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Earning 1.87 lakhs/month, need advice on investing 20000/month and securing a 3 Cr corpus in 10 years

Ramalingam Kalirajan |7159 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 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 - Aug 04, 2024Hindi

Earning 1.87 lakhs/month only have ULIP plans for 20000 and need advice. Can you advice me on how to invest and secure a corpus of 3 cr in 10 years? Is this possible ?

Ans: Assessing Your Current Situation
You’re earning Rs 1.87 lakhs per month, which is a solid income. You currently hold only ULIP plans, contributing Rs 20,000 per month. While ULIPs offer both investment and insurance, they often come with higher charges and may not be the most efficient way to grow your wealth.

Setting a Clear Goal: Rs 3 Crores in 10 Years
Your goal is to accumulate a corpus of Rs 3 crores in 10 years. This is ambitious but achievable with the right strategy. To reach this goal, you need to invest wisely and ensure that your investments are working hard for you.

Evaluating ULIPs: Time for a Change?
High Costs: ULIPs often come with high premium allocation charges, fund management charges, and other costs that eat into your returns.

Complex Structure: The combination of insurance and investment can be confusing and may not provide the best of either.

Consider Surrendering ULIPs: You may want to surrender your ULIP and reinvest in more cost-effective, transparent, and high-growth options like mutual funds. Mutual funds provide better flexibility, lower costs, and potential for higher returns.

Creating an Effective Investment Strategy
To achieve Rs 3 crores in 10 years, you need to create a disciplined and well-diversified investment plan. Here’s how you can proceed:

Increase Your Monthly SIPs
Focus on Equity Funds: Since your goal is long-term, equity mutual funds should be the primary focus. They have the potential to provide higher returns compared to other asset classes.

Diversify Across Categories: Invest in a mix of large-cap, mid-cap, and flexi-cap funds. This diversification will balance risk and return, ensuring steady growth.

Consider Hybrid Funds: Adding hybrid funds can provide stability by including a mix of equity and debt. This approach reduces volatility while still offering growth potential.

Avoid Index Funds: Index funds might seem attractive due to lower costs, but they simply track the market and lack the active management that can provide higher returns. Actively managed funds offer the advantage of professional expertise, aiming to outperform the market.

Regular vs. Direct Funds
Disadvantages of Direct Funds: Direct funds may appear to save you money on commissions, but they lack the guidance and support provided by certified financial planners. Investing through regular funds with the help of a certified financial planner ensures that you’re making informed decisions aligned with your goals.

Benefits of Regular Funds: Regular funds come with professional advice, which can be crucial in navigating market complexities. A certified financial planner can guide you in selecting the right funds, reviewing your portfolio regularly, and making necessary adjustments.

Implementing a Systematic Investment Plan (SIP)
Given your income and the goal of Rs 3 crores, it’s essential to structure your SIPs thoughtfully:

Start with Higher SIPs: Consider starting with a SIP of Rs 50,000 to Rs 75,000 per month. This will give your investments the required momentum.

Increase SIPs Gradually: As your income grows, increase your SIP contributions. This step-up approach helps in reaching your goal without straining your finances.

Stick to the Plan: Consistency is key. Stay committed to your SIPs, regardless of market conditions. Over time, the power of compounding will work in your favor.

Importance of Emergency Fund and Insurance
Before focusing entirely on investments, ensure that your financial foundation is secure:

Emergency Fund: Set aside at least 6 to 12 months of living expenses in a liquid, easily accessible account. This fund will cover unexpected expenses without disrupting your investment strategy.

Health and Term Insurance: Ensure you have adequate health insurance to cover medical emergencies. Also, opt for a pure term insurance plan, which offers a higher cover at a lower premium, providing financial security to your family.

Reviewing and Rebalancing Your Portfolio
Achieving Rs 3 crores in 10 years requires regular monitoring and adjustments:

Annual Reviews: Review your portfolio at least once a year with your certified financial planner. Assess the performance of your investments, and make necessary changes based on market conditions and your life stage.

Rebalancing: If certain investments have grown significantly, it might be time to rebalance your portfolio to maintain the desired asset allocation. This step ensures that you’re not taking on more risk than necessary.

Final Insights
You have a strong income and a clear goal of Rs 3 crores in 10 years. By shifting from ULIPs to a well-structured SIP in mutual funds, focusing on actively managed funds, and maintaining discipline, you can achieve your goal.

Remember to build a solid financial foundation with an emergency fund and insurance before diving into aggressive investments. Regular reviews and adjustments with the help of a certified financial planner will keep you on track. Your goal is ambitious, but with the right strategy and commitment, it’s well within your reach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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