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How to Achieve a 20 Crore Investment Goal by Age 45 with a 2 Lakh Monthly Salary?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 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 - Jul 09, 2024Hindi
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Hello Sir, I am 25 years old.I am investing 23,000 Evey month in MF(60% in mid cap, 30% large cap and 10 to 15% around small cap). I will increase my SIP with my salary like if I got 15 to 20% hike. I want to increase my SIP accordingly. I want 20 crore of age of 45. Pls guide me. how can I achieve my Goal. My salary is 2 lakh per month!!!

Ans: You want Rs. 20 crores by age 45. This is a significant goal, but achievable with disciplined investing.

Current Investment Strategy
SIP Allocation
60% in mid-cap funds

30% in large-cap funds

10% in small-cap funds

Monthly Investment
Rs. 23,000 per month currently
Future SIP Increases
Plan to increase SIP with salary hikes
Evaluating Your Current Strategy
Mid-Cap Funds
Growth Potential: Mid-cap funds offer high growth potential.

Risk: They are riskier compared to large-cap funds.

Large-Cap Funds
Stability: Large-cap funds are stable and provide steady returns.

Lower Risk: Less volatile compared to mid-cap and small-cap funds.

Small-Cap Funds
High Growth: Small-cap funds can provide high returns.

High Risk: They are the most volatile.

Recommendations to Achieve Rs. 20 Crores
Increase SIPs Regularly
Annual Increases: Increase your SIPs by 15-20% annually.

Bonus Investments: Invest additional income from bonuses.

Diversify Your Portfolio
Balanced Approach: Consider adding debt funds for stability.

Reduce Risk: Balance high-risk investments with safer options.

Consider Actively Managed Funds
Expert Management: Actively managed funds can outperform index funds.

Regular Reviews: Ensure fund managers are adjusting to market conditions.

Avoid Direct Funds
Lack of Guidance: Direct funds lack professional guidance.

Benefits of Regular Funds: Investing through a Mutual Fund Distributor (MFD) with CFP credentials ensures expert advice.

Long-Term Investment Discipline
Stay Invested
Market Volatility: Do not panic during market downturns.

Long-Term Focus: Keep your focus on the long-term goal.

Rebalance Your Portfolio
Regular Reviews: Review your portfolio every six months.

Adjust Allocations: Rebalance based on performance and market conditions.

Tax Efficiency
Utilize Tax-Saving Instruments
ELSS Funds: Consider Equity Linked Savings Scheme for tax benefits.

NPS: National Pension System offers tax benefits and long-term growth.

Emergency Fund
Maintain Liquidity
Emergency Savings: Keep 6-12 months of expenses in a liquid fund.

Avoid Withdrawal: Do not dip into your SIP investments for emergencies.

Professional Guidance
Certified Financial Planner
Expert Advice: Consult a Certified Financial Planner for personalized strategies.

Regular Check-ins: Schedule regular reviews with your planner.

Final Insights
To achieve Rs. 20 crores by age 45, increase your SIPs regularly and diversify your portfolio. Balance high-risk investments with safer options and consider actively managed funds. Stay disciplined, review your portfolio regularly, and seek professional advice to stay on track.

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  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2024

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I do SIP of rs 8k per month since 6yrs in SBI bhuechip -2k, SBI focused equity -2k, HSBC small cap -2k, Canararobecco em eq. -2k .Wanted to increase upto 12k per month.Now i am 41 and moderate. Suggest modifications for long term pls.
Ans: Your commitment to systematic investing is commendable, and I'm here to assist you in optimizing your portfolio for long-term growth and stability.

Understanding Your Current Portfolio
Your SIP investments reflect a diversified approach, spanning large-cap, focused equity, small-cap, and emerging market equities. This blend offers exposure to various market segments, mitigating risk and maximizing growth potential.

Assessing Risk Tolerance and Investment Horizon
As you approach your 40s, it's crucial to reassess your risk tolerance and align your investments with your long-term financial goals. Considering your moderate risk appetite and long investment horizon, we'll tailor a strategic plan to optimize returns while managing risk.

Proposed Modifications
Diversification: Expand your portfolio to include additional asset classes like debt funds or hybrid funds. This diversification can provide stability during market downturns while still offering growth opportunities.

Equity Allocation: Given your moderate risk profile, consider rebalancing your equity allocation to reduce exposure to volatile segments like small-cap and emerging market equities. Focus on quality large-cap and focused equity funds for steady growth.

Systematic Increase: Gradually increase your SIP contributions to 12,000 per month, allowing for incremental growth while maintaining discipline in your investment approach.

Periodic Review: Regularly review your portfolio's performance, market trends, and personal financial goals. Adjust your investment strategy as needed to stay aligned with evolving circumstances.

Benefits of Active Management
Active fund management offers the advantage of professional expertise and adaptability to changing market conditions. Skilled fund managers actively research and select stocks, aiming to outperform the market and deliver superior returns over time.

Disadvantages of Index Funds
Index funds may lack the flexibility and potential for outperformance offered by actively managed funds. They're inherently tied to the performance of the underlying index, limiting opportunities to capitalize on market inefficiencies or emerging trends.

Conclusion
By strategically modifying your portfolio, you can optimize returns and mitigate risk, ensuring a secure financial future. As a Certified Financial Planner, I'm committed to guiding you on this journey towards financial prosperity and peace of mind.

Best Regards,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

Asked by Anonymous - Jul 11, 2024Hindi
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I am 46 , earning 3 lakhs per month Investment 50 thousands in sip. Goal of atleast 2 cr in 10 years, will increase SIP ANNUALLY.. CAN YOU GUIDE ME..
Ans: Achieving a Rs. 2 Crore Goal in 10 Years: Strategic SIP Planning
Current Investment Scenario
You are 46 years old and earn Rs. 3 lakhs per month. You invest Rs. 50,000 per month in a SIP. Your goal is to accumulate at least Rs. 2 crores in 10 years. You plan to increase the SIP amount annually.

Importance of SIP for Wealth Creation
SIP is a disciplined investment strategy. It helps in building wealth over time. Investing monthly reduces market timing risk. SIP benefits from rupee cost averaging. This ensures you buy more units when prices are low.

Choosing the Right Funds
Select funds with a good track record. Actively managed funds are recommended. They adjust portfolios based on market changes. This can lead to better returns compared to index funds. Consulting a Certified Financial Planner (CFP) can help in fund selection.

Annual Increase in SIP
Increasing your SIP annually can significantly boost returns. Even a 10-15% annual increase can make a big difference. It ensures that your investment keeps pace with inflation and growing income.

Diversification for Risk Management
Diversify your SIP investments. Include large-cap, mid-cap, and small-cap funds. This mix balances potential returns and risks. Diversification can protect against market volatility.

Monitoring and Rebalancing
Regularly monitor your investments. Rebalance the portfolio to stay aligned with goals. Adjust based on market conditions. This ensures your portfolio remains on track.

Avoid Direct Funds
Direct funds might seem cost-effective. However, they lack professional guidance. Investing through a CFP ensures informed decisions. They provide valuable insights and help in fund selection.

Benefits of Regular Funds
Regular funds offer expert management. A CFP can guide on the best funds. They help in navigating market complexities. Regular funds ensure informed investment decisions.

Calculating Expected Returns
Assume an average annual return of 12-15% for equity funds. With a starting SIP of Rs. 50,000, increasing annually, you can achieve your goal. Regularly increasing the SIP amount enhances your corpus over time.

Risks and Considerations
Investing in mutual funds involves market risks. The value of your investment can fluctuate. Stay informed about market trends and fund performance. Regular reviews and adjustments are crucial. A CFP can assist in managing risks effectively.

Final Insights
Investing Rs. 50,000 per month in SIPs is a wise strategy. Choose actively managed funds with strong performance records. Plan to increase your SIP amount annually. Diversify your investments to manage risk. Regularly monitor and rebalance your portfolio. Consulting a CFP can provide valuable guidance in fund selection and investment strategy. This approach will help you achieve your goal of Rs. 2 crores in 10 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 25, 2024

Asked by Anonymous - Jul 20, 2024Hindi
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Sir i am 32 and recently i have started sips in mutual fund for 20k month and i set my goal to achieve 2 crore at my age of 45 will i need to my sip or any other investment can i do to achieve my goal suggestion please.
Ans: Assessing Your Goal and Current Investment Strategy
Your Financial Goal

Objective: Accumulate Rs 2 crore by age 45.
Current Age: 32.
Investment Horizon: 13 years.
Current Investment Strategy

Monthly SIP Amount: Rs 20,000.
Investment Vehicle: Mutual Funds.
Evaluating Your SIP
Return Expectations

Historical Returns: Equity mutual funds typically offer 12-15% annual returns.
Growth Projection: Evaluate if Rs 20,000 monthly can reach Rs 2 crore in 13 years.
Calculating Potential Growth
Scenario Analysis

Assumed Returns:

12% annual return: Approximately Rs 1.02 crore.
15% annual return: Approximately Rs 1.22 crore.
Gap Analysis: There might be a shortfall in achieving Rs 2 crore with Rs 20,000 SIP at these returns.

Recommendations for Achieving Your Goal
Increase SIP Amount

Revised SIP Calculation: Increase your SIP amount to bridge the gap.
Optimal SIP: Calculate based on desired corpus and realistic return rates.
Diversify Investments

Balanced Portfolio: Consider adding debt funds for stability.
Equity Allocation: Keep a higher equity allocation for growth.
Regular Review and Adjustments

Annual Review: Assess your portfolio annually to ensure it’s on track.
Adjust SIP: Increase SIP amount based on income growth and market performance.
Additional Investment Strategies
Lump Sum Investments

Windfall Gains: Invest any bonuses or windfall gains to boost your corpus.
Regular Top-ups: Add lump sum investments periodically.
Alternative Investment Options

Avoid Direct Funds: Regular funds with a certified financial planner offer professional management and guidance.
Avoid Index Funds: Actively managed funds typically outperform in the long run due to expert management.
Risk Management
Insurance Coverage

Life Insurance: Ensure adequate life insurance to cover financial risks.
Health Insurance: Comprehensive health insurance to mitigate medical expenses.
Emergency Fund

Liquidity: Maintain an emergency fund covering 6-12 months of expenses.
Final Insights
Commitment: Consistency in SIPs is crucial for long-term wealth creation.
Review and Adjust: Regularly review your portfolio and adjust investments based on performance and goals.
Consultation: Engage with a Certified Financial Planner for personalized advice and strategy.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Asked by Anonymous - Nov 22, 2024Hindi
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A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

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Milind

Milind Vadjikar  |682 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your 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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