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Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 05, 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 - Jun 05, 2024Hindi
Money

Hi dev, i earn 1,44 000 per month. I am 33 years old, Around 18000 per month my money goes into LIC jeevan labh yojana. Remaining i give around 40k to my parents as a help monthly. If i cut 10000 as monthly expenditure, how should i invest around 70k per month to get maximum returns.How should be the split.Please suggests SIPs to invest in.

Ans: Earning Rs. 1,44,000 per month is commendable. Your monthly commitments include Rs. 18,000 for LIC Jeevan Labh Yojana, Rs. 40,000 to help your parents, and Rs. 10,000 for personal expenses. After these, you have Rs. 70,000 left for investments. It's great that you’re focusing on maximizing returns. Your commitment to family is admirable and reflects a responsible mindset. Let's discuss a suitable investment strategy for you.

Understanding the Investment Landscape
Investing Rs. 70,000 monthly is substantial. We need to allocate it across various instruments to balance risk and return. Mutual funds are excellent for this purpose due to their diverse options, liquidity, and potential for high returns. Mutual funds pool money from various investors to invest in diversified portfolios. This diversification reduces risk and allows professional management.

Categorizing Mutual Funds
Mutual funds can be categorized based on the underlying assets. Here are some categories to consider:

1. Equity Funds
Equity funds invest in stocks. They can be further classified into large-cap, mid-cap, and small-cap funds based on the companies' market capitalization they invest in.

Large-Cap Funds: Invest in large, well-established companies. They are less volatile and offer steady growth.
Mid-Cap Funds: Invest in mid-sized companies with potential for high growth. They are riskier than large-cap funds but can provide higher returns.
Small-Cap Funds: Invest in smaller companies. They are the most volatile but offer the highest growth potential.
2. Debt Funds
Debt funds invest in fixed income instruments like bonds and treasury bills. They are less risky than equity funds and provide steady returns.

3. Hybrid Funds
Hybrid funds invest in a mix of equity and debt. They offer a balanced approach, providing growth potential and stability.

Splitting Your Investment
To achieve maximum returns while managing risk, a balanced allocation across different mutual fund categories is advisable. Here’s a suggested split for your Rs. 70,000 monthly investment:

Equity Funds (50% - Rs. 35,000)
Equity funds should form the bulk of your portfolio, given their high return potential. Within equity funds, diversify across large-cap, mid-cap, and small-cap funds.

Large-Cap Funds (20% - Rs. 14,000): These funds are relatively stable and provide moderate returns.
Mid-Cap Funds (15% - Rs. 10,500): These funds have a higher growth potential with moderate risk.
Small-Cap Funds (15% - Rs. 10,500): These funds are high-risk but can offer significant returns.
Debt Funds (30% - Rs. 21,000)
Debt funds provide stability and reduce overall portfolio risk. Allocate around 30% of your investment here.

Short-Term Debt Funds (15% - Rs. 10,500): These funds are less affected by interest rate changes.
Long-Term Debt Funds (15% - Rs. 10,500): These funds offer higher returns but come with interest rate risk.
Hybrid Funds (20% - Rs. 14,000)
Hybrid funds offer a balanced mix of equity and debt. They are suitable for medium-term goals and provide a cushion against market volatility.

Aggressive Hybrid Funds (10% - Rs. 7,000): These funds invest primarily in equity but have a significant debt component.
Conservative Hybrid Funds (10% - Rs. 7,000): These funds have a higher debt component, offering more stability.
Advantages of Mutual Funds
Professional Management
Mutual funds are managed by professional fund managers. They make informed decisions based on research and market analysis. This expertise can significantly enhance your returns.

Diversification
Investing in mutual funds offers diversification, spreading your investment across various assets. This reduces risk, as poor performance in one asset is balanced by better performance in another.

Liquidity
Mutual funds are highly liquid. You can buy and sell mutual fund units on any business day, providing flexibility to access your money when needed.

Compounding
Mutual funds benefit from the power of compounding. Reinvesting your returns allows your investment to grow exponentially over time.

Risk Assessment
While mutual funds offer high returns, they come with risks. Here are some key points to consider:

Market Risk
Equity funds are subject to market risk. The value of your investment can fluctuate with market conditions. However, long-term investment in equity funds usually mitigates this risk.

Interest Rate Risk
Debt funds are affected by changes in interest rates. Rising interest rates can reduce the value of existing bonds in a debt fund's portfolio. Short-term debt funds are less affected by this risk.

Credit Risk
Debt funds also face credit risk, the risk of default by issuers of the bonds they hold. Investing in high-quality debt funds can reduce this risk.

Evaluating the Disadvantages of Index Funds
While index funds are popular, they have some drawbacks compared to actively managed funds. Index funds track a specific index and cannot outperform the market. In contrast, actively managed funds aim to beat the market through strategic investments. Fund managers of actively managed funds use their expertise to select high-potential stocks, offering better returns.

Benefits of Investing Through Certified Financial Planners
Investing through a Certified Financial Planner (CFP) has advantages over direct investments. CFPs provide personalized advice based on your financial goals, risk tolerance, and investment horizon. They help you select the right mutual funds, monitor your investments, and make adjustments as needed. Their expertise ensures your investments are aligned with your financial goals.


Your disciplined approach to financial management is commendable. Allocating funds for family support and future investments shows foresight and responsibility. Your commitment to making the most of your income is inspiring and deserves appreciation.


Balancing financial obligations while planning for the future is challenging. Your efforts to secure a strong financial foundation for yourself and your family reflect a deep sense of responsibility. It's clear you care about providing for your loved ones while also striving for personal financial growth.

Final Insights
Investing Rs. 70,000 per month in a diversified portfolio of mutual funds is a smart move. By balancing equity, debt, and hybrid funds, you can maximize returns while managing risk. Remember to review your investments regularly and adjust based on performance and changing financial goals.

Your proactive approach to financial planning sets a strong example. With careful management and the right investments, you can achieve significant financial growth and security.

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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Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 05, 2024

Asked by Anonymous - Jun 05, 2024Hindi
Money
I am 53 yrs and having a monthly salary of 1lakh , having a SIP of 70000 per month and having a pf of 6 lakh How I can plan my investment
Ans: Financial Planning for a 53-Year-Old: An In-Depth Guide
Planning your investments at 53 requires a strategic approach. Your monthly salary is Rs 1 lakh, and you have an impressive SIP of Rs 70,000 per month. Additionally, you have a provident fund (PF) of Rs 6 lakh. With careful planning, you can ensure a secure financial future.

Assessing Your Current Financial Situation
First, let's review your current financial situation. Your income and investments are crucial for future planning.

Monthly Salary: Rs 1 lakh

Your monthly income is a significant factor in your financial planning. It forms the basis for your savings, investments, and expenses.

SIP: Rs 70,000 per month

Your SIP investment shows a strong commitment to long-term wealth creation. SIPs are a disciplined way to invest, averaging out market volatility. With such a substantial monthly investment, you have the potential to accumulate significant wealth over time.

Provident Fund: Rs 6 lakh

Your PF balance of Rs 6 lakh is an essential part of your retirement corpus. Provident funds offer a secure and tax-efficient way to save for retirement.

Establishing Financial Goals
Define clear financial goals. Consider short-term, medium-term, and long-term objectives.

Short-Term Goals: Emergency fund, home renovations, vacations.

Short-term goals are those that you aim to achieve within the next few years. These goals typically require relatively smaller amounts of money and can be funded through regular savings or short-term investments.

Medium-Term Goals: Children’s education, marriage expenses.

Medium-term goals typically have a time horizon of 5-10 years. These goals require more significant financial planning and may involve investments in instruments with moderate risk levels.

Long-Term Goals: Retirement planning, health care needs.

Long-term goals are those that you aim to achieve over a longer time horizon, typically 10 years or more. These goals require careful planning and disciplined investing to ensure that you accumulate the necessary corpus by the time you need it.

Each goal requires different strategies. Aligning your investments with these goals will provide direction.

Building an Emergency Fund
An emergency fund is essential. It provides a safety net during unexpected situations.

Recommendation: Save 6-12 months of expenses.

Strategy: Keep this fund in a savings account or liquid funds for easy access.

An emergency fund acts as a financial cushion during unforeseen events such as job loss, medical emergencies, or major repairs. By setting aside a portion of your income in a liquid account, you can ensure that you are prepared to handle any financial emergencies without having to dip into your long-term investments.

Reviewing Your Provident Fund
Your PF of Rs 6 lakh is a significant amount. It provides financial security and helps in retirement planning.

Consideration: Avoid withdrawing PF unless necessary. PF accumulates interest over time, providing substantial benefits.

Provident funds are one of the most popular retirement savings options in India due to their tax benefits and guaranteed returns. By contributing regularly to your PF and letting it grow over time, you can build a substantial corpus for your retirement years.

Evaluating Your SIP Investments
You are investing Rs 70,000 per month in SIPs. SIPs are excellent for rupee cost averaging and long-term growth.

Recommendation: Ensure your SIPs are diversified across various sectors and market capitalizations.

Strategy: Regularly review and rebalance your SIP portfolio to align with your risk tolerance and goals.

Systematic Investment Plans (SIPs) are a popular investment option for retail investors due to their simplicity and affordability. By investing a fixed amount regularly in mutual funds, you can benefit from the power of compounding and rupee cost averaging, which can help you accumulate wealth over the long term.

Importance of Diversification
Diversification reduces risk and enhances returns. Invest in a mix of equity, debt, and hybrid funds.

Equity Funds: High growth potential, suitable for long-term goals.

Debt Funds: Stability and lower risk, ideal for short to medium-term goals.

Hybrid Funds: Balanced approach, combining equity and debt.

Diversification is a fundamental principle of investing that aims to spread your investment risk across different asset classes and sectors. By diversifying your investment portfolio, you can reduce the impact of any single investment's poor performance on your overall portfolio returns.

Retirement Planning
Retirement planning is crucial at this stage. You need to ensure a comfortable and secure retirement.

Estimation: Calculate the corpus required for retirement considering inflation and lifestyle.

Investment Strategy: Increase contributions to your retirement fund. Consider equity and hybrid funds for higher growth.

Retirement planning involves estimating the amount of money you will need to maintain your desired standard of living after you retire and then working backward to determine how much you need to save each month to achieve that goal. By starting early and investing regularly in retirement-oriented investment vehicles, you can build a substantial corpus for your golden years.

Health Care Planning
Healthcare costs can be substantial in retirement. Plan for medical emergencies and regular health expenses.

Health Insurance: Ensure adequate health insurance coverage. Consider a higher sum insured with critical illness coverage.

Health Savings Fund: Create a separate fund for medical expenses. Use debt funds or fixed deposits for this purpose.

Healthcare planning is an essential aspect of financial planning, especially as you age and your healthcare needs increase. By investing in a comprehensive health insurance policy and setting aside funds for medical emergencies, you can ensure that you are prepared to meet any healthcare expenses that may arise in the future without putting a strain on your finances.

Tax Planning
Efficient tax planning can save a significant amount of money. Utilize tax-saving instruments to reduce your tax liability.

Section 80C: Invest in ELSS, PPF, or NSC to claim deductions up to Rs 1.5 lakh.

Section 80D: Avail tax benefits on health insurance premiums for yourself and family.

Tax planning is an integral part of financial planning and involves structuring your finances in a way that minimizes your tax liability while maximizing your post-tax returns. By taking advantage of various tax-saving instruments and deductions available under the Income Tax Act, you can reduce your tax burden and increase your disposable income.

Reviewing Insurance Policies
Evaluate your existing insurance policies. Ensure they provide adequate coverage.

Life Insurance: Check if the sum assured is sufficient to cover your family’s needs.

ULIPs and Endowment Policies: Consider surrendering these policies if they are not performing well. Reinvest the proceeds in mutual funds for better returns.

Insurance planning is an essential component of financial planning and involves assessing your insurance needs and ensuring that you have adequate coverage to protect yourself and your loved ones against unforeseen events. By reviewing your existing insurance policies periodically and making necessary adjustments, you can ensure that you are adequately covered and that your insurance portfolio remains aligned with your financial goals.

Benefits of Actively Managed Funds
Avoid index funds and direct funds. Actively managed funds, through a Certified Financial Planner, offer several benefits.

Professional Management: Experienced fund managers make informed decisions.

Higher Returns: Actively managed funds have the potential to outperform the market.

Regular Monitoring: Regular reviews and adjustments ensure alignment with financial goals.

Actively managed funds are mutual funds in which fund managers actively make investment decisions with the aim of outperforming the market and generating higher returns for investors. By investing in actively managed funds through a Certified Financial Planner (CFP), you can benefit from professional management and expertise. Certified Financial Planners are trained professionals who can help you navigate the complexities of the financial markets and make informed investment decisions that align with your financial goals and risk tolerance.

Creating a Withdrawal Strategy
A well-planned withdrawal strategy ensures you don’t outlive your savings.

Systematic Withdrawal Plan (SWP): Use SWPs in mutual funds to create a regular income stream during retirement.

Staggered Withdrawals: Avoid withdrawing large amounts at once to reduce tax liability and maintain growth potential.

Creating a withdrawal strategy is essential to ensure that you can sustain your lifestyle in retirement without depleting your savings too quickly. By implementing a systematic withdrawal plan (SWP) in mutual funds or staggering your withdrawals over time, you can generate a steady income stream while preserving the principal amount for future growth.

Estate Planning
Estate planning ensures your assets are distributed according to your wishes.

Will: Draft a will to specify how your assets should be distributed.

Nominees: Ensure all investments and accounts have updated nominee details.

Trust: Consider setting up a trust for more complex estate planning needs.

Estate planning is the process of arranging for the transfer of your assets to your heirs or beneficiaries after your death. By creating a will, designating nominees for your investments and accounts, and setting up trusts for more complex estate planning needs, you can ensure that your assets are distributed according to your wishes and that your loved ones are provided for after you're gone.

Continuous Monitoring and Review
Regularly monitor and review your financial plan. Adjust strategies as needed to stay on track with your goals.

Annual Review: Conduct a thorough review of your financial plan at least once a year.

Life Changes: Update your plan for any significant life changes such as marriage, birth, or change in employment.

Continuous monitoring and review of your financial plan are essential to ensure that it remains aligned with your goals and objectives. By conducting an annual review and updating your plan for any significant life changes, you can make necessary adjustments to your investment portfolio and financial strategy to adapt to changing circumstances and stay on track towards achieving your long-term financial goals.

Conclusion
In conclusion, planning your investments at 53 is crucial for a secure future. Your current SIPs, provident fund, and monthly salary form a strong foundation for your financial plan. By diversifying your investments, planning for retirement and healthcare, and making informed decisions with the help of a Certified Financial Planner, you can achieve your financial goals and enjoy a comfortable and secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Asked by Anonymous - Feb 10, 2025Hindi
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I am 51 single, divorced and have one little sister who is 32. Recently I lost my job, and I am not in the mood to search for a new one. I am in the process of making arrangement to fulfill my monthly needs. I am holding the NPS which has a small corpus of 5 lacs in tier 1 and 45k in tier 2. Now I want to completely exit from the NPS. Now I must compulsorily accept the 20% withdrawal and 80% annuity. I have a few queries below. 1. Should I consider buying 100% annuity. 20% withdrawal does not make sense 2. Should I consider putting 1.5 lacs more to enhance the annuity (The corpus will become 7 lacs approx.). 3. Should I consider taking out the annuity on a yearly basis (Please explain Its pros and cons), since it offers more benefit. 4. Should I consider the Shriram life insurance. 5. Will it be safe to consider Shriram life insurance for life long future annuity. It offers the highest annuity. 6. Should I consider Annuity for Life with ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s). The annual offer is 49,063.00 (7.01%) 7. Should I consider Annuity for Life without ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases, and no further amount will be payable. The annual offer is 58,112.00 (8.30%)
Ans: Hello;

Point wise answers to your queries as given below:

1. Yes.
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4. Cannot comment on suitability of xyz firm.

5. Consider an insurer which has good capital adequacy, growing profitable business, preferably listed, reputation of the owner/group apart from decent annuity rates on offer.

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I graduated with a BBA in 2022, and since then, I’ve been on a thrilling two-year adventure at an MNC. But guess what? I decided to resign in March 2024 because, you know, who doesn’t love a little drama at work? Now, I’ve managed to burn through all my hard-earned savings like a pro, and here I am, utterly confused about my future. Sometimes I think about leaving India—maybe for studies or just to escape and do some mindless job somewhere. Other times, I dream of retreating to the most remote corner of India and living off the grid. I’ve always been pretty good with technology, snagged a degree, and even racked up some work experience. But now? I’m completely lost on where to start over. I’ve scoured countless articles and advice columns, but they’ve been about as helpful as a chocolate teapot. I’m just looking for that life-changing advice that seems to be in short supply. Turning 24 this year!
Ans: Hello Manan,
My simple advice to you would be to get back to some job while you can continue to ponder over your long term goals/passion/pursuits.
Sitting idle (with no funds) at home won't help & it is not going to do any good to your career/life plans.
Simultaneously you can continue to do introspection & chalk out a proper plan as far your larger life goals are concerned.
Say you earnestly wish to pursue higher studies than you need to get yourself these answers 1) Why you need a higher degree in first place ? 2) Will it help you to get job/career of your choice? 3) If yes, then shortlist some relevant good courses & start exploring admit process etc. 4) Meanwhile do account for funds that will help you to time your break from the job (savings, loans etc.)
Likewise ask yourself questions for each option you have in mind & be honest in responses, that will help you to zero on your real aspiration & then do the proper detailing/planning. This may entail some compromises in short term but will certainly pave your way to achieve long term goals.

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Hello dear sir, I gave the 12th state board exam in 2024. I have given jee main three attempts I haven't given jee advanced exam yet . I have got less percentage in 12th , So will I have two more attempts for JEE Advanced? after doing 12th from state board and CBSE board?
Ans: Your question is not clear to me. Yes you can give JEE exam three times.

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Asked by Anonymous - Feb 08, 2025
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Me and my girlfriend we both are in relationship from about last 2 years (almost). After such a long time I got to know that she had 2 relationships before me that too she didn't told I got to know it by third person she was sexually involved too (not intercourse but yes other things with one of them)... When I asked her that why you didn't told anything to me before she said she was scared that if she'll tell it to me so I'll leave her and she really did not wanted that... She was scared to loose me. And she was still in contact with that guy and when I asked her that why you were still in contact with him (it's been around 3 years they got separated) so she says that she is like that only... She can't deny anyone because of her soft hearted nature but she did not had any feelings for him. She also said that once she even went to meet him when he requested to meet and also on the same she claims that her soft hearted nature has done that she wasn't able to deny. I loved her too much but now all these things are hurting me like anything. (She is my first relationship before her i never had anyone)
Ans: Dear Anonymous,
I understand that you are hurt and the complexities of the hearts might be difficult sometimes to grasp. The first reason for your sorrow, her past relationship, and the fact that she was physically intimate with them is not completely justifiable. Though I understand that you feel hurt because she did not disclose it to you, still it should not matter so much as to ruin your present relationship. And whether she will open up about such sensitive details is actually up to her. It has nothing to do with how much she loves you or trusts you. Please understand that.

Now coming to the next thing, the fact that she is still in touch with them and has even met one of them, that is slightly concerning. It would have been okay if she did that openly- please understand that I am not saying she should have asked for your permission, but rather discuss the same with you. Moreover, in a relationship, it is also important to understand how much your partner is comfortable with- goes for both men and women. If you are uncomfortable with her relationship with her exes, she should consider that. I would have said the same if the table was turned. I suggest you have a clear conversation with her and express how you feel about this situation- depending on how she reacts and how the conversation goes, you both can think about the next step.

Hope this helps.

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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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