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Ramalingam

Ramalingam Kalirajan  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 24, 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 24, 2024Hindi
Money

I am ex Serviceman from Army since 2014. In thease days I am working. My first salary have came RS 28000/- and second salary in contractual job came Rs 18000/- but I have not save money till end of Month. My all pension and salary have finished after every 15 day of month. Can you suggest me how I save money in the last of month. Thank and regards.

Ans: I understand your situation and appreciate your service. Saving money can be challenging, especially when expenses come quickly. Let's explore how you can save money effectively by the end of each month.

Understanding Your Financial Situation
Firstly, let's take a closer look at your current financial situation. You receive a pension and a salary. Your first salary was Rs. 28,000, and the second from a contractual job was Rs. 18,000. Despite this income, you find it hard to save money. This is a common issue, and we can work on it together.

Current Income and Expenses
Income: Your combined monthly income is from your pension and salary. Knowing the exact amount will help in planning.
Expenses: List all your expenses. Include rent, utilities, groceries, transportation, and other necessities. This helps in understanding where your money goes.
Analyzing Spending Patterns
It’s essential to analyze your spending patterns. This involves noting down every expense, no matter how small. You might discover areas where you can cut down.

Budgeting: The First Step to Saving
Creating a budget is the first step towards financial stability. A budget helps you track your income and expenses, ensuring you live within your means.

Creating a Budget
Track Income: Note down all sources of income, including your pension and salary.

List Expenses: Categorize your expenses. This includes fixed costs (rent, utilities) and variable costs (groceries, entertainment).

Set Limits: Allocate a specific amount for each category. Ensure you don’t exceed these limits.

Sticking to Your Budget
Monitor Spending: Regularly check your spending against your budget. Use apps or a simple notebook.

Adjust as Needed: If you overspend in one category, reduce spending in another to balance it out.

Identifying and Reducing Unnecessary Expenses
Sometimes, we spend on things we don’t really need. Identifying and reducing these expenses can free up money for savings.

Common Unnecessary Expenses
Dining Out: Eating out frequently can be costly. Cooking at home is a cheaper alternative.

Entertainment: Limit spending on movies, events, and other entertainment. Look for free or low-cost alternatives.

Subscriptions: Cancel unused subscriptions. These can include magazines, streaming services, and gym memberships.

Cutting Down Costs
Grocery Shopping: Make a list before going to the store. Stick to it to avoid impulse purchases.

Utilities: Save on electricity and water by being mindful of usage. Small changes can lead to significant savings.

Transportation: Use public transport or carpool to reduce fuel costs.

Saving Strategies: Building a Financial Cushion
Once you have a budget and have cut unnecessary expenses, it’s time to focus on saving strategies.

Paying Yourself First
This means setting aside a portion of your income for savings before spending on anything else.

Automatic Transfers: Set up automatic transfers to a savings account. This ensures you save without thinking about it.

Percentage of Income: Aim to save at least 10-15% of your income. Adjust this percentage based on your financial situation.

Emergency Fund
An emergency fund is crucial. It covers unexpected expenses like medical emergencies, car repairs, or job loss.

Starting Small: Begin by saving Rs. 1,000 and gradually build up to cover 3-6 months of expenses.

Accessible Account: Keep this fund in a separate, easily accessible account.

Investment Options: Growing Your Savings
While saving is important, investing helps grow your money over time. Let’s explore some safe and effective investment options.

Mutual Funds: A Wise Choice
Mutual funds are managed by professionals and offer diversification.

Benefits: They provide exposure to various assets, reducing risk. Mutual funds are easier to manage compared to direct stock investments.

Types: Consider equity, debt, and balanced funds based on your risk tolerance and financial goals.

Systematic Investment Plan (SIP)
Investing in mutual funds through a SIP ensures disciplined investing.

Regular Investment: You invest a fixed amount regularly. This helps in averaging out the cost and reduces the impact of market volatility.

Long-Term Growth: SIPs are ideal for long-term goals like retirement or children’s education.

Debt Management: Reducing Financial Burden
Managing and reducing debt is crucial for financial stability. High-interest debts can drain your finances.

Prioritizing Debts
High-Interest Debt: Focus on paying off high-interest debt first. This includes credit card debt and personal loans.

Consolidating Debt: Consider consolidating multiple debts into one with a lower interest rate. This simplifies repayment and can reduce overall interest costs.

Debt Repayment Strategies
Snowball Method: Pay off the smallest debt first. Once cleared, move to the next smallest. This builds momentum and motivation.

Avalanche Method: Pay off the highest interest debt first. This method saves more money on interest in the long run.

Planning for the Future
Planning for the future ensures financial security. This includes retirement planning and insurance.

Retirement Planning
Regular Contributions: Contribute regularly to a retirement fund. This ensures you have enough saved for retirement.

Investment Mix: Diversify your investments to balance risk and return. Include mutual funds, fixed deposits, and government schemes.

Insurance
Life Insurance: Ensure you have adequate life insurance coverage. It protects your family in case of an unexpected event.

Health Insurance: Health insurance covers medical expenses and prevents financial strain due to illness or injury.

Financial Discipline: Key to Long-Term Success
Financial discipline is essential for achieving your financial goals. This involves consistent effort and making informed decisions.

Consistent Saving
Monthly Savings Goal: Set a monthly savings goal. Strive to meet or exceed it.

Track Progress: Monitor your savings progress regularly. Adjust your budget and spending habits as needed.

Making Informed Decisions
Research Investments: Before investing, research thoroughly. Understand the risks and potential returns.

Seek Advice: Consult a certified financial planner for expert advice. They can help tailor a plan to your specific needs and goals.

Final Insights
Saving money can be challenging, but it’s possible with the right strategies. Here’s a summary of the steps you can take:

Create a Budget: Track your income and expenses. Set limits and stick to them.

Reduce Unnecessary Expenses: Identify and cut down on non-essential spending.

Save Regularly: Pay yourself first. Set up automatic transfers to a savings account.

Build an Emergency Fund: Start small and gradually build up to cover 3-6 months of expenses.

Invest Wisely: Consider mutual funds and SIPs for long-term growth.

Manage Debt: Prioritize and pay off high-interest debt. Consider consolidation if beneficial.

Plan for the Future: Regularly contribute to retirement funds and ensure adequate insurance coverage.

Maintain Financial Discipline: Set monthly savings goals and track progress. Make informed decisions and seek expert advice when needed.

By following these steps, you can achieve financial stability and peace of mind. Remember, small changes can lead to significant results over time.

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  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

Asked by Anonymous - Jun 14, 2024Hindi
Listen
Money
Hi I am 28yrs old , my monthly in-hand salary is 1lakh , currently I am paying previous personal loans after October I'm debt free , currently I am investing ELSS mutual funds monthly 5k and lic moneback policy for monthly 5k , and investing in gold monthly 6k . Suggest me how to save money which gave me bulk amount to buy a 3bhk house in metropolitan city and retirement plan.
Ans: Current Financial Situation

You are 28 years old with a monthly in-hand salary of Rs 1 lakh. You are currently paying off personal loans, which will be completed by October. Your current investments include Rs 5,000 in ELSS mutual funds, Rs 5,000 in a LIC moneyback policy, and Rs 6,000 in gold.

Post-Debt Investment Strategy

Once your loans are cleared, you will have more disposable income. This is an excellent opportunity to reallocate your funds towards achieving your goals.

Building a House Fund

Increase SIP in Mutual Funds:

Post-October, consider increasing your ELSS SIP. Additionally, diversify into other mutual funds like large-cap, mid-cap, and multi-cap funds. This will help you build a substantial corpus over time.
Liquid Funds for Short-Term Goals:

Park a portion of your savings in liquid funds. This ensures liquidity while earning better returns than a savings account.
Fixed Deposits (FDs):

Consider investing a part in FDs for a fixed return. This adds stability to your portfolio.

Retirement Planning

Diversified Mutual Funds:

Continue with your ELSS for tax benefits and long-term growth. Also, add balanced funds and debt funds to ensure a stable return.
Public Provident Fund (PPF):

Start investing in PPF for safe, long-term returns and tax benefits. It has a lock-in period but offers attractive interest rates.
National Pension System (NPS):

Invest in NPS for retirement. It offers market-linked returns and additional tax benefits under Section 80CCD(1B).

Reevaluate LIC Policy

LIC moneyback policies typically offer lower returns. Consider switching to term insurance for higher coverage at a lower premium. Redirect the savings into mutual funds for better returns.

Gold Investments

Gold is a good hedge but typically offers lower returns. Keep it as a smaller portion of your portfolio. Diversify into other assets for better growth.

Final Insights

To buy a 3BHK in a metropolitan city, you need a disciplined savings and investment approach. Increase your mutual fund SIPs post-debt, start a PPF and NPS, and reevaluate your LIC policy. Diversifying your investments will help you build a substantial corpus for both your house and retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 27, 2024

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Money
Hello sir, I have recently joined government job and earning Rs.29,555 per month and I'm 27 years old. I have to send 20k for my family as our monthly expenses and have younger sister who is still studying and even her expense are covered in that 20k. In the remaining 9k I have to spend Rs.2500 for monthly bus pass and 1k for petrol and 1.5k for miscellaneous. I don't have any savings o, how can I save money for my future from this?
Ans: Congratulations on your new government job! You’re already on a great path by thinking about saving and planning for your future. Let’s break down your situation and find ways to manage your finances effectively while saving for the future.

Understanding Your Financial Situation
You earn Rs. 29,555 per month. You send Rs. 20,000 to your family for expenses, which includes your younger sister’s educational expenses. After this, you have Rs. 9,555 left.

Your monthly expenses are:

Rs. 2,500 for a bus pass

Rs. 1,000 for petrol

Rs. 1,500 for miscellaneous expenses

This leaves you with Rs. 4,555 at the end of each month.

Creating a Budget
Creating a budget is essential. It will help you track your spending and ensure you save money every month. Let’s create a simple budget plan.

Fixed Expenses
Family expenses: Rs. 20,000

Bus pass: Rs. 2,500

Petrol: Rs. 1,000

Miscellaneous: Rs. 1,500

Total fixed expenses: Rs. 25,000

Savings
Emergency fund: Rs. 1,000

Long-term savings: Rs. 1,555

This way, you can start building a financial cushion while also setting aside money for the future.

Building an Emergency Fund
Having an emergency fund is crucial. It helps you handle unexpected expenses without derailing your financial plans. Aim to save at least Rs. 1,000 each month. Even though it might seem small, it will grow over time. Keep this money in a savings account for easy access.

Long-term Savings and Investments
With Rs. 1,555 left for long-term savings, consider investing in mutual funds. They offer better returns compared to traditional savings accounts. Start with a systematic investment plan (SIP) in mutual funds. It allows you to invest a fixed amount regularly, which can be as low as Rs. 500 per month.

Benefits of Mutual Funds
Mutual funds are managed by professionals who invest in a diversified portfolio. This reduces risk and can provide higher returns over time. By investing through a certified financial planner, you get expert advice and personalized investment plans.

Financial Goals
Short-term Goals
Emergency Fund: Save at least Rs. 20,000 in the next year for emergencies.

Savings for Small Purchases: Set aside a small amount each month for things you want to buy in the near future.

Long-term Goals
Retirement Savings: Start a retirement savings plan. Even small amounts invested regularly can grow significantly over time.

Sister’s Education: Continue supporting your sister’s education. Once she graduates, you can redirect this money to other financial goals.

Tips for Saving Money
Track Your Expenses: Use a budgeting app or a simple notebook to track your daily expenses. This helps identify unnecessary spending.

Cut Unnecessary Costs: Review your expenses and cut down on non-essential items. Small savings add up over time.

Use Public Transport: You’re already doing this with your bus pass. It’s a great way to save money.

Cook at Home: Avoid eating out frequently. Cooking at home is cheaper and healthier.

Look for Discounts: Always look for discounts and deals when shopping. This can save you a lot over time.

Importance of Financial Discipline
Being disciplined with your finances is key to building a secure future. Stick to your budget, save regularly, and avoid unnecessary debt. Over time, these habits will pay off.

Seeking Professional Advice
Consider consulting a certified financial planner. They can provide personalized advice and help you create a comprehensive financial plan. They can also help you choose the right mutual funds and other investment options based on your risk tolerance and financial goals.

Final Insights
Your current financial situation might seem tight, but with careful planning and disciplined saving, you can achieve your financial goals. Start by creating a budget, building an emergency fund, and investing in mutual funds through a certified financial planner. Over time, your savings will grow, and you’ll be better prepared for the future.

Remember, every small step you take towards saving and investing counts. It’s important to stay consistent and patient. Your efforts today will secure a brighter financial future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 15, 2025

Asked by Anonymous - Apr 15, 2025Hindi
Money
I want to invest in my daughter's education. She is 3 years now. I am investing in Sukanya Samriddhi Yojana. I would like to invest Rs 10,000 to Rs 15,000 every month for her education and future. Can you please suggest the best schemes?
Ans: It’s truly wonderful that you’re thinking about your daughter’s education early.
This habit of planning ahead gives her a strong foundation.

Let’s look at the best way to invest Rs 10,000 to Rs 15,000 monthly.
We will build a 360-degree plan that is simple, stress-free, and goal-focused.

Understanding the Time Horizon
Your daughter is now 3 years old.

You need funds in two stages – school and college.

School needs may arise in 5 to 8 years.

Higher education needs come in 12 to 15 years.

This gives us two time horizons – medium-term and long-term.

Your strategy must match these time goals for right growth.

Your Existing Investment: Sukanya Samriddhi Yojana
This is a good step.

The interest is tax-free.

It gives capital safety and fixed returns.

But returns are not high enough to beat future inflation.

So, this is only a partial solution.

You must add growth-oriented investments for better wealth.

Risk and Reward Balance
Since the goal is more than 10 years away, equity helps.

Equity gives higher returns over the long term.

But it has ups and downs in the short run.

Don’t worry, we will balance this with stable options.

Let us now split your monthly investment.

Suggested Investment Structure (Rs 15,000 Monthly Plan)
You can adjust to Rs 10,000 also.
The structure stays same.

1. Equity Mutual Funds – Rs 9,000
Invest in actively managed equity mutual funds.

Choose diversified funds with consistent past performance.

Actively managed funds are handled by expert fund managers.

They aim to beat the market.

These funds can give better returns than index funds.

Index funds only follow the market.

They don’t protect you in falling markets.

In your case, beating inflation is more important.

So, avoid index funds. Choose regular active mutual funds.

Invest through a Certified Financial Planner or MFD.

Don’t invest directly.

Direct funds look cheaper but give poor guidance.

You may miss fund reviews, rebalancing, or right asset mix.

A Certified Financial Planner ensures your portfolio stays aligned to your goal.

2. Hybrid or Balanced Mutual Funds – Rs 3,000
These funds mix equity and debt.

They reduce risk, and give more stable returns.

Use them for medium-term needs.

School education and coaching expenses may start in 5–7 years.

These funds give moderate returns with lower risk than pure equity.

Invest regularly through SIPs.

Keep investing even during market ups and downs.

3. Debt Fund or Short-Term Recurring Deposit – Rs 2,000
Use this for very short-term or emergency school needs.

Or yearly fees, books, school trips, etc.

Recurring deposits give capital safety and fixed returns.

You can also use debt mutual funds.

These have slightly better tax benefits if held long.

But debt fund returns are now taxed like interest.

Both options are safe and useful for predictable needs.

Investment Planning for Rs 10,000 Monthly Option
If you want to start with Rs 10,000, here is the split.

Rs 6,000 in equity mutual funds (long term)

Rs 2,500 in hybrid mutual funds (medium term)

Rs 1,500 in RD or debt funds (short term)

Benefits of SIPs (Systematic Investment Plans)
SIP builds discipline.

You invest monthly without timing the market.

It gives compounding benefits.

You average the cost by buying in both low and high markets.

SIPs are best for long-term goals like education.

Why Not Index Funds or ETFs?
Index funds copy the market.

They don’t aim to beat it.

No protection in falling markets.

No professional risk management.

Your goal needs customised solutions.

Active funds give this edge.

ETFs are passive. You also need a Demat account.

They suit traders more than long-term savers.

Avoid them for your child’s goal.

Why Not Direct Plans?
Direct funds skip distributor cost.

But they give no human advice.

You are alone to monitor, rebalance, and manage.

Over 15 years, this becomes difficult.

Mistakes can reduce your final amount.

Better to invest via regular plans with Certified Financial Planner.

You get proper handholding and goal tracking.

You can revise portfolio when goals or risks change.

Review and Rebalance Every Year
Your SIPs must be reviewed every year.

You may need to change funds or amount.

Your daughter’s education needs may increase.

So, rebalancing is important.

Don’t keep investing blindly.

Check performance yearly with the help of a Certified Financial Planner.

Create a Goal-Based Investment Tracker
Write your goal in a book or Excel file.

Write monthly SIP, total invested, and expected returns.

Track this once every year.

This gives motivation and clarity.

You will know if you are on track.

Prepare an Emergency Backup
Education plans can face surprises.

Health issues or job loss may affect savings.

Keep a separate emergency fund for 6–12 months expenses.

Don't use your daughter’s fund for other needs.

This helps you stay committed to her dream.

Prepare Mentally for Long Term
Market may go up and down.

Don’t stop SIPs in bad times.

These phases give the best returns later.

Stay patient and goal-focused.

Avoid panic decisions.

Every rupee invested today brings peace later.

Education Inflation is Real
Education costs are rising 8–10% every year.

A Rs 15 lakh course today may cost Rs 30 lakh in 15 years.

Only growth investments can beat this.

Bank FDs and fixed deposits will not be enough.

Use Sukanya for stability and mutual funds for growth.

Tax Considerations You Should Know
Equity mutual funds give tax benefit if sold after 1 year.

LTCG above Rs 1.25 lakh taxed at 12.5%.

Short-term gains taxed at 20%.

Debt fund gains taxed as per your income slab.

Sukanya returns are tax-free.

NPS has tax benefit also, but partial withdrawal only.

Diversify in a Smart Way
Use 3–4 good mutual fund schemes.

Not more than that.

Too many funds confuse tracking.

Keep it simple.

Focus on long-term performance and fund quality.

Add a Term Plan for Yourself
If you’re the earning parent, take term insurance.

It protects your daughter’s education in case of your absence.

Don’t mix insurance with investment.

ULIPs or money-back plans are not suitable.

Take pure term plan. Low premium and high cover.

Don’t Stop SIPs Midway
Many parents stop SIPs after few years.

Don’t do that.

Continue till her college admission.

You will be thankful later.

Start Early, Benefit More
Your daughter is just 3.

You have 15 years.

Starting early gives big compounding benefits.

Even small monthly SIPs become big corpus.

Educate Your Child Gradually
As your daughter grows, teach her about money.

Let her understand savings and goals.

This habit will help her in adult life.

Finally
Planning your daughter’s future is a noble goal.
You have already started the right steps.

Sukanya Yojana gives stability.
Mutual funds give long-term growth.

Use SIPs in actively managed regular plans.
Take guidance from a Certified Financial Planner.

Keep goals written and reviewed.
Invest every month without fail.

Let your money work while you sleep.
And your daughter’s dreams grow strong.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 15, 2025

Asked by Anonymous - Apr 15, 2025Hindi
Money
I have sip of 15k in mutual fund & 5k in stock also 1.5k rd, 1k sukanya samriddhi nps 18k pf 7k how much can be amount after 20 years.
Ans: You are already on a steady path.

Your monthly investments are spread across mutual funds, stocks, RD, NPS, PF and Sukanya Samriddhi. A well-diversified structure like this can give strong long-term results.

Let us now look at each part closely.

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Mutual Fund SIP – Rs 15,000 per month

This is the core of your long-term wealth growth.

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Equity mutual funds can give higher returns than FDs or RDs.

?

Actively managed funds are better than index funds in many ways.

?

Fund managers adjust the portfolio as per market conditions.

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Index funds follow the market blindly without any strategy.

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Your Rs 15,000 SIP for 20 years can become a big amount.

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Discipline is the key. Keep investing without stopping during market falls.

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Use regular plans through MFDs guided by a Certified Financial Planner.

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Direct plans may look cheaper but come with zero guidance or monitoring.

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A regular plan gives long-term relationship-based advice from a certified expert.

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A well-managed SIP for 20 years can build wealth over Rs 1 crore.

?

Keep reviewing SIP performance every year with your planner.

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Make changes only if fund consistently underperforms for 2-3 years.

?

Stock Investment – Rs 5,000 per month

Investing in stocks shows good risk-taking ability.

?

Stock investment can give higher growth than other options.

?

But it needs more knowledge and time to track companies.

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Stocks can be volatile. So, stay calm during market ups and downs.

?

Avoid panic selling when markets crash.

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Long holding gives the best results in stocks.

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After 20 years, even this Rs 5,000 per month can become a sizeable amount.

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Prefer quality businesses with strong track record and future potential.

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If unsure, shift this to mutual funds under expert guidance.

?

Recurring Deposit – Rs 1,500 per month

RD is safe, but returns are low compared to other options.

?

RD interest is fully taxable as per your income tax slab.

?

Over 20 years, RD will give lowest return in your portfolio.

?

You can keep it only for short-term goals or emergency reserve.

?

For long-term, shift this to equity mutual funds.

?

Or you can put in hybrid mutual funds for slightly lower risk.

?

Sukanya Samriddhi Yojana – Rs 1,000 per month

This is a very good scheme for girl child.

?

It is safe and backed by the government.

?

Interest is tax-free. Maturity is also tax-free.

?

Lock-in until 21 years, so it suits long-term education/marriage goal.

?

Keep contributing regularly to get maximum maturity benefit.

?

You can expect a large corpus after 21 years with steady investment.

?

Ideal for disciplined investors who want safe and tax-free returns.

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NPS – Rs 18,000 per month

NPS helps to build retirement corpus over long term.

?

Investment is split between equity and debt automatically.

?

You can also choose allocation yourself with active choice.

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Equity part can grow well in long term.

?

Returns are market-linked, but more stable than pure equity.

?

There is lock-in till age 60, so ideal for retirement goal only.

?

After retirement, partial amount is tax-free.

?

Some part must be used to buy pension (annuity), which is taxable.

?

Although annuity is compulsory in NPS, you can plan withdrawals smartly.

?

NPS of Rs 18,000 monthly can build a large retirement fund.

?

Keep track of performance every year and rebalance if needed.

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Provident Fund – Rs 7,000 per month

EPF or PPF is a low-risk long-term savings tool.

?

Interest is tax-free and withdrawal is also tax-free.

?

Suits conservative investors looking for safe capital.

?

PF works well with equity for balanced growth.

?

You already have good exposure across products, which is positive.

?

Over 20 years, this amount grows slowly but steadily.

?

Don’t stop contributions. It’s your retirement backup.

?

You can also open Voluntary PF to increase savings.

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Expected Total Value After 20 Years

Your total monthly savings is Rs 47,500.

?

This is very strong commitment for your future.

?

With average returns, you may build Rs 2.5 crore to Rs 3 crore.

?

If equity performs well, you may reach Rs 3.5 crore or more.

?

This depends on discipline, patience and smart review every year.

?

Market ups and downs are normal. Stay focused on the 20-year goal.

?

Avoid stopping SIPs during crisis. That’s when real wealth is built.

?

Diversification helps to reduce risk and increase stability.

?

Your current portfolio is well-diversified across equity, debt, and government schemes.

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It is the right balance for long-term investors.

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360 Degree Suggestions for Better Results

Do annual review of all investments with a Certified Financial Planner.

?

Check if asset allocation needs to be changed based on your age and goals.

?

Increase SIP amount every year as income grows.

?

Shift RD money to mutual funds or hybrid funds for better returns.

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Continue Sukanya Samriddhi regularly for daughter’s future.

?

Monitor NPS and PF for performance and tax efficiency.

?

Avoid direct stocks if you don’t have time or expertise.

?

Do not invest in index funds or ETFs.

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Index funds give average returns without any flexibility.

?

Active mutual funds have skilled fund managers who track markets better.

?

Use regular mutual fund plans through a CFP and MFD channel.

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Direct plans look cheaper but offer no advice or monitoring.

?

Regular plan ensures review and goal tracking with expert help.

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Do not invest in real estate unless for own use. It gives low rental returns.

?

No need for annuities. They lock your money with low returns.

?

Focus on growth-oriented, flexible investment tools like mutual funds.

?

Create an emergency fund with at least 6 months’ expenses.

?

Take term insurance to protect your family financially.

?

Health insurance should also cover family members adequately.

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Tax Rules to Remember

Mutual Fund LTCG above Rs 1.25 lakh is taxed at 12.5%.

?

STCG in mutual funds is taxed at 20%.

?

RD interest is taxed as per your income slab.

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Sukanya Samriddhi, NPS (partial), PF – tax-free on maturity.

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Plan withdrawals smartly to save taxes in future.

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Finally

You are doing a great job by saving across different tools.

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This structure can give you financial freedom and peace of mind.

?

With smart review and regular investing, your 20-year goals can be fulfilled easily.

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Stay committed. Be patient. Don’t chase quick profits.

?

Keep it simple. Focus on goals and expert-guided investment.

?

Best Regards,
?
K. Ramalingam, MBA, CFP,
?
Chief Financial Planner,
?
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8235 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 15, 2025

Money
I want to invest in my childs education born in 2023. What is the best thing in the market?
Ans: Absolutely appreciate your intention to invest early for your child’s education.

This is a thoughtful and wise move.

Your child born in 2023 will likely need funds for college around 2040.

That gives you a long investment horizon of 15+ years.

This gives enough time for compounding to work well.

Let me share a 360-degree investment roadmap for this goal.

This plan is written in a simple tone but with professional depth.

Let us now explore the best available options in the market today.

Understand the Nature of the Goal
Education is a non-negotiable goal.

You cannot postpone or compromise it easily.

It is a high-cost goal due to inflation in education fees.

Hence, your investment must beat education inflation.

Regular savings in a bank will not be enough.

You need growth assets with better long-term returns.

Also, safety and discipline are important.

Tax efficiency matters because the goal is long-term.

You must track progress regularly and adjust if needed.

You must not withdraw before maturity, even during emergencies.

Begin with a Clear Goal Plan
Estimate the year your child will need funds.

For UG courses, it could be in 2040.

For PG, it may be 2043 or later.

Estimate cost of education in today’s value.

Then adjust for education inflation.

Usually, education inflation is around 8–10%.

Do not ignore living costs, books, and hostel fees.

Add buffer for foreign education or special courses.

Split the goal into 2 phases: UG and PG.

Assign different timelines and amounts to each.

Then plan SIPs or lump sums accordingly.

Why Fixed Deposits Are Not Suitable
FD returns are lower than education inflation.

Tax on FD interest reduces actual returns.

Compounding works poorly in FDs.

FDs do not allow automatic step-up in investment.

They also don’t offer any growth during long tenure.

Reinvesting maturity amount each time is inefficient.

Your long-term wealth will remain stagnant.

They are only okay for short-term parking.

Not ideal for a 15 to 20-year education goal.

Avoiding Index Funds for Education Planning
Index funds only copy the market.

They lack human intelligence and decision-making.

They do not outperform in volatile markets.

They carry full market risk without active adjustment.

In falling markets, they fall fully with no defense.

Index funds cannot shift from poor sectors.

Actively managed funds can change strategy mid-way.

Fund managers can shift to better sectors.

Hence, for education goals, prefer active mutual funds.

Debt Mutual Funds: Use Them Carefully
Debt funds are useful for short-term education goals.

Also useful 2-3 years before goal maturity.

They reduce risk from sudden equity fall.

But returns are not high for long-term.

Tax treatment is as per income tax slab.

You may pay more tax if in higher slab.

So use debt funds only during last few years.

Do not start education investing with them.

Gold ETFs or Sovereign Gold Bonds: Limited Use
Gold may give inflation-like returns over time.

But it is not consistent year after year.

No dividend or income from gold investment.

Gold prices can stay flat for years.

SGBs are tax-free after 8 years, but lack flexibility.

Hence, use only 5–10% of corpus in gold.

Do not depend only on gold for education goal.

Best Core Strategy: Active Mutual Funds
These are managed by skilled fund managers.

They aim to beat market by smart decisions.

They adjust portfolio based on market situation.

They change allocation between sectors and themes.

They select good companies and avoid weak ones.

Over long term, they can outperform passive funds.

Also, they are well-regulated and transparent.

SIP in active funds gives rupee cost averaging.

Over 15 years, this can create strong corpus.

These are ideal for long-term child education needs.

Disadvantages of Direct Plans
In direct funds, you invest without any guidance.

You need to monitor and rebalance yourself.

Most investors do not review portfolio regularly.

No help to handle underperforming funds.

No one reminds or guides you during market changes.

You may miss out on newer, better opportunities.

Wrong selection or wrong asset mix causes damage.

Instead, choose regular plans through Certified Financial Planner.

You get professional support with goal-based planning.

You stay on track and reduce mistakes.

Systematic Investment Plan (SIP): Best Route
SIP builds habit and discipline in investing.

It removes the pressure of timing the market.

Even small amounts can become big with time.

You can increase SIP every year as income grows.

It helps in averaging cost during market ups and downs.

You remain invested even during market falls.

SIP is a good match for long-term education goals.

Use Step-up SIP for Higher Growth
Step-up SIP means increasing SIP yearly.

This matches your salary or business growth.

It helps beat inflation better over 15 years.

You invest more without much effort.

This results in higher maturity amount.

A Certified Financial Planner can help calculate ideal step-up.

Mix of Equity Mutual Funds Based on Child’s Age
When your child is 0 to 10 years old:

Allocate 90–100% to equity mutual funds.

Use a mix of large-cap, flexi-cap and mid-cap funds.

Add small-cap only if you can tolerate volatility.

Avoid thematic or sectoral funds now.

Keep it simple and diversified.

When your child turns 11–13 years:

Gradually reduce mid- and small-cap exposure.

Shift 20–30% into conservative hybrid funds.

Reduce equity to about 70–80%.

From 14–16 years onward:

Move 40–60% to short-duration debt funds.

This will protect the goal from equity volatility.

Keep rest in flexi-cap and large-cap funds.

1–2 years before goal:

Move entire corpus to liquid and short-term debt funds.

Ensure capital is safe and ready for use.

Use Goal Tracker Every Year
Track if your corpus is growing as per plan.

Review fund performance every year.

Replace underperforming funds with better ones.

Adjust SIP amount if needed.

Increase SIP if inflation rises more than expected.

Use XIRR to check overall returns.

A Certified Financial Planner will do this yearly.

Use Separate Folio for Education Goal
Don’t mix this goal with other investments.

Use one folio for this specific purpose.

This gives clear visibility and control.

You won’t accidentally withdraw for other needs.

It keeps your mental focus intact.

Insurance is Not Investment
Do not mix insurance with child education.

Avoid ULIPs, endowment plans or money-back policies.

They give poor returns and long lock-in.

Mostly 3–5% return only, after charges.

Instead, buy pure term insurance separately.

Invest remaining in good mutual funds.

If you hold any investment-cum-insurance policy:

Do a cost-benefit analysis.

If returns are low, surrender and reinvest.

Redeem carefully to avoid exit load or tax.

Emergency Fund and Term Insurance
Always keep 6–12 months expense as emergency fund.

This avoids breaking child investment during crisis.

Use liquid mutual funds or FD for this.

Also buy term insurance to protect child’s goal.

It should cover at least 15–20 times your annual income.

If anything happens to you, the child’s goal stays safe.

Tax Impact and Smart Withdrawals
Equity MF gains above Rs 1.25 lakh taxed at 12.5%.

This applies only after one year holding.

If sold within 1 year, 20% tax applies.

For debt funds, tax as per income tax slab.

Plan withdrawals over 2–3 financial years.

This reduces tax burden and keeps money liquid.

A Certified Financial Planner can guide tax-efficient exit.

Avoid Lump Sum Late Investment
Don’t wait to invest in final 3–5 years.

Lump sum at that time is risky and stressful.

It may coincide with market downturn.

Start early and do SIP consistently.

Early investment reduces pressure later.

Final Insights
Starting early is your biggest advantage.

You already made a great first step.

Continue SIPs for 15 years with discipline.

Do not panic during market fluctuations.

Review every year with a Certified Financial Planner.

Adjust based on inflation, market and child’s career path.

Keep insurance separate and invest only in mutual funds.

Never stop SIP mid-way unless emergency.

Child’s future deserves consistent planning and care.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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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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