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Sanjeev Govila | Answer |Ask -Follow

Financial Planner - Answered on May 29, 2023

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more

Question by Biswa on May 29, 2023Hindi

Money

Sir My father bought a plot 8m 1950 or 1952. Constructed a 2 BR house in a town in east Bardhaman. My father died in the year 1954 or 55 when I was class 6. My mother died in 2003. In the record of land 3 brothers name shown. We have sold some part of the land in 2 installments and now all brothers wants to sale balance portion. Since no amount is known for cost of land and house construction how to index and arrive at LTCG for me a Sr Citizen.

Ans: To get the valuation of your plot in India through government-provided data on the internet, follow these steps:

1. Visit the official website of the relevant government authority responsible for property valuation.
2. Look for the section or service related to property valuation or land records.
3. Access the property valuation service and provide accurate plot details.
4. Retrieve the valuation information displayed on the website, including market value and other relevant factors.
5. If necessary, follow the instructions to request an official valuation certificate.

Please note that online property valuation data availability and accuracy may vary, so it's advisable to refer to official government websites and consider consulting a professional or local Revenue Department for further assistance.

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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Question by Gautam - Aug 12, 2024Hindi

Money

Please advise me on LTCG for the house property purchased by my father in 1975 for Rs.44,616/ area is 676 sq ft or 62.79 sq.mtr. I have cold the property this year August 2024 for the consideration of Rs.1.20 cr. How do I compute LTCG? How to calculate fair market value? I wish to avail indexation benefit and also reinvert in house property. Thanks Gautam H

Ans: You will need to reach out to property valuer and arrive at a value as on 01 st April 2001. The amount thereafter can be indexed to current levels by applying inflation index and accordingly the same can be computed.

Alternatively, if the intent is to reinvest in a residential property itself then you may directly compute capital gains using cost and not indexed cost if the amount of reinvestment is greater than capital gains amount.

Please consult your CA before moving ahead.

Mihir Tanna |977 Answers |Ask -Follow

Tax Expert - Answered on Sep 09, 2024

Question by Sarit - Aug 17, 2024Hindi

Money

Hi Sir, I have purchased a Land in 1997 @ 63000 Rs and sold it @ 45 L at Pune SUS area. How much Indexation is expected please as part of LTCG

Ans: As land is acquired before 1.4.2001, first you have to determine fair market value as on 1.4.2001 and on that you have to apply indexation benefit for tax calculation purpose. After that you can calculate indexed cost from income tax calculator : https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

Mihir Tanna |977 Answers |Ask -Follow

Tax Expert - Answered on Oct 18, 2024

Question by Venkat - Oct 05, 2024Hindi

Money

We have purchased a land & constructed building in 1989 Now in April 2024 entered in JDA with a Builder - 50/50 - Out of 6 Flats 3 for owner 3 he will sell - approx during August 2025 he will hand over these Flats How to calculate LTCG Also if the same all 3 flats has been transfrd to his Son/Daughter , is there any LTCG applicable. The Owner is 90 years old-Live pl Thanks

Ans: In case of JDA, 1st tax liability arise for transfer of land for development and on which tax is required to be paid year in which completion certificate is issued.

After that when you transfer property, it will STCG if sold within 24 months of JDA.

Property transfer as a gift is not taxable

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Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 13, 2024Hindi

Money

I am 42 yr old ,married and having a 13 yr old Kid. My monthly take home after deduction is 3,30,000 INR. My parents stay with me My investments/month are as below SIP per month is 37K Axis Mid Cap Fund-> 7000 UTI Flexicap Fund Gr-> 7000 ICICI PRu BlueChip Fund- Gr-> 3000 Kotak Emerging Equity Fund 5000 Axis Axis Small Cap Fund 10000 DSP DSP Nifty Next 50 Index.. 5000 RD/month is 136000 eNPS around 23k/month I don’t have any loans, my EPF amount is around 50 lacs. I stay in my own house. Please suggest a plan so that I can retire at the age of 50. My monthly expenses are around 60k

Ans: Current Financial Overview
Your monthly take-home income of Rs 3,30,000 is substantial.
You are disciplined in investments, which is commendable.
No loans and owning a house is a strong foundation.
Your monthly expenses are well within limits, allowing significant savings.
With these points in mind, here’s a 360-degree approach to help you retire at 50.

Investment Review
Systematic Investment Plans (SIPs)
Your SIP allocation shows a balanced mix of mid-cap, flexi-cap, large-cap, small-cap, and emerging equity.
Actively managed funds outperform index funds in volatile markets. They offer better returns with expertise.
If your funds are direct plans, consider shifting to regular plans via a Certified Financial Planner. Regular plans ensure ongoing guidance and fund monitoring.
Monthly Recurring Deposit (RD)
Rs 1,36,000 in RD ensures safety but offers low returns compared to inflation.
Gradually reduce RD contributions and allocate more to equity mutual funds for better growth.
eNPS Contribution
Rs 23,000 monthly contribution to eNPS aligns with your retirement goals.
Tier-I eNPS has tax benefits, but liquidity is low. Balance this with flexible investments.
EPF Corpus
Your EPF corpus of Rs 50 lakhs will provide a safety cushion during retirement.
Continue EPF contributions for assured returns and tax-free withdrawals at maturity.
Suggested Investment Adjustments
Equity Allocation
Gradually increase your equity exposure from SIPs. Equity delivers higher returns over the long term.
Diversify into flexi-cap and multi-cap funds, as they adapt to market conditions.
Avoid overconcentration in small-cap funds, as they carry higher risk.
Debt Allocation
Shift a portion of your RD to debt mutual funds. Debt mutual funds can offer higher post-tax returns.
Avoid traditional options like FDs due to lower returns.
Emergency Fund
Maintain an emergency fund covering 12 months’ expenses (around Rs 7.2 lakhs).
Park this in a liquid fund or a high-interest savings account for easy access.
Tax Efficiency
Invest in equity mutual funds wisely to optimise long-term capital gains tax.
Long-term capital gains (LTCG) above Rs 1.25 lakh on equity mutual funds are taxed at 12.5%.
For debt mutual funds, gains are taxed per your income slab. Plan redemptions to minimise tax impact.
Insurance Review
Ensure you have a term insurance cover of at least Rs 1 crore for your family’s security.
Review health insurance to include Rs 25-30 lakh family floater coverage, especially with your parents living with you.
Avoid ULIPs or investment-linked insurance policies. They have high costs and low returns.
Retirement Planning
Corpus Requirement
Retiring at 50 means planning for a post-retirement period of over 30 years.
Estimate retirement expenses at Rs 1 lakh per month, adjusted for inflation.
Factor in healthcare costs, lifestyle changes, and contingencies.
Asset Allocation
Maintain a 70:30 equity-to-debt ratio for the next eight years.
Post-retirement, gradually shift to a 50:50 ratio for stability and regular income.
Withdrawal Strategy
Opt for a systematic withdrawal plan (SWP) from mutual funds for steady cash flow.
SWP ensures tax efficiency and avoids depleting your corpus too quickly.
Additional Suggestions
Children’s Education and Marriage
Start a dedicated SIP for your child’s higher education and marriage.
Use a mix of equity and balanced advantage funds to build this corpus.
Parents’ Financial Security
Ensure adequate health insurance coverage for your parents.
Create a separate contingency fund to address any medical emergencies.
Regular Monitoring
Review your portfolio every six months with a Certified Financial Planner.
Realign investments based on market conditions and life goals.
Key Considerations for Index Funds and Direct Plans
Index Funds
Index funds track the market but lack active management, which limits flexibility.
Actively managed funds offer better returns by adapting to market trends.
Direct Plans
Direct funds might save costs but lack professional oversight.
Regular plans through Certified Financial Planners provide strategic advice, regular reviews, and informed decisions.
Final Insights
Your financial foundation is strong, and you are on track for early retirement.

With strategic adjustments, enhanced equity exposure, and professional guidance, you can achieve your goal by 50.

Focus on tax efficiency, regular reviews, and comprehensive planning to secure your family’s future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Question by raghu - Dec 13, 2024Hindi

Money

Hi I am 50 years now and presently I am working in a pharma sales. I need a corpus of 7 cr in next 5 years. I have 2 daughters ages 18 yrs and 11 yrs. I got a monthly salary after deductions 2.3laks per month. But every month my emi hors 1.65 laks. My overall property value now 3cr as per market value today. I am investing monthly SIP of Rs. 42000 and my total SIP invested value as on date is 23.85 laks since 2014 in different funds in midcap and small cap and the present value is 49 laks, also my PF is around 15 laks,.PPF is 3.5 laks and also I am investing ICICI signature growth which i have invested lumpsum amount of 7 lakhs for 3 yrs back and today the value is 14 lakhs. Also I am getting a monthly rental value in amount rs. 45000 per month. Plz suggest how I can reduce my emi and i would like to.plan for my retirement, my both the daughters education and marriage.

Ans: You have outlined a complex financial situation. You are working towards multiple goals, which require strategic planning. Your current financial position indicates significant strengths, but there is also a need for optimisation.

1. Evaluate Your EMI Burden
Your EMI of Rs. 1.65 lakh is consuming 72% of your monthly salary.

This is a high debt-to-income ratio. Reducing EMIs is essential for liquidity.

Contact your lender to restructure the loan. Extend the tenure to reduce monthly payments.

Use part of your liquid investments, like PPF or ICICI growth, to prepay a portion of the loan.

2. Planning for Retirement
You aim for Rs 7 crore in 5 years. This is an ambitious goal.

Start by maximising your SIP contributions. Increase your SIP gradually every year.

Allocate more to equity funds, especially large-cap and flexi-cap categories.

Balanced advantage funds can provide stability to your portfolio as you near retirement.

3. Education and Marriage Planning for Daughters
For Your Elder Daughter (18 years old):
Higher education expenses may arise soon.

Avoid withdrawing from equity investments for this need.

Use your monthly rental income or fixed income instruments like PPF.

For Your Younger Daughter (11 years old):
Invest in equity mutual funds for her education and marriage.

Set aside a portion of your rental income for her future needs.

Review the investments periodically to ensure they align with her goals.

4. Review Your Current Investments
Your SIP investments have grown significantly. Continue investing in mid-cap and small-cap funds.

Add large-cap and flexi-cap funds for diversification and stability.

Your ICICI signature growth plan has performed well. Assess the exit charges and tax implications if you plan to redeem.

Your PPF and PF are safe investments. Continue contributing to them for fixed returns.

5. Build an Emergency Fund
Maintain an emergency fund equal to 6 months of expenses.

Use liquid mutual funds or fixed deposits for this purpose.

This fund will help avoid financial strain during unexpected situations.

6. Tax Planning
Your rental income and mutual fund gains are taxable.

Long-term capital gains (LTCG) on equity funds above Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

Debt mutual funds are taxed as per your income tax slab.

Consult with a Certified Financial Planner to optimise tax savings.

7. Insurance Planning
Ensure you have adequate life and health insurance.

Term insurance should cover at least 10 times your annual income.

Health insurance is essential for your family’s security.

8. Strategic Use of Property
Your property value of Rs 3 crore is a significant asset.

Avoid selling the property unless it is the only option to reduce debt.

Consider generating additional rental income if possible.

9. Set Clear Financial Goals
Prioritise your goals: retirement, education, and marriage.

Assign specific timelines and amounts for each goal.

Review and adjust your financial plan annually.

Finally
You are in a challenging yet promising financial situation. Focus on reducing debt, increasing investments, and planning systematically for your goals. Seek professional guidance to optimise your portfolio and achieve financial stability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 12, 2024Hindi

Money

Maine SBI ka smart fortune builder plan liya hai 1 lac per annum after 5 year kitna fund taiyar ho jayega

Ans: The SBI Life Smart Fortune Builder is a Unit Linked Insurance Plan (ULIP). It combines life insurance coverage with market-linked investments. Your final fund value after 5 years depends on several factors:

Factors Affecting Your Fund Value
Investment Allocation

The returns depend on the funds you select (equity, debt, or balanced).
Equity-oriented funds offer higher growth potential but come with risks.
Debt funds offer stability but may have lower returns.
Charges Deducted

Premium Allocation Charges: Deducted upfront from each premium.
Policy Administration Charges: Monthly deductions from your fund value.
Fund Management Charges: A percentage of the fund value is deducted annually.
These charges can significantly impact your returns.
Market Performance

ULIP returns are market-dependent. If markets perform well, equity funds can provide good returns.
However, market downturns can reduce fund growth.
Sum Assured Deduction

Mortality charges for the life cover reduce your investment value.
Approximate Projection
Assuming moderate returns of 8%-10% annually from equity-oriented funds:

Fund Value After 5 Years: Around Rs. 4.6 lakhs to Rs. 4.8 lakhs after charges.
If you choose debt-oriented funds with conservative returns of 5%-6%:

Fund Value After 5 Years: Around Rs. 4.2 lakhs to Rs. 4.4 lakhs after charges.
Is This Plan Right for You?
ULIPs often have high charges, reducing returns compared to mutual funds.
For wealth creation, a mutual fund SIP is more efficient and transparent.
Recommendation
If your focus is on wealth creation, consider surrendering the policy after 5 years (lock-in period).
Reinvest the proceeds into mutual funds for better returns and flexibility.
For a personalised strategy, consult a Certified Financial Planner to align your investments with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Question by Vinothkumar - Dec 11, 2024Hindi

Money

Hi , I'm 29 years old and wanna retire by 50 and I'm investing in the below funds. I have 12 lakh invested in this portfolio . PPFAS FLEXI CAP -20000 EDELWEISS MIDCAP 150 MOMENTUM 30 INDEX -20000 MOTILAL SMALL CAP FUND - 20000 QUANT SMALL CAP FUND - 12000 MOTILAL MICROCAP FUND - 8000 IM GONNA GRADUALLY SHIFT TO DEBT FUND and balance fund from age 38 to 50. And I will be sitting on an allocation of 60% debt and 40%equity when I'm 50. Please advise if I need any changes.?

Ans: It’s impressive that you are planning early for retirement at 29. This discipline and foresight will help you achieve financial independence. Let’s evaluate your current portfolio and retirement plan, considering your goals and strategy.

Strengths in Your Investment Approach
Starting early gives your investments time to compound effectively.

Your portfolio is well-diversified across equity categories, covering large-cap, mid-cap, and small-cap funds.

A planned shift to debt funds starting at 38 ensures reduced risk as you approach retirement.

Allocating 60% to debt and 40% to equity by retirement is a sound risk-reward strategy.

Portfolio Assessment
PPFAS Flexi Cap Fund
This fund offers diversification across domestic and global equities.

It balances risk with a stable performance history.

Edelweiss Midcap 150 Momentum 30 Index Fund
Index funds like this rely on pre-set indices.

Actively managed mid-cap funds may offer better long-term returns.

Consider switching to actively managed mid-cap funds for expert management and stock selection.

Motilal Oswal Small Cap Fund and Quant Small Cap Fund
Small-cap funds are high-risk, high-return investments.

Allocating 40% of your equity exposure to small-cap funds is slightly aggressive.

Consider reducing exposure to small caps to about 25%-30%.

Motilal Oswal Microcap Fund
Microcap funds carry higher risks due to their focus on smaller, less-established companies.

Gradually reduce exposure to this fund and redistribute to large-cap or balanced funds.

Debt Fund Transition Plan
Your strategy to shift gradually to debt funds is well thought out.

Start with short-term debt funds and dynamic bond funds at age 38.

As you approach 50, include ultra-short-term debt funds for better liquidity.

Suggestions for Equity-Debt Allocation
By age 50, aim for 60% debt and 40% equity as planned.

Maintain some allocation in equity to outpace inflation.

Use balanced or hybrid funds to simplify allocation management.

General Recommendations
Emergency Fund: Keep 6-12 months of expenses in a liquid fund or fixed deposit.

Health and Life Insurance: Ensure sufficient coverage for unforeseen circumstances.

Tax Planning: Utilize Section 80C through ELSS, PPF, and insurance premiums.

Mutual Fund Reviews: Periodically review fund performance and align it with your goals.

Final Insights
Your early retirement goal is achievable with disciplined investing and periodic reviews. Ensure you reduce risks as you approach retirement by balancing equity and debt. Seek guidance from a Certified Financial Planner for regular portfolio adjustments.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Question by Tabrez - Dec 11, 2024Hindi

Money

I have a loan debt if 1.90 lacs. I have lost my job. Bank has filed a case for recovery. I do not have money for settlement also as I have borrowed money already. What should i do please guide.

Ans: Your financial challenges are significant, but they can be managed. Focus on a step-by-step plan to resolve the loan issue and stabilise your finances.

1. Understand the Loan Case Filed
Verify the type of case filed by the bank.

Review the loan documents to understand your rights and obligations.

Check if the bank has issued any prior notices.

2. Communicate with the Bank
Contact the bank's recovery department directly.

Explain your job loss and current financial situation honestly.

Request a temporary freeze on repayment or a restructuring of the loan.

3. Explore Loan Restructuring Options
Banks may offer loan restructuring for genuine hardships.

Restructuring can include reducing EMIs, extending tenure, or pausing payments temporarily.

Emphasise your willingness to repay once your situation improves.

4. Seek Help from a Debt Counsellor
Debt counselling organisations can mediate with the bank on your behalf.

They help negotiate manageable repayment terms and reduce pressure from recovery agents.

5. Look for Temporary Income Sources
Identify immediate opportunities for earning, like freelance work or part-time jobs.

Even small income can help you make token payments to show your intent to repay.

Leverage any skills or resources you have to generate income quickly.

6. Avoid Further Borrowing
Stop taking new loans or borrowing from friends and family.

Additional debt will worsen your financial burden.

Focus on stabilising your current situation first.

7. Understand Legal Implications
Banks cannot harass you through illegal means or use unfair recovery practices.

If harassed, you can file a complaint with the banking ombudsman.

Consult a lawyer if you receive court summons or other legal notices.

8. Liquidate Unnecessary Assets
Evaluate if you have assets that can be sold to partially repay the loan.

Assets like gold, electronics, or unused items can provide immediate relief.

Prioritise using non-essential assets to avoid affecting your basic needs.

9. Prioritise Essential Expenses
Manage your available funds to cover essentials like food, rent, and utilities.

Avoid diverting these funds entirely for debt repayment.

10. Seek Emotional Support
Share your situation with trusted family or friends for emotional support.

Stress can affect decision-making, so seek guidance from those you trust.

Stay motivated and focused on improving your circumstances.

Finally
Your current challenges require resilience and a structured plan. Reach out to the bank, seek help from counsellors, and focus on temporary income. With patience and effort, you can overcome this phase.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 03, 2024Hindi

Money

If I filter top 5 Stocks from Growth Stocks screen in screener.in having highest 3 months return and invest money and monitor daily and each 3 months interval I sell/buy new growth stocks. Is this plan good?

Ans: Investing in growth stocks with a short-term focus requires a comprehensive understanding of risks and market trends. Your approach of selecting top-performing stocks based on a screener, rebalancing quarterly, and monitoring daily can be evaluated through various aspects. Let’s break it down step by step.

Understanding Growth Stocks
Growth stocks are companies expected to grow faster than the market average.
These stocks often reinvest profits, focusing on future growth over current dividends.
They can offer significant returns but come with high volatility and risk.
Benefits of Your Proposed Strategy
1. Identifying Market Leaders
Filtering top 5 growth stocks ensures a focus on high-potential companies.
High 3-month returns often indicate strong market momentum.
2. Quarterly Rebalancing
Regularly reviewing investments aligns your portfolio with changing market dynamics.
Selling underperformers and investing in fresh opportunities improves return potential.
3. Daily Monitoring
Active monitoring allows quick action during market volatility.
It helps in avoiding significant losses by identifying early warning signs.
Risks and Challenges
1. Overemphasis on Short-Term Trends
High recent returns may not sustain, as past performance isn’t a guarantee for the future.
Stocks showing short-term spikes can correct sharply, impacting returns.
2. Increased Transaction Costs
Frequent buying and selling increase brokerage charges and taxes.
These costs erode overall returns, especially with quarterly rebalancing.
3. Tax Implications
Short-term gains are taxed at 20%, significantly affecting profits.
Long-term gains tax benefits are missed due to frequent turnover.
4. Emotional Bias in Monitoring
Daily monitoring can lead to impulsive decisions during market fluctuations.
It’s challenging to stay rational amidst volatility.
Alternative Approach for Better Results
1. Focus on Fundamental Analysis
Choose stocks with strong financials, consistent growth, and sustainable business models.
Consider factors like earnings growth, debt levels, and competitive advantages.
2. Diversify Your Portfolio
Spread investments across sectors to minimise risks from sector-specific downturns.
Avoid over-concentration in a few stocks, even if they appear promising.
3. Invest with a Medium to Long-Term Perspective
Holding quality growth stocks for 3-5 years helps realise their full potential.
This approach reduces the impact of short-term volatility and taxes.
4. Consult a Certified Financial Planner
A Certified Financial Planner can help align your strategy with financial goals.
They provide personalised guidance and objective insights.
Active Funds as a Reliable Option
Actively managed equity mutual funds offer professional expertise in stock selection.
Fund managers adjust portfolios based on market conditions and company fundamentals.
Regular funds via a mutual fund distributor (MFD) ensure informed decision-making and monitoring.
Why Avoid Index Funds or Direct Plans?
Index Funds
Index funds passively track indices and don’t focus on specific opportunities.
They underperform in bear markets or during economic shifts.
Direct Plans
Direct plans lack professional advice, requiring more time and expertise.
Investing via a CFP ensures tailored strategies and timely portfolio adjustments.
Tax Implications to Consider
Frequent transactions result in high short-term capital gains (STCG) taxes of 20%.
Holding stocks longer can attract lower long-term capital gains (LTCG) taxes of 12.5%.
A tax-efficient strategy can significantly improve net returns.
Final Insights
While your strategy of filtering and investing in top growth stocks has potential, it involves high risks, costs, and emotional strain. A more balanced approach combining fundamental analysis, diversification, and long-term holding can deliver better results. Additionally, actively managed mutual funds offer professional management with reduced effort and risk.

For optimal results, consult a Certified Financial Planner to align your investments with your goals. This ensures a structured, tax-efficient, and sustainable approach to wealth creation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Nov 26, 2024Hindi

Money

I'm 48 years old and how much monthly SIP would be required (and in which funds) to have a retirement corpus of 2.70 crore by the age of 60; expecting 6% interest on that corpus (16,20,000) in order to have a monthly SWP of 1,35,000 (16,20,000÷12).

Ans: Your retirement goal is clear. You need a corpus of Rs 2.70 crore at age 60. This will generate Rs 1.35 lakh monthly through a 6% annual return. Let us evaluate how to achieve this corpus through a disciplined SIP approach.

1. Evaluating the Corpus Requirement
Your target corpus is Rs 2.70 crore. This corpus will provide Rs 1.35 lakh per month.

A return of 6% annually on Rs 2.70 crore meets your SWP need.

We will now calculate the SIP amount needed to accumulate Rs 2.70 crore.

2. Selecting Suitable Fund Categories
Large-Cap Funds: These offer stability and consistent growth over the long term. They are less volatile and ideal for a core portfolio.

Flexi-Cap Funds: These diversify across market caps and sectors, offering balanced risk and reward.

Mid-Cap Funds: These provide higher growth potential for wealth creation. However, they require a longer time horizon.

Balanced Advantage Funds: These manage equity and debt exposure dynamically, offering lower risk during market fluctuations.

3. SIP Allocation Strategy
Distribute your SIP across these fund categories.

Allocate more towards large-cap and flexi-cap funds for stability.

Allocate a smaller portion to mid-cap funds for higher growth potential.

Include balanced advantage funds to reduce overall risk in the portfolio.

4. Role of Time and Discipline
You have 12 years to build this corpus. This period allows compounding to work effectively.

Start SIPs immediately. The earlier you begin, the lower your required monthly investment.

Maintain consistency in SIP contributions, even during market corrections.

5. Avoid Index Funds and Direct Funds
Index funds only mirror the market and lack active management. They may not outperform in the long run.

Actively managed funds, chosen through a Certified Financial Planner, can outperform the market.

Direct funds require market expertise. Regular funds offer professional fund management and guidance.

6. Tax Considerations
Long-term capital gains (LTCG) on equity funds are taxed at 12.5% beyond Rs 1.25 lakh.

For debt funds, gains are taxed as per your income tax slab.

Plan withdrawals strategically during retirement to minimise taxes.

7. Inflation-Proofing Your Plan
Factor in inflation for both your SIP contributions and withdrawal needs.

A higher SIP amount today ensures a larger corpus tomorrow.

Equity funds help counter long-term inflation effectively.

8. Periodic Review of Investments
Review your portfolio annually.

Rebalance funds to ensure alignment with your retirement goal.

A Certified Financial Planner can help fine-tune your plan.

9. Estimating SIP Amount
To accumulate Rs 2.70 crore in 12 years, SIP contributions depend on expected returns.

Assume returns of 10-12% annually from a well-diversified portfolio.

Higher returns lower the monthly SIP required.

Begin with a realistic SIP amount and increase it by 5-10% yearly.

10. Create an Emergency Fund
Maintain 6-12 months of expenses in a liquid fund.

This avoids disrupting your SIPs during unexpected events.

Finally
Your goal is achievable with consistent effort and proper planning. Start SIPs today and remain disciplined. A diversified portfolio, regular reviews, and professional guidance will ensure success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Question by Dwarakanath - Nov 24, 2024Hindi

Money

My age is 40yrs I am having an amount of Rs 5L I have decided to invest in mutual fund for a period of 5yrs please suggest the best MF where i can able to get the best returns so that I can able to invest in the best Hybrid MF for my monthly income SWP.

Ans: Investing Rs. 5 lakh for five years with the goal of creating a future Systematic Withdrawal Plan (SWP) is a smart approach. This strategy involves growing the investment while preparing it for regular income generation through a hybrid mutual fund.

Step 1: Investment Objective
Your primary goal is to maximise returns within five years.
You also want to shift to a hybrid fund for regular SWP later.
A balanced risk-reward strategy is critical for achieving both goals.
Step 2: Selecting Mutual Fund Categories
Dynamic Asset Allocation or Balanced Advantage Funds (BAFs)
These funds adjust their allocation between equity and debt based on market conditions.
They provide a balance between growth and risk reduction.
Allocate 30% of your corpus to BAFs to stabilise returns and manage volatility.
Equity-Oriented Funds for Growth
Equity funds, especially large-cap or flexi-cap funds, can grow your corpus effectively.
They suit investors with moderate risk appetite and a five-year horizon.
Allocate 50% of your corpus here for higher growth potential.
Short-Term Debt Funds for Safety
These funds invest in low-risk debt instruments and offer stable returns.
They are ideal for creating liquidity and reducing portfolio risk.
Allocate 20% of your corpus to short-term debt funds to add stability.
Step 3: Transition to Hybrid Funds for SWP
Hybrid funds provide regular income while preserving capital.
After five years, shift your corpus to an equity-oriented hybrid fund.
This ensures a mix of growth and income generation.
Benefits of a Systematic Withdrawal Plan
SWP provides a regular, predictable income post-investment phase.
It allows partial redemption, leaving the rest to grow.
Gains are taxed favourably due to long-term capital gains rules.
Tax Implications
During Growth Phase
Equity fund LTCG above Rs. 1.25 lakh is taxed at 12.5%.
Debt fund gains are taxed as per your income tax slab.
Plan fund switches and withdrawals to minimise tax outgo.
During SWP Phase
SWP is treated as a capital withdrawal, reducing immediate tax burden.
Only the gains portion in each withdrawal is taxed.
Why Not Index or Direct Funds?
Limitations of Index Funds
Index funds mirror markets and lack active management.
They underperform in volatile or corrective markets.
Drawbacks of Direct Plans
Direct plans don’t offer professional guidance.
A Certified Financial Planner ensures tailored advice and active monitoring.
Recommendations for Better Outcomes
Start with a diversified portfolio as per the above allocation.
Regularly review your portfolio to align with market changes.
Seek the help of a Certified Financial Planner for personalised strategies.
Finally
Investing wisely in equity and debt funds over five years will maximise growth. Transitioning to hybrid funds for SWP will ensure a regular income. Focus on consistent reviews and tax optimisation to secure your retirement income goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Nov 29, 2024Hindi

Money

Hi Sir, I am Gourav 40 Year old I have a monthly in hand salary of 67,000 INR. I have a Home Loan outstanding of Rs 950000 and EMI on That Rs 11000 Rate of 9.85%, having a personal loan of rs 150000 and Emi on that rs 9000 other expenses for 20000. I Invest MF SIP 23000/Month, lic of children 1000/month , 1726/per month is Term insurance plan , please suggest is I am doing right or some thing have to change in my plan.?

Ans: It’s commendable that you have a structured financial plan. Your disciplined approach is evident in your consistent investments and commitments. Let’s evaluate your financial situation and make necessary improvements.

Current Income and Expense Management
Your monthly in-hand salary of Rs 67,000 provides a solid foundation.

Home loan EMI of Rs 11,000 (at 9.85%) and personal loan EMI of Rs 9,000 are manageable but significant.

Fixed expenses like loans and insurance account for Rs 21,726, leaving Rs 45,274 for investments and other expenses.

Your monthly household and lifestyle expenses of Rs 20,000 are reasonable given your income.

Strengths in Your Financial Plan
A disciplined SIP of Rs 23,000 shows a strong focus on wealth creation.

Allocating Rs 1,726 to term insurance reflects good risk management.

LIC policy for your children at Rs 1,000 per month is a thoughtful step.

Loan Management
Home loan: Consider prepaying the loan partially when you receive bonuses or increments. This will reduce interest burden.

Personal loan: This loan has a high-interest rate compared to your home loan. Prioritize repaying this early. Use any surplus or low-risk investments to clear it sooner.

Avoid taking any new loans unless absolutely necessary.

Investment Analysis
Mutual Funds
Your SIP allocation of Rs 23,000/month is impressive. Ensure it is diversified across large-cap, mid-cap, and debt funds.

Actively managed funds offer better returns compared to index funds. They are handled by expert fund managers, which helps in better stock selection.

Consider consulting a Certified Financial Planner for periodic portfolio reviews.

LIC Policy
Review the LIC policy to understand its returns and benefits. If it is not giving sufficient returns, consider surrendering and reinvesting in mutual funds.
Term Insurance
Your Rs 1,726/month term insurance plan is vital. It provides financial security to your family. Ensure the coverage is adequate. Ideally, the coverage should be 10-15 times your annual income.
Risk Coverage and Contingency Planning
Emergency Fund: Maintain 6-12 months’ worth of expenses in a liquid fund or savings account. This will safeguard you during job changes or emergencies.

Health Insurance: Ensure you have a separate health insurance policy apart from your employer’s cover. Family floater plans are a good option.

Additional Insurance Needs: Ensure your personal accident insurance is in place. This adds to your risk coverage.

Tax Efficiency
Investments in equity mutual funds should align with long-term goals to enjoy lower LTCG tax. Gains above Rs 1.25 lakh are taxed at 12.5%.

Debt mutual funds have LTCG and STCG taxed as per your income slab. Consider them for short-term goals.

Section 80C: Maximize tax savings by utilizing Rs 1.5 lakh under this section. LIC premiums, ELSS mutual funds, and PPF contributions can help.

Section 80D: Avail deductions for health insurance premiums paid.

Retirement Planning
It’s crucial to set aside funds for retirement early.

Mutual funds, especially balanced or hybrid funds, can provide steady growth.

Avoid ULIPs or annuities, as they often underperform compared to mutual funds.

Children’s Future Planning
You already have an LIC policy for your children. Review its returns and maturity benefits.

Invest in child-specific mutual funds or balanced funds to build a corpus for higher education and marriage.

Use SIPs for long-term goals. They ensure disciplined investing and rupee cost averaging.

Improvement Areas and Suggestions
Focus on repaying high-interest loans like personal loans first.

Increase SIP allocation when your income increases.

Review your mutual fund portfolio annually to ensure it aligns with goals.

Diversify your investments beyond equity, such as debt funds or fixed deposits for short-term goals.

Final Insights
Your financial planning shows discipline and foresight. By fine-tuning loan repayment and investment strategies, you can achieve your goals faster. Regular reviews with a Certified Financial Planner will help optimize your plan. Stay committed to your financial journey and avoid impulsive expenses.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

Ramalingam Kalirajan |7313 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Question by Anurag - Nov 23, 2024Hindi

Money

I am 62 and retiring in 2 years time. Have around 7 cr in MFs, all types. Large, mid, small, flexi, some debt funds, and balanced advantage funds. My question is when I start withdrawing in two years, where shall i begin?? BAF or Flexicap or small cap. I can even withdraw from debt funds and live for 2-3 years giving other funds more time. Please guide me what should be the sequence. I need around Rs 15 lakhs per annum.

Ans: Your current financial portfolio of Rs 7 crore is a strong foundation. With a well-diversified mix of large-cap, mid-cap, small-cap, flexi-cap, balanced advantage, and debt funds, you are positioned well for retirement.

You have two years before you begin withdrawing Rs 15 lakh per annum. This gives your investments more time to grow. Let us evaluate the optimal withdrawal strategy step by step.

1. Prioritise Stability During Initial Withdrawals
Start withdrawals from debt funds.
Debt funds are less volatile and provide stability. Withdrawing from these initially avoids disrupting equity fund growth.

Debt funds also have a predictable return pattern. This helps you meet immediate cash flow needs confidently.

Withdraw from your debt funds to cover the first 2-3 years of expenses. This ensures equity funds remain invested longer.

2. Balanced Advantage Funds as a Secondary Source
Balanced advantage funds (BAFs) are hybrid funds offering a mix of debt and equity. They manage risk dynamically by adjusting allocations.

After using debt funds, withdraw from BAFs. These funds provide moderate growth and are less volatile than pure equity funds.

BAFs act as a buffer when transitioning from low-risk debt funds to equity-based funds.

3. Maintain Growth Potential of Equity Funds
Equity funds like flexi-cap, large-cap, mid-cap, and small-cap have high growth potential over time.

Delay withdrawing from equity funds until other sources (debt and BAFs) are exhausted. This allows your equity portfolio to benefit from compounding.

Withdraw from flexi-cap funds next. These funds have diversified holdings and balanced risk, making them a stable choice.

4. Approach Small-Cap and Mid-Cap Funds Strategically
Small-cap and mid-cap funds are high-risk, high-reward investments. They perform better over longer horizons.

Keep these funds for later years when you can afford to take higher risks.

If markets are performing exceptionally well, consider partial withdrawals from these funds to lock in gains.

5. Reassess Tax Implications of Withdrawals
Equity mutual funds attract long-term capital gains (LTCG) tax of 12.5% above Rs 1.25 lakh.

Short-term capital gains (STCG) are taxed at 20%.

Debt funds are taxed as per your income slab. Factor this into your withdrawal planning to minimise tax outgo.

Spreading withdrawals across multiple financial years can reduce tax liability.

6. Emergency Fund for Liquidity
Maintain 12-18 months of expenses in a liquid fund or savings account.

This ensures you have immediate funds without needing to sell investments in a downturn.

7. Periodic Portfolio Review
Review your portfolio at least once a year. This ensures alignment with your financial goals.

Monitor fund performance and rebalance your portfolio if needed.

Seek guidance from a Certified Financial Planner for expert insights.

8. Avoid Common Pitfalls
Avoid withdrawing from small-cap and mid-cap funds early. This may erode long-term returns.

Avoid making hasty decisions during market corrections. Equity markets need time for recovery.

Avoid direct funds if you lack expertise. Regular funds provide professional fund management and offer better support through an MFD.

9. Align Withdrawals with Inflation
Your Rs 15 lakh requirement may rise over the years due to inflation.

Adjust withdrawal amounts periodically to maintain purchasing power.

Equity funds are well-suited to counter inflation over time.

10. Plan Wealth Transfer Efficiently
If you wish to leave a legacy, ensure part of your portfolio remains invested for heirs.

Avoid liquidating high-growth funds entirely if your expenses are covered.

Nominate beneficiaries for all your investments to simplify wealth transfer.

11. Professional Guidance Matters
A Certified Financial Planner can refine your withdrawal strategy. They help optimise returns, manage risks, and minimise taxes.

Professional advice ensures your retirement corpus lasts longer and meets your goals effectively.

Finally
Your financial preparation is commendable. By withdrawing strategically, you can meet your annual expenses while growing your wealth. Focus on preserving capital initially and enabling growth for the long term.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

See more questions »

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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