625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 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 22, 2024Hindi
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I have one crore corpus in liquid cash. I want to make 5 crores in 10 years. But I can't take risky investment. I want to know moderate risk investment strategy.

Ans: Your Financial Picture

Current corpus: Rs. 1 crore
Goal: Rs. 5 crores
Time frame: 10 years
Risk appetite: Moderate

Understanding Your Goal

You want to grow your money 5 times in 10 years
This needs a yearly return of about 17-18%
It's a bit high for moderate risk, but we can try

Investment Strategy
For moderate risk, we can split your money like this:

50-60% in equity-related investments
30-40% in debt-related investments
5-10% in gold or other alternative investments

Equity Investments

Put money in good actively managed mutual funds
These funds can give better returns than the market
The fund managers work hard to pick the best stocks

Benefits of Actively Managed Funds

Professional management of your money
Expert fund managers pick stocks for you
They can change investments based on market conditions
You get the benefit of their knowledge and experience

Debt Investments

Invest in corporate bond funds and banking PSU funds
These give steady returns with moderate risk
They're safer than pure equity funds

Gold Investments

Gold can protect your money when markets are bad
Don't put too much money in gold
5-10% of your total investment is enough

Regular Funds vs Direct Funds

Regular funds are better for most people
You get help from a certified financial planner
They guide you in picking the right funds
They help you stay on track with your goals

Investment Plan
Here's a simple plan you can follow:

Start with 55% in equity funds
Put 35% in debt funds
Keep 10% in gold funds
Review and change this mix every year

Regular Reviews

Check your investments every 3-6 months
Make changes if needed
Keep an eye on how close you are to your goal

Protection First

Make sure you have good life insurance
Get health insurance for you and your family
Keep some money aside for emergencies

Tax Planning

Invest in tax-saving options within this plan
Don't focus only on saving tax
Look at overall returns and how they fit your goal

Finally
Your goal is tough but not impossible. Start investing right away. Be patient and disciplined. Regular reviews will help you stay on track. Remember, slow and steady wins the race!
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.
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Moneywize

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Financial Planner - Answered on Feb 03, 2024

Asked by Anonymous - Feb 02, 2024Hindi
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I have Rs 3.5 lakh and want to invest this amount for a period of 5 years. I can take low to moderate risk. What options would you suggest for me? I am expecting only moderate returns of up to 15-18% for my investments. What would you suggest for me if I want say higher returns in the range of 20-25%?
Ans: For a 5-year investment horizon with a preference for low to moderate risk, it's important to consider a well-diversified portfolio to balance potential returns and risks.

Here are some investment options based on your risk preferences:

• Low to Moderate Risk (Expecting returns of 15-18%):

1. Equity Mutual Funds:

Opt for large-cap or multi-cap equity mutual funds. These funds provide exposure to well-established companies and offer the potential for moderate returns. Choose funds with a consistent track record and a focus on risk management.

2. Balanced Funds:

Balanced funds, also known as hybrid funds, invest in a mix of equities and debt instruments. They provide a balance between growth and stability, making them suitable for investors with a moderate risk appetite.

3. Debt Mutual Funds:

Consider allocating a portion of your investment to debt mutual funds, particularly short to medium-term funds. These funds invest in fixed-income securities and can provide stable returns with lower volatility compared to equities.

4. Fixed Deposits (FDs):

Bank fixed deposits and corporate FDs offer capital protection and a fixed rate of return. While the returns may be relatively lower, they provide a stable and predictable income stream.

• Higher Risk (Expecting returns of 20-25%):

1. Mid and Small-Cap Equity Funds:

If you are willing to take on a higher level of risk, consider mid and small-cap equity funds. These funds invest in smaller companies with higher growth potential but come with increased volatility.

2. Sector-Specific Funds:

Allocate a small portion of your portfolio to sector-specific funds. These funds focus on specific industries like technology, healthcare, or banking, which may offer higher returns but come with sector-specific risks.

3. Unit Linked Insurance Plans (ULIPs):

ULIPs combine insurance with investment and offer the flexibility to invest in equity or debt funds. However, be mindful of the charges associated with ULIPs and thoroughly understand the terms and conditions.

4. Stocks:

Direct equity investment in individual stocks can potentially provide higher returns. However, stock market investments carry higher risk and require a good understanding of the market. Diversify your stock portfolio to manage risk.

5. Systematic Investment Plans (SIPs):

Consider investing in equity mutual funds through Systematic Investment Plans (SIPs). SIPs allow you to invest a fixed amount regularly, promoting disciplined investing and taking advantage of rupee cost averaging.

Before making any investment decisions, carefully assess your financial goals, risk tolerance, and investment horizon. Diversification across different asset classes can help manage risk. It's also advisable to consult with a financial advisor to create a personalised investment strategy based on your specific situation and goals.

..Read more

Ramalingam

Ramalingam Kalirajan  |6625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

Asked by Anonymous - Apr 19, 2024Hindi
Money
I need suggestion on how to make a good corpus in next 5 years.. I am a female of 33 yrs age and I earn 2 lakhs per month. I have invested in shares and have life insurance of LIC and ICICI of 5 lakhs each which will mature in 2038 Should I make more risky investments or should I make riskfree investments like PPF. I am also opting for new regime in tax so does it make sense to go for voluntary NPS of 50k per year.
Ans: Building a Corpus in 5 Years: Strategic Planning

Guidance on Investment Strategies and Financial Planning

Your aspiration to build a substantial corpus over the next 5 years reflects a proactive approach towards financial growth. Let's explore suitable investment avenues considering your income, risk appetite, and tax planning preferences to optimize your wealth accumulation.

Understanding Financial Goals and Risk Appetite

As a 33-year-old female with a monthly income of 2 lakhs, it's essential to align your investment strategy with your financial goals and risk tolerance. Assess your willingness to accept risk and volatility in pursuit of higher returns versus prioritizing capital preservation and stability.

Balancing Risk and Return

Considering your existing investments in shares and life insurance policies, evaluate the overall risk exposure of your portfolio. While higher-risk investments offer the potential for greater returns, they also entail increased volatility and the possibility of capital loss. Assess your comfort level with risk and diversify your portfolio accordingly.

Insurance-cum-investment schemes
Insurance-cum-investment schemes (ULIPs, endowment plans) offer a one-stop solution for insurance and investment needs. However, they might not be the best choice for pure investment due to:
• Lower Potential Returns: Guaranteed returns are usually lower than what MFs can offer through market exposure.
• Higher Costs: Multiple fees in insurance plans (allocation charges, admin fees) can reduce returns compared to the expense ratio of MFs.
• Limited Flexibility: Lock-in periods restrict access to your money, whereas MFs provide more flexibility.
MFs, on the other hand, focus solely on investment and offer:
• Potentially Higher Returns: Investments in stocks and bonds can lead to higher growth compared to guaranteed returns.
• Lower Costs: Expense ratios in MFs are generally lower than the multiple fees in insurance plans.
• Greater Control: You have a wider range of investment options and control over asset allocation to suit your risk appetite.
Consider your goals!
• Need life insurance? Term Insurance plans might be suitable.
• Focus on growing wealth? MFs might be a better option due to their flexibility and return potential.



Exploring Investment Options

Equity Investments: Given your relatively young age and income level, consider allocating a portion of your portfolio to equity investments, such as diversified mutual funds or individual stocks. Equity investments offer the potential for long-term capital appreciation, although they come with higher volatility.

Fixed Income Investments: To balance risk, consider allocating a portion of your portfolio to fixed income instruments like Public Provident Fund (PPF) or debt mutual funds. These investments provide stability and steady returns, albeit at lower rates compared to equities.

Tax Planning: Opting for the new tax regime and investing in tax-efficient instruments can enhance your overall financial plan. Voluntary contributions to the National Pension System (NPS) offer tax benefits under Section 80CCD(1B), providing additional savings while optimizing tax liability.

Considering PPF and Voluntary NPS

PPF: PPF offers attractive tax benefits, compounded returns, and capital protection, making it an ideal choice for risk-averse investors. By investing in PPF, you can build a tax-efficient corpus over time while enjoying the security of government-backed savings.

Voluntary NPS: Opting for voluntary contributions to NPS can supplement your retirement savings and provide tax benefits under the new tax regime. Evaluate the flexibility, investment options, and tax implications of NPS before making a decision.

Crafting a Comprehensive Financial Plan

Formulate a comprehensive financial plan encompassing your income, expenses, investment goals, and risk profile. Seek guidance from a Certified Financial Planner (CFP) to develop a tailored investment strategy aligned with your objectives and preferences.

Regular Review and Adjustment

Regularly review your investment portfolio, track performance, and make necessary adjustments to ensure alignment with your financial goals and changing circumstances. Stay informed about market developments and seek professional advice as needed to optimize your financial plan.

Conclusion

By striking a balance between risk and return, diversifying your investment portfolio, and leveraging tax-efficient instruments like PPF and voluntary NPS, you can work towards building a substantial corpus over the next 5 years. Stay disciplined, informed, and proactive in managing your finances to achieve your wealth accumulation objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6625 Answers  |Ask -

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

Asked by Anonymous - Jul 22, 2024Hindi
Money
I have a corpus of 1 crore in liquid cash. How to make investment that will yield me 5 crore in 10 years time.
Ans: You have a corpus of Rs. 1 crore. Your goal is to grow this to Rs. 5 crore in 10 years. This is an ambitious target, but achievable with the right strategy.

Achieving a five-fold increase over ten years requires an annual return of about 17.5%. Let’s explore how you can structure your investments to meet this goal.

Assessing Your Risk Profile
Your target return indicates a need for higher-risk investments.
Assess your risk tolerance. Higher returns often come with higher volatility.
If you are comfortable with market fluctuations, a significant portion of your portfolio can be allocated to equity.
Diversified Equity Investments
Equity Mutual Funds
Equity mutual funds should form the core of your portfolio. They can provide the growth needed to reach your target.
Diversify across large-cap, mid-cap, and small-cap funds. This will help balance risk and reward.
Large-cap funds offer stability, while mid-cap and small-cap funds provide higher growth potential.
Actively Managed Funds
Avoid index funds. They track the market and may not achieve your target.
Actively managed funds, led by experienced fund managers, aim to outperform the market.
A Certified Financial Planner can help you select the best-performing funds.
Sector and Thematic Funds
Consider sector-specific funds in high-growth industries like technology or healthcare.
Thematic funds focusing on emerging trends can also be lucrative.
These funds carry higher risk but can significantly boost returns if chosen wisely.
Systematic Investment Plans (SIPs)
While you already have Rs. 1 crore, regular investments through SIPs can enhance returns.
SIPs help in rupee-cost averaging, reducing the impact of market volatility.
Start SIPs in a mix of the funds mentioned above. This will ensure disciplined investing.
Direct vs. Regular Funds
Direct funds may have lower expenses, but they require active management.
Investing through a regular plan with a Certified Financial Planner ensures expert advice.
The planner can help adjust your portfolio as market conditions change, optimizing returns.
Portfolio Rebalancing
Regular Monitoring
Regular monitoring of your portfolio is crucial. Market conditions can change, affecting fund performance.
A Certified Financial Planner will review your investments periodically, making necessary adjustments.
Rebalancing
Rebalancing ensures your portfolio stays aligned with your goals.
For example, if small-cap funds outperform and their weight in your portfolio increases, rebalancing will bring your portfolio back to the desired risk level.
This strategy helps in locking in profits from high-performing assets.
Adding Debt Instruments for Stability
Balanced Allocation
While equity should dominate, a portion of your portfolio in debt instruments can add stability.
Debt funds or fixed-income securities provide regular income and reduce overall risk.
A small allocation to these instruments ensures that your portfolio remains resilient during market downturns.
Hybrid Funds
Hybrid funds, which invest in both equity and debt, can offer a balanced approach.
They provide the growth potential of equity while cushioning against volatility through debt investments.
These funds are suitable if you prefer a more conservative approach.
Tax Considerations
Long-Term Capital Gains (LTCG)
Equity investments held for more than one year are subject to LTCG tax at 10% on gains above Rs. 1 lakh.
Plan your withdrawals to minimize tax liability. Consider spreading withdrawals over multiple financial years if needed.
Tax-Efficient Funds
Choose tax-efficient funds to enhance your post-tax returns.
Equity Linked Saving Schemes (ELSS) offer tax benefits under Section 80C but may not be necessary if tax-saving is not a priority.
Focus on funds that provide better returns after taxes, considering your tax bracket.
Emergency Fund and Liquidity
Maintaining Liquidity
Ensure that you keep an emergency fund aside from the Rs. 1 crore corpus.
This fund should cover at least 6-12 months of your living expenses.
Liquid funds or short-term debt funds can be ideal for this purpose.
Liquidity in Portfolio
While aiming for growth, ensure a portion of your portfolio remains liquid.
This will allow you to make adjustments if financial needs arise or market conditions change.
Final Insights
Your goal to grow Rs. 1 crore to Rs. 5 crore in 10 years is challenging but achievable. A diversified investment strategy, focused primarily on equity, is essential. Actively managed funds, sector funds, and thematic investments can drive the growth you need. Regular monitoring and rebalancing are crucial to ensure your portfolio stays on track. Additionally, maintaining a balance between growth and stability with some debt instruments can protect your investments during volatile periods. Tax efficiency and liquidity should not be overlooked, as they play a significant role in maximizing your returns and meeting any unforeseen financial needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Hello Madam, i am 38 year married women, having a 15year 1 kid boy ( but my husband not loving me even he is not talking with me from the last 8 years but we r leaving together due to our son, he fulfilled the need with the responsibilities of our home and our son but as wife he is not talking and even not caring to me ,but before 2 years back one married man come to talk with me he is my official colleague and we both attached a lot with each other after some days he proposed me and said that he is loving me many years ago but he thought that i am very Strick person will not response him, but now he is saying that he wants me as a life partner me also every time he treat me like a wife very much caring and loving nature now i introduce him to my family as a friend and family members also very happy with taking to him, we are from 2 year together is it good or what should i do further?
Ans: Dear Ruta,
You want to get into a relationship with a married man? Will that not complicate your already complicated life?
You certainly deserve to be loved and taken care of BUT do not jump towards a married man...you do understand that his priorities will lie with his first family and this will hurt you again and you will feel neglected AGAIN...

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Milind

Milind Vadjikar  |426 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 15, 2024

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Dear Sir, My Age is 59 and investment is as follows: Stock market 1.2 Cr MFI 2.0 Cr Expectied pension from 2026 1,4L per month House : own house Loan liability is zero Responsibility: Marriage of two sons who finished PG My question is " above fund sufficient to take over for me and my wife for next 30 year (assuming life expectancy is 90 Years) Regards Srinivasan
Ans: Hello;

You may invest 20 L in Arbitrage type of mutual fund(low risk) earmarked for marriage of your sons.

Also you may invest 3 Cr into equity savings type mutual fund (moderate risk).

After 3 years it may grow into a sum of 3.89 Cr considering modest return of 9%.

I suggest that you redeem this corpus by paying LTCG(~11 L) and buy an immediate annuity for balance corpus of 3.78 Cr from a life insurance company.

I am not recommending you to do an SWP because for your required monthly income SWP rate will have to be 4.5%+ annually and I ran this on an swp calculator which shows depleted corpus of less then 1 Cr after 30 years.

Considering annuity rate of 6% you may expect to receive monthly payment of 1.89 L(pre-tax).

Seek joint annuity for yourself and your spouse with return of purchase price to your nominees.

Some life insurers offer increasing annuity at fixed intervals to account for inflation.

Also if you shop around and negotiate you may get a better annuity rate.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

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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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