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Ramalingam Kalirajan |7550 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 14, 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

Question by Rohan on May 02, 2024Hindi

Hello, I am 25 yrs old and my take home monthly salary is approx 80k. I do freelance as well, so total in hand income comes around 1.2lacs pm. I am investing in PPF since 2020. Used to invest around Rs. 1000/- pm but slowly increased my investment to 12,500 from last month onwards and looking to continue the same. Since beginning of this year, I have started to invest in mutual funds with a monthly SIP of 15,000. I invest in a mix of small, mid and large cap funds. Does it makes sense to consider investing in ELSS tax saver funds? Do they generally give good returns as compared to SML cap funds? I am looking to step up my SIP by 10% every year. My goal is to attain financial freedom in the next ten years with more 1cr. as a corpus. I also have a LIC jeevan anand policy and I invest around 1,250/- every month which will mature in next 10 years. In order to achieve my financial goal fast, should I increase my monthly SIP to maybe 30k by decreasing the amount invested in other schemes? I know that SIPs generally comes with a better return but with a high risk. Is there any other scheme that I should opt for which gives higher return? Please suggest how to go about it based on my current income and living expenses. I also have some liabilities after investments such as: Personal loan: 45k Consumer loans: around 10k House expenses: 20k My current investment portfolio so far: SIP: 40K (Recently started as mentioned) PPF: 2.2 lacs EPF: 1.8 lacs LIC: 1 lac Thank you!

Ans: It's impressive to see your proactive approach towards financial planning at such a young age. Let's delve into optimizing your investment strategy to achieve your goal of attaining financial freedom with a corpus of ?1 Crore in the next ten years.

Evaluating Your Current Investments
Your investment journey, including PPF, SIPs in mutual funds, and a LIC Jeevan Anand policy, demonstrates a solid foundation for wealth creation. However, let's explore potential enhancements to accelerate your wealth accumulation.

Considering ELSS Tax Saver Funds
ELSS tax saver funds offer the dual benefit of tax savings under Section 80C of the Income Tax Act and potential for higher returns. While they carry market risk like any equity investment, historically, ELSS funds have provided competitive returns compared to other equity categories over the long term.

Assessing Asset Allocation and Risk Tolerance
Diversification across asset classes is essential to manage risk effectively. While your current portfolio includes a mix of equity (SIPs), debt (PPF, LIC), and EPF, it's crucial to align your asset allocation with your risk tolerance and investment horizon.

Stepping Up SIP Contributions
Increasing your monthly SIP contributions to ?30,000, as you've proposed, can expedite your journey towards your financial goal. By redirecting funds from other schemes, such as reducing contributions to your LIC Jeevan Anand policy, you can allocate more towards equity investments, potentially generating higher returns over the long term.

Exploring Alternatives for High Returns
While SIPs offer a disciplined approach to wealth accumulation, exploring other investment avenues can complement your portfolio. Consider avenues like direct equity investments, provided you have the expertise and time for thorough research. However, be mindful of the associated risks and volatility.

Managing Liabilities
Addressing your existing liabilities, including personal and consumer loans, should be a priority. Prioritize paying off high-interest debt to free up more funds for investment and improve your overall financial health.

Maintaining a Balanced Approach
Balancing your investment goals with your living expenses is crucial to ensure financial stability. Regularly review your budget and investment strategy to optimize returns while meeting your lifestyle needs.

Final Thoughts
By enhancing your SIP contributions, exploring ELSS tax saver funds, and maintaining a disciplined approach to investment, you're on track to achieve your financial freedom goal. Remember to seek guidance from a Certified Financial Planner to tailor a personalized plan aligned with your aspirations and circumstances.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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