Should I Invest 10 Lakhs in Mutual Funds for My Son's Future?

Ans: Hello Pranjal. Your current portfolio diversification sounds good except ABSL PSU Equity Fund. With multiple goal align in next 10-20yrs. I would suggest to consider small cap , midcap , and flexicap categories for your additional portfolio.

Ans: It's commendable that you're looking to start investing in mutual funds to achieve your financial goals. With a clear vision and a steady income, you're well-positioned to embark on this investment journey.

Given your goals and current investments, here's a suggested approach:

Retirement Corpus (5 Cr in 16 years): Given the time horizon, you can consider investing in a combination of equity mutual funds for higher returns potential and debt mutual funds for stability. An SIP in diversified equity funds and balanced funds could be a good starting point.
Son's Higher Education (1 Cr in 7 years): To achieve this goal, you might consider investing in a mix of equity and debt funds, leaning more towards equity for higher growth potential.
Son's Marriage (1 Cr in 10 years): Similar to the education goal, a blend of equity and debt funds can be considered. You might also explore targeted funds designed for specific financial goals.
Given your current investments in PPF, VPF, PF, and NPS, you have a stable foundation. However, considering the reducing interest rates and your goals' timelines, diversifying into mutual funds could potentially offer higher returns.

A Certified Financial Planner can provide personalized advice tailored to your needs, risk tolerance, and investment horizon. They can help you select suitable mutual fund categories, recommend investment amounts, and guide you on portfolio diversification.

Remember, investing is a long-term commitment, and it's essential to stay invested and review your portfolio periodically. Best wishes on your investment journey towards achieving your financial goals!

Ans: Hi,

Your overall savings are quite good but is scattered. You have invested in very low return instruments as well which is not required at this age. Let us have a look at them one-by-one:
- PPF: 40k per month - very big amount. It is a pure debt instrument and this amount can be utilized to build wealth for your future. You should invest abre minimum of Rs. 500 yearly to keep the account active and redirect 40k monthly to mutual fund investment.
- FD: 10 lakhs - good option to consider this amount as your emergency fund. Let it be as is.
- SSY: Can continue but limit the monthly contribution to 5,000 monthly and start SIP of 5000 for your daughter.
- ULIP: not a good idea. It is market linked but has huge commission payout to agents. HEnce very low return. But no use of surrendering now. So continue.
- LIC: 10,000 monthly - not a good idea. LIC's are endowment plan which has both investment and insurance. One should keep these 2 entirely separate by taking pure life insurance and having different pure investment options. LIC's offer 4-5% annual return which is even less than FD. It has already been 13 years for you. Share its maturity date for me to guide you better.
- Mutual Fund: 20k monthly is good to start. Add 40k from PPF. And another SIP of 5k for daughter. Total 65k per month (60k for you; 5k daughter). It can generate an annual CAGR of 14%. Choose equity oriented funds and do a step-up of 10% each year. You will get 14 crores for yourself at the age of 60 which will fund your retirement and a huge inheritance for kids. You can consult a proper advisor to help you in fund selection and goal formation.
- Plot and land are good for future. Hold them.
- Have ample health and life insurance for your family and yourself.

Hence my advice for you would be to consult a professional Certified Financial Planner - a CFP who can guide you with exact funds to invest in keeping in mind your age, requirements, financial goals and risk profile.

Best Regards,
Reetika Sharma, Certified Financial Planner
https://www.instagram.com/cfpreetika/

Ans: You have done very well in creating multiple savings and investment streams. Your dedication to disciplined investing is clear. You are also managing family goals with Sukanya Samriddhi, PPF, ULIP, LIC, FDs, and now mutual funds. This shows responsibility and long-term focus. At age 40, this is the right stage to fine-tune and rebalance.

» Present position

PPF at Rs.40,000 per month is high. Current balance is Rs.6 lakh.

FD of Rs.10 lakh adds safety but earns limited return.

Sukanya Samriddhi at Rs.10,000 per month is good for daughters’ education. Started in 2016.

Bajaj Future Gain ULIP started in 2021. Premium Rs.10,000 per month till 2031. Maturity in 2041.

LIC policy with Rs.10,000 per month since 2013. Long-term lock-in with low returns.

Mutual fund started recently with Rs.3 lakh lumpsum and Rs.20,000 per month SIP. Value now Rs.3.4 lakh.

Agricultural land worth Rs.45 lakh and plot worth Rs.30 lakh. Not generating liquid cash flow.

Your portfolio is safe-heavy. Insurance-cum-investment products are eating your cash flow. Mutual funds are under-allocated. At 40, growth allocation is necessary.

» PPF investment

PPF is safe but interest is only around 7% to 8%.

Maximum deposit allowed is Rs.1.5 lakh per year. You are putting Rs.4.8 lakh yearly. Only Rs.1.5 lakh qualifies. Rest is invalid.

Hence, your Rs.40,000 monthly deposit is not allowed in full. You should reduce it.

Keep only Rs.12,500 monthly in PPF. That keeps Rs.1.5 lakh per year.

» Sukanya Samriddhi

Good scheme for daughters’ future. Higher interest than PPF.

Rs.10,000 per month since 2016 is stable. Continue this.

It also gives EEE benefit. Don’t disturb this.

» Fixed deposit

FD of Rs.10 lakh is safe but return is taxable.

Keep FD only as emergency reserve.

You already have land and insurance products. No need to lock more in FD.

Redeem part of FD and shift towards growth mutual funds gradually.

» ULIP investment

ULIPs have high charges and low transparency.

Bajaj Future Gain ULIP will eat return in early years.

Premium till 2031 and maturity only in 2041 means low liquidity.

IRR will be around 5% to 6% only.

You should surrender ULIP after lock-in is completed and redirect money to mutual funds.

» LIC policy

Traditional LIC policy has very low return.

10,000 per month from 2013 is a heavy drag.

Return will be only 4% to 5%.

Better to surrender after paid-up value and reinvest in mutual funds.

For protection, keep only a term plan with high coverage.

» Mutual funds

You started recently. 3 lakh lumpsum and 20,000 monthly SIP. Current value is 3.4 lakh.

This is the right direction. Mutual funds will create wealth for long-term.

At 40, you need equity exposure for growth.

Increase SIP step by step. Reduce PPF, ULIP, LIC and redirect those savings into mutual funds.

Mutual funds are flexible, transparent and managed by professionals.

Regular funds with a Certified Financial Planner support are better. Direct funds look cheaper but create mistakes without guidance.

Active funds managed by skilled managers give you better chance than index funds. Index funds don’t protect downside. They just copy market. You need active allocation.

» Insurance planning

Check if you have adequate term insurance. A pure term plan of 15 to 20 times annual income is needed.

LIC and ULIP are not giving proper risk cover.

Once you surrender them, buy pure term plan. Premium is very low for high cover.

Health insurance is also needed for family.

» Real estate exposure

You have agriculture land worth Rs.45 lakh and a plot worth Rs.30 lakh.

They are assets but not liquid. They don’t generate income.

Don’t add more into real estate now. Focus on financial assets for liquidity.

» Retirement goal

At 40, you have 15 to 18 years for retirement.

Retirement needs inflation-proof corpus. FD, PPF, LIC will not beat inflation.

Mutual funds will give growth. With SIPs and compounding, you can create large corpus.

Review every 2 to 3 years and adjust.

» Children’s education goal

Sukanya Samriddhi will support daughters’ education.

But inflation in education is very high. You also need mutual fund corpus.

Start earmarked SIP for children’s higher education.

» Tax efficiency

PPF and Sukanya are EEE schemes. Keep them but don’t overload.

FD interest is fully taxable.

LIC and ULIP tax-free maturity is uncertain because of high premium rules.

Mutual funds have clear taxation. Equity MF LTCG above Rs.1.25 lakh taxed at 12.5%. STCG taxed at 20%. Debt MF gains taxed as per slab.

With long-term discipline, tax outgo is lower in mutual funds.

» Cash flow rebalancing

Reduce PPF to Rs.12,500 monthly.

Stop fresh FD creation.

Plan to surrender ULIP after 5 years lock-in.

Review LIC policy surrender value. Exit gradually.

Redirect these savings to mutual funds SIP. Target Rs.50,000 to Rs.70,000 monthly SIP.

» Asset allocation strategy

Keep 10% in FD for emergencies.

Keep 15% in PPF and Sukanya for safety.

Keep balance 75% in mutual funds for growth.

Within MF, diversify across large-cap, flexi-cap, mid-cap, and hybrid.

Review with a Certified Financial Planner regularly.

» Psychological comfort

Army officers are disciplined savers. You already showed that.

Reducing low return products will feel difficult but necessary.

Mutual funds give flexibility and growth. Stay patient for 10+ years.

Avoid stock market direct investing if you have no time. Stick to MFs.

» Finally

Your present structure is tilted towards safe and low return products.

To create wealth, shift towards equity mutual funds.

Reduce PPF to allowed limit only.

Continue Sukanya.

Surrender ULIP and LIC step by step and reinvest in mutual funds.

FD only for emergencies.

Build SIPs gradually to 50,000 or more per month.

Keep term insurance for protection.

Stay disciplined for next 15 years.

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

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

Ans: Hi,

It is great that you are taking a step forward towards your early retirement after 10 years. Let us analyse things one at a time.
1. Emergency Fund - You want to put 5 lakhs as emergency fund for you. It is a good amount and you can park in liquid mutual fund. Go for ICICI or HDFC liquid funds for this.
2. Term Insurance - 2 crores cover is good enough. If you share monthly income, would be able to calculate exact amount more accurately.
3. Health Insurance - Take one with a minimum cover of 15 lakhs to cover yourself and family.
4. Current MF - currently around 8.5 lakhs value. Good funds. Continue this amount in these.
5. Stocks - current value of 8.1 lakhs. Direct stock investment is very risky and nor recommended as it requires complete tracking and knowledge. You can consider shifting the entire amount in mutual funds for your retirement.

You want to invest a lumpsum of 15 lakhs and start a SIP of 1.3 lakhs again. You can choose to invest 15 lakhs in equal proportion in your current mutual funds and start SIP in the same funds as well.
However, you can also consider consulting a professional advisor who can build a portfolio for you for all your investments. An advisor guides you with right investment throughout and monitors all investments periodically to cater the requirement and market movements.

Your goal is to reach a corpus of 4 crores in 10 years. With current investments you can only get 3.5 crores in 10 years. You need to increase your SIP by 10% each year to get 5 crores.

Also make sure you have no financial liability left when you retire. And have a dedicated fund for other major goals such as kids education, travel, their marriage etc.

Hence do consult a professional Certified Financial Planner - a CFP who can guide you with exact funds to invest in keeping in mind your age, requirements, financial goals and risk profile. A CFP periodically reviews your portfolio and suggest any amendments to be made, if required.

Let me know if you need more help.

Best Regards,
Reetika Sharma, Certified Financial Planner
https://www.instagram.com/cfpreetika/