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Ramalingam Kalirajan |6568 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 18, 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 - Apr 29, 2024Hindi

Sir, Am a govt officer class 1, i hav nearly 50 lacs in pf,20 lacs in lic ulip, 50 lacs savings in bank.accounts ,need to buy a house along vth my husband b4 i retire for which i may need my savings ,i hav 10 lacs every year from my agriculture land lease for 5 yrs ending next year I vl b getting a pension for my monthly expenses How do i plan my financial future sir. How can i

Ans: You have managed your finances well with significant savings and diverse investments. Your disciplined approach sets a strong foundation for your future. Let's work on a plan to secure your financial future.

Current Financial Overview
Provident Fund (PF): ?50 lakhs in PF offers safety and steady growth.
LIC ULIP: ?20 lakhs in ULIP provides life cover and market-linked returns.
Savings: ?50 lakhs in bank accounts ensure liquidity.
Agricultural Income: ?10 lakhs per year for five years offers additional cash flow.
Pension: A pension will cover your monthly expenses post-retirement.
Goal: Buying a House
You plan to buy a house with your husband before retirement. Ensure you have a clear budget and timeline. Combining your savings with a potential home loan can make this achievable without exhausting all your funds.

Managing Current Savings
Provident Fund (PF): Keep your PF as it is, ensuring stable growth and safety. It serves as a retirement cushion.
LIC ULIP: ULIPs offer insurance and investment. Review its performance and consider its role in your portfolio. Ensure it aligns with your long-term goals.
Insurance-cum-investment schemes
Insurance-cum-investment schemes (ULIPs, endowment plans) offer a one-stop solution for insurance and investment needs. However, they might not be the best choice for pure investment due to:
• Lower Potential Returns: Guaranteed returns are usually lower than what MFs can offer through market exposure.
• Higher Costs: Multiple fees in insurance plans (allocation charges, admin fees) can reduce returns compared to the expense ratio of MFs.
• Limited Flexibility: Lock-in periods restrict access to your money, whereas MFs provide more flexibility.
MFs, on the other hand, focus solely on investment and offer:
• Potentially Higher Returns: Investments in stocks and bonds can lead to higher growth compared to guaranteed returns.
• Lower Costs: Expense ratios in MFs are generally lower than the multiple fees in insurance plans.
• Greater Control: You have a wider range of investment options and control over asset allocation to suit your risk appetite.
Consider your goals!
• Need life insurance? Term Insurance plans might be suitable.
• Focus on growing wealth? MFs might be a better option due to their flexibility and return potential.

Bank Savings: ?50 lakhs in savings accounts provide liquidity but low returns. Consider moving a portion into higher-yield investments.
Investment Recommendations
Actively Managed Mutual Funds:

Actively managed funds adapt to market conditions, potentially offering better returns than index funds.
Consider diversified funds like balanced advantage funds and equity-oriented hybrid funds.
These funds offer growth potential with a balanced risk profile.
Balanced Asset Allocation:

Ensure a mix of equities, debt, and fixed income to balance risk and return.
Equities offer growth, while debt provides stability.
Rebalance your portfolio periodically to maintain the desired asset allocation.
Regular Funds vs. Direct Funds:

Regular funds provide professional guidance through a Certified Financial Planner (CFP).
A CFP helps in monitoring and adjusting your portfolio, ensuring it meets your goals.
The expertise often outweighs the higher expense ratio compared to direct funds.
Planning for Retirement
House Purchase: Allocate funds for the down payment and consider a manageable home loan. Ensure you retain enough liquidity for emergencies.
Pension: Your pension will cover regular expenses. This reduces the need to draw heavily from your savings.
Emergency Fund: Maintain an emergency fund covering 6-12 months of expenses. Keep this in a liquid fund for easy access.
Post-Retirement Income
Agricultural Income: Utilize the ?10 lakhs annual income from your land lease wisely. Consider reinvesting it in diversified funds to generate additional returns.
Part-Time Work: If interested, consider part-time work post-retirement for extra income and engagement.
Regular Financial Review
Review Investments: Regularly review your investment portfolio. Ensure it aligns with your evolving goals and market conditions.
Consult a CFP: Engage a Certified Financial Planner for personalized advice and ongoing support. They can help optimize your portfolio and navigate market changes.
Final Thoughts
You have a solid financial base with diverse investments and a clear goal of buying a house. By strategically managing your savings and investments, you can achieve your goals and secure a comfortable retirement. Regularly reviewing your financial plan and seeking professional advice will keep you on the right track. Your disciplined approach and thoughtful planning are key to your financial success.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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