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Ramalingam Kalirajan |10894 Answers |Ask -Follow

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

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

Question by Kamlesh on Jul 12, 2025Hindi

Hi, my in hand salary is 1 lac , have no plans yet. Planning of buying a house and car in next 5 years. Pls suggest how to invest money and where.

Ans: Your monthly in-hand salary of Rs. 1 lakh gives good opportunity.
You have no liabilities yet. No existing EMIs. That’s a strong base.
You plan to buy a car and a house in the next 5 years.
Let’s look at your goals and create a step-by-step financial plan.

? Monthly Cash Flow Management

– Begin by tracking your monthly expenses carefully.
– Try to save at least 40% of your income.
– That means saving Rs. 40,000 every month.
– Keep expenses below Rs. 60,000 monthly if possible.
– Savings is the first step to investment.

Don’t let your salary slip away in small expenses. Budgeting is a habit.

? Emergency Fund Setup

– Emergency fund gives peace of mind in tough times.
– Save 4 to 6 months of expenses first.
– If your expenses are Rs. 60,000, keep Rs. 3.6L as emergency fund.
– Use a mix of savings bank, FD, and liquid mutual funds.
– Don’t use equity for emergency money.

This amount should be always accessible, but not mixed with regular savings.

? Car Purchase Planning (5-Year Goal)

– Buying a car is a short to medium-term goal.
– Don’t invest this money in equity or shares.
– Equity has risk of short-term losses.
– Use recurring deposit or short-term debt mutual funds.
– Save separately for car down payment.

Suppose you need Rs. 6L for the car.
You need to save Rs. 10,000 per month approximately.
Stick to the plan. Don’t delay saving.

? House Purchase Planning (5-Year Goal)

– House purchase is a high-value goal.
– It also needs big down payment.
– You may need Rs. 15L to Rs. 20L as down payment.
– This is achievable in 5 years with consistent savings.
– Don’t put this in low-return instruments.

Use balanced mutual funds and flexi-cap funds.
They are managed by professionals and grow well.
Choose regular plans through an MFD with CFP support.

Direct mutual funds may seem low-cost.
But they have no expert to guide you.
A small mistake in fund or timing can cost you years.

Regular plan via Certified Financial Planner and MFD ensures proper tracking.
You get goal-based review. Not random investing.

? Monthly Investment Allocation

– Out of Rs. 1L salary, save Rs. 40,000 minimum.
– Split this Rs. 40,000 into three parts:

Rs. 10,000 for car goal (debt fund or RD)

Rs. 20,000 for house down payment (mutual funds)

Rs. 10,000 for long-term wealth creation (mutual funds)

This mix covers your present and future well.
Don’t skip SIP. Don’t redeem unless needed.

? Mutual Fund Investing Strategy

– Equity mutual funds are for long-term growth.
– Use large-cap, flexi-cap, and mid-cap funds in mix.
– Don’t invest in index funds.
– Index funds have no downside protection.
– They follow market blindly. No manager decisions.
– Actively managed funds perform better in tough markets.

Start with SIPs. Stay consistent.
Increase SIP amount every year with salary hike.

Use regular mutual funds through MFD for service and advice.
Avoid DIY investing unless you track markets full time.

? Investment Discipline and SIP Benefits

– SIP builds investing habit.
– You invest monthly, same date, same amount.
– No need to time market.
– Avoid lump sum investing unless goal is near.
– SIP benefits from rupee cost averaging.

Over time, SIP can grow into big corpus.
Don’t stop SIP if markets go down.
That is when you buy more units.
This builds wealth faster.

? Insurance Planning (Term + Health)

– Insurance is protection, not investment.
– First get a pure term life insurance.
– If you are unmarried now, still take Rs. 1Cr cover.
– Premium is low if taken early.

– Also take health insurance for yourself.
– Start with a cover of Rs. 5L.
– Add top-up later when you have dependents.
– Don’t depend only on office health cover.
– Job change or job loss can remove it.

Buy personal cover which continues always.

? Avoiding Insurance-Linked Investments

– Don’t invest in ULIP or LIC money-back plans.
– These mix insurance with returns.
– Returns are low and lock-in is long.
– Term insurance is better. It’s simple and pure.
– For investment, choose mutual funds separately.

If you already have such plans, check surrender value.
Then move that money to mutual funds.

? Long-Term Wealth Creation

– Start early with equity mutual funds.
– Time in market is more important than timing.
– Set up SIPs for 10+ years.
– Use this for retirement or passive income.

Compound growth works best over long term.
Every delay reduces future gains.

Track your SIPs once a year.
Take help from Certified Financial Planner regularly.

? Tax-Saving Investments

– Use Section 80C limit of Rs. 1.5L every year.
– Choose ELSS mutual funds to save tax and grow wealth.
– ELSS has 3-year lock-in. Shortest among all 80C options.
– Avoid PPF or traditional LIC unless for specific use.

Also claim 80D for health insurance premiums.
Keep tax planning and wealth building connected.

? Asset Allocation Strategy

– Don’t keep all money in one place.
– Mix debt, equity, and cash for right balance.
– Short term goals in debt.
– Long term goals in equity.
– Emergency fund in cash and liquid assets.

Review allocation every year.
Rebalance when market or income changes.

A wrong allocation can ruin best investment choices.
A CFP helps in adjusting this correctly.

? Avoid These Mistakes

– Don’t invest without clear goals.
– Don’t mix investment and insurance.
– Don’t follow random stock tips or apps.
– Don’t stop SIPs due to market fall.
– Don’t delay emergency fund.
– Don’t invest in real estate unless for personal stay.

Real estate lacks liquidity. Also needs huge cash.
Returns are uncertain and often overestimated.

? Start with These Steps Now

– Track all expenses this month.
– Fix Rs. 40,000 for monthly saving.
– Open a SIP in equity mutual fund via MFD.
– Start RD or debt mutual fund for car goal.
– Take term insurance and health cover.
– Keep Rs. 50,000 in savings bank as emergency start.
– Set calendar reminder to review monthly.

Financial discipline beats big income.
Start small but stay regular.

? Finally

– You are at the perfect stage to build strong wealth.
– No loans, no EMIs, and good salary.
– Your 5-year goals are realistic.
– Right investment choices will help you reach them.
– Don’t wait too long to begin.
– Use mutual funds wisely. Avoid index and direct options.
– Direct funds lack guidance. Regular plans with MFD + CFP is safer.
– Use SIPs, avoid lump sum for now.
– Don’t depend on fixed deposits or saving account.
– Don’t forget health and term insurance.

A 360-degree plan gives both safety and growth.
Follow this path with consistency and patience.
You will build wealth faster than you expect.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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.