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Want to earn Rs. 1.5 lakh monthly after 5 years? Here's what I did with Rs. 1.27 crore investment.

Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 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
Prakash Question by Prakash on Jun 19, 2024Hindi
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Want to generate 1.5 lakh monthly after 5 years. Current investments are:- Equites: 81 lakhs, Mutual Funds Folios: 26 lakhs, PPF Ac:20 Lakhs and monthly sip is :25k

Ans: To achieve your goal of generating Rs 1.5 lakh per month after 5 years, let's assess your current investments and formulate a strategic plan.

Current Investments Overview

Equities: Rs 81 lakhs

Mutual Funds: Rs 26 lakhs

PPF Account: Rs 20 lakhs

Monthly SIPs: Rs 25,000

Analyzing Your Investment Portfolio

Your current portfolio is well-diversified across equities, mutual funds, and PPF. Each has its own benefits and growth potential.

Equities

Growth Potential: Equities offer high growth potential. They can significantly contribute to your wealth accumulation.

Volatility: Equities are volatile. They can experience sharp price movements.

Mutual Funds

Diversification: Mutual funds provide diversification across various sectors and assets.

Professional Management: They are managed by professional fund managers, which can lead to better returns.

PPF Account

Safety: PPF offers a safe investment with guaranteed returns.

Tax Benefits: PPF contributions and interest earned are tax-free.

Projected Growth and Strategy

Considering a balanced approach for the next 5 years:

Equities Growth: Assuming a moderate annual growth rate of 12% for equities.

Mutual Funds Growth: Assuming an average annual growth rate of 10% for mutual funds.

PPF Growth: Assuming a steady annual interest rate of 7% for PPF.

Recommended Adjustments

To optimize your portfolio and achieve your goal:

Increase SIPs in Equities and Mutual Funds: Consider increasing your monthly SIPs to boost your equity and mutual fund investments.

Rebalance Your Portfolio: Periodically rebalance your portfolio to ensure optimal asset allocation.

Focus on Actively Managed Funds: Actively managed funds have the potential to outperform index funds. They are managed by skilled professionals who can make informed decisions.

Avoid Direct Funds: Direct funds lack professional guidance. Regular funds with a Certified Financial Planner (CFP) offer better support and advice.

Income Generation Plan

After 5 years, your accumulated corpus can be structured to generate monthly income:

Systematic Withdrawal Plan (SWP): Use SWPs in mutual funds to generate regular income. This provides flexibility and tax efficiency.

Dividend Payouts: Opt for mutual funds with regular dividend payouts. This can provide a steady income stream.

Partial Withdrawals from PPF: Utilize partial withdrawals from your PPF account. This ensures you maintain liquidity while enjoying tax benefits.

Disadvantages of Index Funds

No Flexibility: Index funds track a specific index and cannot adapt to market changes.

Lower Potential for Outperformance: They aim to match market performance, not exceed it.

Benefits of Actively Managed Funds

Expertise: Managed by experienced fund managers.

Adaptability: Can respond to market conditions and opportunities.

Disadvantages of Direct Funds

Lack of Professional Guidance: Direct funds require you to manage your investments without expert help.

Time-Consuming: Monitoring and managing investments yourself can be time-intensive.

Advantages of Regular Funds with CFP

Professional Advice: A CFP provides tailored investment advice.

Better Planning: Helps in aligning investments with financial goals.

Peace of Mind: Ensures better financial health with expert support.

Final Insights

To generate Rs 1.5 lakh monthly after 5 years, focus on enhancing your current investments. Increase SIPs, rebalance your portfolio, and consider SWPs and dividend payouts for regular income. Avoid direct funds and index funds. Use actively managed funds with a CFP for better returns and professional advice.

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  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 04, 2024

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Am 55 year old and have MF of. 35 Lakhs with total 1lakh monthly SIP in funds like Tata large/ Midcap fund/ HSBC midcap/ Kotak Emerging Equity fund / Axis blue chip Fund/ UTI Flexi cap fund &FD around 12 lakhs / 10 lakhs in PPF.. My Goal is to create 3-4 cr Pls advise
Ans: Given your age and financial goals, it's essential to ensure that your investment portfolio is aligned with your objectives and risk tolerance. Here are some suggestions to help you work towards your goal of creating a corpus of 3-4 crores:

Review Your Asset Allocation:
Assess your current asset allocation and ensure it aligns with your risk profile and investment horizon.
Consider rebalancing your portfolio to maintain the desired mix of equity, debt, and other assets.
Optimize Your Mutual Fund Portfolio:
Review the performance and consistency of your existing mutual fund holdings.
Consider consolidating or pruning underperforming funds and focusing on those with a strong track record and aligned with your investment goals.
Diversify across different market segments and investment styles to manage risk effectively.
Explore Retirement-Focused Investments:
Given your age and goal of creating a substantial corpus for retirement, consider increasing your exposure to retirement-focused investments such as National Pension System (NPS) or retirement-oriented mutual funds.
These instruments offer tax benefits and are specifically designed to help individuals build a retirement corpus over the long term.
Regular Monitoring and Adjustments:
Regularly review your investment portfolio and make adjustments as needed based on changes in your financial situation, market conditions, and investment goals.
Stay informed about market trends and economic developments to make informed investment decisions.
Seek Professional Advice:
Consider consulting with a Certified Financial Planner to receive personalized advice tailored to your specific needs and goals.
They can help you develop a comprehensive financial plan, optimize your investment portfolio, and track your progress towards your retirement goal.
By following these steps and staying disciplined in your investment approach, you can work towards achieving your goal of creating a corpus of 3-4 crores for retirement.

..Read more

Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

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Iam 38 years old i need 5cr corpus in 55 years i have started sip of amount 7500 with 15% returns now value 1 lakh.
Ans: It's excellent that you're planning for your financial future by investing in SIPs. Here's a breakdown of your goal and how you can achieve it:

Goal: You aim to accumulate a corpus of 5 crore by the time you turn 55. This is a significant amount and requires disciplined investing over the years.
Current SIP: You've started with a monthly SIP of 7500 with an assumed return rate of 15%. At present, your SIP value is 1 lakh.
Investment Strategy:
Increase SIP Amount: Consider gradually increasing your SIP amount over time. As your income grows or expenses decrease, channel a higher portion towards your investments.
Diversify Portfolio: While it's great to have high-return expectations, it's crucial to diversify your portfolio to manage risk. Consider investing in a mix of equity, debt, and other asset classes.
Regular Review: Regularly review your investment portfolio and adjust your SIP amount or asset allocation as needed. Market conditions and personal circumstances can change, so it's essential to stay flexible.
Long-Term Perspective: Keep in mind that building a 5 crore corpus over the next 17 years requires patience and discipline. Stick to your investment plan even during market fluctuations, and avoid making impulsive decisions.
Professional Guidance: Consider consulting a Certified Financial Planner (CFP) to fine-tune your investment strategy and ensure it aligns with your financial goals and risk tolerance.
Emergency Fund: While focusing on long-term goals, don't forget to maintain an emergency fund to cover unexpected expenses. Aim for at least 6-12 months' worth of living expenses in a liquid and easily accessible account.
By following a systematic investment approach, staying committed to your financial goals, and seeking professional advice when needed, you can work towards building a substantial corpus for your future.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

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

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this is md nadeem, 40 year age, just now one month back started SIP in Mutual fund (SBI Blue chip & SBI index fund), I want to make monthly income rs 25,000 Per month after 5 year and another plan is, make a crore, I will be greatful if you tell me about, i dont have any loans but having 5 to 6 lakhs saving, business is not monthly basis it depend on season or oppornity.
Ans: Md Nadeem, you’ve set clear goals for your financial future. You want to achieve a monthly income of Rs 25,000 after 5 years and build a corpus of Rs 1 crore. Let’s assess how your current strategy aligns with these goals and what adjustments might be needed.

Current Investment in Mutual Funds
You’ve started a SIP in a blue-chip fund and an index fund. Blue-chip funds invest in well-established companies with a strong track record. These funds offer stability and moderate returns. They are suitable for conservative investors looking for steady growth.

However, index funds have limitations. They mirror market indices and do not offer the flexibility of actively managed funds. Index funds do not aim to outperform the market, and during market downturns, they might not protect your investments as effectively as actively managed funds. You might want to reconsider your investment in index funds and focus on actively managed funds. These funds have the potential to deliver better returns, especially in volatile markets.

Achieving a Monthly Income of Rs 25,000
To generate a monthly income of Rs 25,000 after 5 years, your investment approach needs to be carefully planned. While SIPs in mutual funds are a good starting point, the choice of funds is crucial. Actively managed funds, particularly those focused on generating regular income, might be more appropriate for your goal.

You should also consider the following:

Diversification: Investing in a mix of equity and debt funds can balance growth and income. Equity funds offer growth potential, while debt funds provide stability and income.

Systematic Withdrawal Plan (SWP): After 5 years, you can opt for an SWP from your mutual fund investments. This allows you to withdraw a fixed amount regularly while keeping the rest of your investment growing.

Risk Management: Since your income is seasonal, it’s essential to manage risk. Ensure your portfolio is diversified across different asset classes to reduce the impact of market fluctuations.

Building a Corpus of Rs 1 Crore
To accumulate Rs 1 crore, your current savings and SIPs need to be supplemented with a more aggressive investment strategy. Here’s how you can approach it:

Increase SIP Contributions: If possible, gradually increase your SIP amount. Regularly increasing your SIP can significantly boost your corpus over time.

Focus on Growth-Oriented Funds: Consider investing in mid-cap or small-cap funds, which have higher growth potential. However, be mindful of the risk associated with these funds.

Lumpsum Investments: You have Rs 5-6 lakhs in savings. You can invest this amount in a staggered manner in growth-oriented funds. This approach can enhance your overall returns without exposing you to significant market risk at once.

Regular Review and Rebalancing: Periodically review your portfolio with a Certified Financial Planner. This will help you stay on track with your goals and make necessary adjustments.

Managing Seasonal Business Income
Given that your business income is seasonal, it’s important to plan your investments and savings carefully:

Emergency Fund: Ensure that you have a robust emergency fund. This fund should cover at least 6-12 months of expenses. It will provide a cushion during lean business periods.

Flexible SIP Options: Choose mutual fund SIPs with the option to pause or modify contributions. This flexibility can be useful when your business income fluctuates.

Diversified Income Streams: Consider diversifying your income sources. Investments in dividend-paying funds or other income-generating assets can provide additional income during off-seasons.

Final Insights
Md Nadeem, you are on the right path by starting your investments in mutual funds. However, to achieve your financial goals, consider focusing on actively managed funds over index funds. Actively managed funds offer better growth potential and flexibility, which are crucial for your objectives.

Increase your SIP contributions if possible and consider investing your savings in a staggered manner to enhance returns. Keep an emergency fund and ensure that your investments are diversified to manage risks effectively.

Regularly review your portfolio with a Certified Financial Planner to stay aligned with your goals. With careful planning and disciplined investing, you can achieve your desired monthly income and build a substantial corpus over time.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 13, 2025

Asked by Anonymous - Feb 13, 2025Hindi
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Why do Debt Funds offer lower returns as compared to Equity Mutual Funds?
Ans: Debt funds and equity mutual funds serve different purposes in an investor's portfolio. Debt funds offer stability and lower risk, while equity mutual funds focus on high growth with higher risk.

Below are the key reasons why debt funds provide lower returns than equity funds.

1. Nature of Underlying Investments
Debt funds invest in bonds, government securities, corporate debt, and fixed-income instruments.

These instruments provide fixed interest, leading to predictable but lower returns.

Equity mutual funds invest in company stocks, which have the potential for higher capital appreciation over time.

2. Risk-Return Tradeoff
Lower risk means lower return potential in debt funds.

Debt investments focus on preserving capital rather than aggressive growth.

Equities are volatile, but over the long term, they tend to generate higher returns.

3. Interest Rate Sensitivity
Debt fund returns depend on interest rate movements in the economy.

Rising interest rates reduce bond prices, lowering returns in debt funds.

Equity funds are less impacted by interest rate changes and benefit from economic growth.

4. Inflation-Adjusted Returns
Debt funds often fail to beat inflation in the long run.

Equity investments provide inflation-adjusted growth due to rising corporate earnings.

Holding equities for longer durations results in compounding benefits.

5. Growth Potential
Equities represent ownership in businesses that expand over time.

Business growth translates to higher share prices and higher returns.

Debt instruments provide fixed interest, which limits potential upside.

6. Tax Efficiency
Equity mutual funds enjoy lower long-term capital gains (LTCG) tax rates compared to debt funds.

Debt fund gains are taxed as per the investor’s income tax slab, reducing post-tax returns.

This tax treatment makes equities more attractive for long-term wealth creation.

7. Market Performance
During economic growth, companies generate higher profits, leading to higher equity returns.

Debt fund returns depend on interest rate cycles, making them less rewarding in growth periods.

Equities have historically outperformed debt over longer durations.

Finally
Debt funds provide safety and stability but offer lower returns.

Equity mutual funds outperform over time due to business expansion and compounding.

A well-balanced portfolio should include both debt and equity, based on financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

...Read more

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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