Dear Sir,
I am aged 40 years a aggressive investor I have recent corpus of 13 lac in mutual fund and doing SIP of Rs30500 monthly in following funds . Nippon small cap - 9000 , Tata small cap - 7500 , Quant Small cap - 6000 , kotak small cap - 5000 and Pgmi Flexi cap -3000 and a vision for next 22 years with step up of 10 %. I also invest in PPF of 12500 monthly and In EPF with 25000 basic salary and i will also get Rs 50 lac from various LIC policy at the age of 60 . I want to know that is my approach is right and what would be the future corpus at the age of 62 years .
Ans: You are doing a disciplined and smart job with your investments. You have a long-term horizon, a strong SIP commitment, and a clear goal in mind. That’s a big step many don’t take seriously. Let me now evaluate your approach from all angles. This will be a 360-degree review of your investment plan and future readiness.
Let us go step-by-step to understand if your approach is right and what the future looks like.
Your Current Financial Setup
You are 40 years old now.
You have a mutual fund corpus of Rs 13 lakh.
You invest Rs 30,500 monthly through SIP.
You invest in four small cap funds and one flexi cap fund.
You step up your SIP by 10% annually.
You have a PPF investment of Rs 12,500 monthly.
You contribute to EPF. Your basic salary is Rs 25,000.
You will receive Rs 50 lakh from LIC policies at age 60.
Your investment horizon is 22 years from now.
This is a solid plan and shows discipline. Now, let us evaluate it carefully with insights and suggestions.
Assessment of Mutual Fund Investments
You are investing heavily in small cap mutual funds.
Four out of five funds are from the small cap category.
Small caps give high returns, but they also carry high risk.
Over 22 years, this risk may work in your favour.
But the ride will be bumpy. There will be sharp ups and downs.
At times, you may see short-term losses. That is normal.
However, putting over 85% of SIP in small caps may be risky.
You need better diversification for stability.
Adding large cap and mid cap funds may balance the risk.
Your Flexi cap fund does help a bit, but it is still not enough.
A blend of market caps will give smoother long-term growth.
It is better to slowly bring down small cap exposure to 50%.
Increase exposure to diversified and mid-cap funds gradually.
Don’t exit small cap funds suddenly. Take a phased approach.
This change will make your portfolio strong and well-balanced.
Step-Up SIP Strategy – Strong and Effective
Increasing SIP by 10% annually is a smart idea.
This fights inflation and grows your wealth faster.
It uses your rising income to build a big corpus.
Many investors ignore step-up. You are doing it correctly.
Keep increasing the SIP without fail every year.
Even a break in step-up can delay your target.
Review your SIPs yearly and adjust as income rises.
This strategy will help you reach your target corpus faster.
Investment in PPF – A Safe Long-Term Cushion
PPF offers guaranteed, tax-free interest.
You are investing Rs 12,500 monthly in PPF.
Over 22 years, this will become a strong safe corpus.
It adds stability to your overall financial plan.
PPF is good for retirement since it is risk-free.
Keep continuing till maturity. Do not withdraw early.
Interest rate may vary, but long-term returns are good.
You also get tax exemption under Section 80C.
This risk-free asset will protect you from equity market shocks.
EPF – A Reliable Retirement Contributor
Your EPF is linked to your Rs 25,000 basic salary.
The employer also contributes monthly.
Over 22 years, this will grow into a big amount.
EPF offers fixed, tax-free returns with no market risk.
It is an excellent tool for retirement planning.
Avoid premature withdrawals from EPF.
You can withdraw after retirement for use as income.
This will be a strong pillar of your retirement security.
LIC Maturity at Age 60 – A Special Boost
You will receive Rs 50 lakh from LIC policies at age 60.
This will come at a perfect time near retirement.
You must check if these are traditional or ULIP plans.
Traditional plans offer low returns, mostly below inflation.
ULIPs carry market risk and high charges.
If these are investment-cum-insurance plans, surrendering is wise.
You can reinvest that surrender amount in mutual funds.
Use proper asset allocation while reinvesting.
For insurance needs, use only term insurance.
Reinvesting in mutual funds can make this Rs 50 lakh grow further.
Future Corpus at Age 62 – What to Expect
With SIPs, EPF, PPF and LIC money, your total savings will be huge.
Your mutual fund corpus will grow rapidly with step-up.
Your PPF and EPF will grow safely, year after year.
LIC amount will give a big boost just before retirement.
With 10% SIP step-up, your corpus can cross Rs 9 to 10 crore.
Exact figure depends on market returns, SIP discipline, and inflation.
But you are definitely on the right path to reach financial freedom.
You are preparing for retirement very well.
This kind of planning gives peace of mind and confidence.
Things You Are Doing Right – A Quick Look
Strong SIP discipline and long-term vision.
Investing in equity for long-term wealth creation.
Following step-up SIP approach.
Investing in PPF and EPF for safe returns.
Keeping investment horizon of 22 years.
Maintaining separate LIC maturity plans.
You are showing smart behaviour as an aggressive investor.
Key Improvements You Should Consider
Reduce small cap exposure to 50% slowly.
Add more mid-cap and flexi cap funds.
Avoid overlapping funds from same category.
Review performance of all funds every 6 months.
Check expense ratios and consistency of returns.
Track goal progress once a year with clear targets.
Make sure your portfolio has good asset allocation.
Don’t hold funds only based on past returns.
Always go through a Certified Financial Planner for changes.
This will make your portfolio more stable and return-oriented.
Important Taxation Insight
Long-Term Capital Gains above Rs 1.25 lakh are taxed at 12.5%.
Short-Term Capital Gains are taxed at 20%.
Plan redemptions smartly to reduce tax.
Use staggered withdrawals near retirement.
Redeem equity funds over time, not all at once.
PPF and EPF are tax-free. LIC maturity is also tax-free.
But for mutual funds, plan redemptions with tax efficiency.
This will help you protect your wealth from tax erosion.
Important Notes on Fund Types and Investments
Do not use direct mutual funds if you are not an expert.
Direct funds need self-review and research, always.
There is no handholding or guidance with direct funds.
If you miss fund underperformance, losses may happen.
Regular funds through MFD with CFP advice are safer.
CFP will do goal review, fund analysis and rebalancing.
This adds value and protects your goals from derailment.
Always go through a trusted CFP for a 360-degree plan.
Your long-term wealth deserves the right expert attention.
Finally – Our Insights for You
You are on a great track with vision and discipline.
You are investing smartly across equity and debt.
With minor changes, your plan can become stronger.
Keep focus on diversification and risk management.
Review your goals and progress yearly with expert help.
Stick to your plan even during market falls.
Continue your SIP step-up and never skip contributions.
Use professional guidance to ensure smooth journey.
Your retirement will be financially independent and stress-free.
This approach will help you lead a proud, peaceful life post-60.
Stay committed and consistent. You are doing excellent already.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Ravesh on Aug 13, 2024Hindi
