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Ramalingam

Ramalingam Kalirajan  |9407 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 04, 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
Rajesh Question by Rajesh on Jun 04, 2024Hindi
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Hello Sir, I am 37 year old and earning 2lac/month. I save 33k per month, 13k in SIP(small call, blue chip and flexi) and 20k in post office RD. I have a home loan of 1.50 cr whose monthly installment is 1.29 lakh. I do have 3 childrens ( 2 teenage kids and 1 small kid). I need your guidance to pay the loan amount ASAP and also want to save the corpus amount for my kids higher studies. Note. For my monthly needs i do have another passive income which fullfil our basic needs.

Ans: Securing Your Family's Future: A Financial Roadmap
It's great that you're thinking about paying off your home loan early and saving for your children's education! You're taking charge of your family's financial well-being. Let's explore some strategies to help you achieve your goals:

1. Analyzing Your Cash Flow:

Track Your Expenses: For a month, track all your income sources and expenses (including your passive income). This will help you identify areas where you can potentially cut back and free up more cash for debt repayment and savings.

Debt-to-Income Ratio: Calculate your debt-to-income ratio (total monthly debt payments divided by gross monthly income). A lower ratio indicates better debt management. A CFP can help you analyze this ratio and suggest strategies for improvement.

2. Prioritizing Debt Repayment:

Additional Lump Sums: Do you have any upcoming bonuses or windfalls? Consider using them for additional home loan payments to reduce the principal faster.

Part Pre-Payment: Explore the option of a part pre-payment on your home loan. This can significantly bring down your overall interest outgo.

3. Exploring Refinancing Options:

Compare Interest Rates: Research current home loan interest rates offered by different lenders. If you find a significantly lower rate than your existing one, refinancing your loan can save you money in the long run.

Processing Fees: Consider any processing fees associated with refinancing and weigh them against the potential interest savings.

4. Saving for Children's Education:

Investment Time Horizon: For your older children (likely closer to needing funds for education), a 5-8 year investment horizon might be suitable. This allows for some aggressive investment options.

Younger Child: For your younger child (with a longer horizon, say 10-15 years), a balanced actively managed SIP can offer growth with some stability.

5. Choosing Actively Managed SIPs:

Actively Managed vs. Index Funds: Actively managed funds have fund managers who try to outperform the market by selecting promising stocks. This has the potential for higher returns than passively managed options like index funds, but also involves more risk. A CFP can help you choose the right option based on your risk tolerance.

Diversification: Consider investing in a diversified mix of actively managed SIPs across different market segments (large-cap, mid-cap) to spread your risk and maximize growth potential.

Remember, a CFP can't recommend specific schemes. However, they can help you understand the features and risks of different actively managed fund categories based on your goals.

Additional Considerations:

Emergency Fund: Ensure you have an emergency fund with 3-6 months of living expenses to handle unexpected situations.

Life Insurance: Review your life insurance coverage to ensure your family is financially protected in case of an unfortunate event.

Taking Action:

Schedule a CFP Consultation: A CFP can create a personalized roadmap considering your specific situation, risk tolerance, and financial goals.

Review and Monitor: Your financial situation and goals might change over time. Regularly review your progress with your CFP and make adjustments to your plan as needed.

By following these steps and seeking professional guidance, you can effectively manage your debt, save for your children's education, and achieve your long-term financial goals. Remember, actively managed funds can be a powerful tool for growth, but they also carry risk. Consulting a CFP can help you make informed investment decisions for a secure future.

Don't wait! Take charge of your financial well-being today.

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  |9407 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 06, 2024

Asked by Anonymous - Jun 24, 2024Hindi
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Hello sir I m 48 years old and me & my wife got earing of 1+ lakhs per month and home loan of rs 40 lakhs.. Which i took 4 years back..with EMIof ?39615/ month Which i have planned to increase by 5% every year I too have daughter of 5 years .. Who has started going to school From this year As per saving is concerned.. I have ppf... ?2000/ month Bajaj allience? 6000/year Sukanya s yojana ? 1000/ month Met life pnb ? for last 10 years. ? 3000/ month Epf.. Both me & my wife Since last year 19& 18 years respectively How shd i manege my finance So that i could.. Finish the loan before me & my wife retirement.. Thank you
Ans: Managing your finances effectively can ensure a secure and comfortable future for you and your family. At 48, with a combined monthly earning of over Rs 1 lakh and a daughter starting school, it's essential to have a robust financial plan. Let's dive into how you can manage your finances to finish your home loan before retirement and secure your family's future.

Understanding Your Financial Position
Firstly, let's assess your current financial status:

Age: 48 years
Combined Monthly Earnings: Over Rs 1 lakh
Home Loan: Rs 40 lakhs, taken 4 years back
EMI: Rs 39,615/month, planned to increase by 5% annually
Daughter's Age: 5 years, recently started school
Existing Investments and Savings
You have several ongoing investments and savings plans:

PPF: Rs 2000/month
Bajaj Allianz: Rs 6000/year
Sukanya Samriddhi Yojana: Rs 1000/month
Met Life PNB: Rs 3000/month (for last 10 years)
EPF: Both you and your wife have been contributing (19 years and 18 years respectively)
Goal: Finishing the Home Loan Before Retirement
Your primary goal is to finish the home loan before you and your wife retire. Let's break down the steps to achieve this.

Step 1: Evaluating and Adjusting the EMI
You're currently paying an EMI of Rs 39,615/month. Increasing this by 5% annually is a good strategy. This will help you pay off the loan faster and reduce the total interest paid. Here’s how you can implement it effectively:

Yearly Increase: Make sure to adjust your budget to accommodate this increase each year.
Prepayments: Use any bonuses or extra income for prepayments. This reduces the principal amount and the interest burden.
Step 2: Reviewing Your Investments
Now, let's review and optimize your existing investments for better returns and liquidity.

PPF (Public Provident Fund):

Pros: Safe, tax-free returns.
Cons: Lock-in period of 15 years, partial withdrawals allowed after 7 years.
Recommendation: Continue with PPF for its safety and tax benefits.
Bajaj Allianz:

Pros: Provides insurance cover along with investment.
Cons: Returns are generally lower compared to mutual funds.
Recommendation: Consider surrendering this policy and investing the proceeds in mutual funds for better returns.
Sukanya Samriddhi Yojana:

Pros: High-interest rate, tax benefits, specifically for girl child.
Cons: Lock-in period until the girl turns 21.
Recommendation: Continue with this as it's specifically for your daughter’s future.
Met Life PNB:

Pros: Provides insurance cover.
Cons: Lower returns compared to mutual funds.
Recommendation: Evaluate the surrender value and consider moving the funds to mutual funds.
Step 3: Building a Balanced Portfolio
Creating a balanced portfolio with a mix of equity and debt investments will help you achieve your financial goals.

Equity Mutual Funds:

Pros: Higher potential returns, suitable for long-term goals.
Cons: Market risk, requires patience and a long-term horizon.
Recommendation: Allocate a portion of your savings to equity mutual funds for wealth creation.
Debt Mutual Funds:

Pros: Lower risk, stable returns.
Cons: Lower returns compared to equity.
Recommendation: Use debt mutual funds for medium-term goals and to balance the risk in your portfolio.
Step 4: Increasing EPF Contributions
Both you and your wife have been contributing to EPF for many years. Consider increasing your voluntary provident fund (VPF) contributions. EPF offers safe and tax-free returns, making it an excellent tool for retirement planning.

Step 5: Education Fund for Your Daughter
With your daughter starting school, it's essential to plan for her future education expenses.

Sukanya Samriddhi Yojana:

Continue contributing as it offers good returns and tax benefits.
Education Fund:

Recommendation: Start a dedicated education fund with equity mutual funds. This will help you meet her higher education expenses.
Step 6: Emergency Fund
Ensure you have an emergency fund that covers at least 6-12 months of your monthly expenses. This fund should be easily accessible and kept in liquid assets like a savings account or liquid mutual funds.

Step 7: Insurance Coverage
Having adequate insurance coverage is crucial to protect your family’s financial future.

Term Insurance:

Ensure both you and your wife have term insurance coverage that is 10-15 times your annual income. This provides financial security in case of an unfortunate event.
Health Insurance:

Have comprehensive health insurance for your entire family to cover medical expenses.
Analyzing and Rebalancing Your Portfolio
Regularly review your portfolio to ensure it remains aligned with your financial goals and risk tolerance. Rebalance your portfolio annually to maintain the desired asset allocation between equity and debt.


It’s commendable that you are focused on managing your finances and securing your family’s future. Your commitment to increasing your EMI and planning for your daughter's education is impressive. Balancing multiple financial goals at this stage of life is challenging, and your proactive approach is truly inspiring.

Final Insights
To achieve your goal of finishing the home loan before retirement, focus on increasing your EMI, making prepayments, and optimizing your investments. Building a balanced portfolio with equity and debt mutual funds will help in wealth creation and risk management. Regularly review and rebalance your portfolio to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9407 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 2024

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I am 39 having a monthly gross salary of 1.10 and received in hand is 81000. I have two children 10 and 5 years old. I want to take a home loan of 50 lac. Monthly expenses are about 35000/- . My second source of income gives me on an average 25000/- p.m. No other savings is there. However I have a health insurance and term loan and a Lic for Sum assured 25lac. Now I want to have my own house and I want to take a home loan of 50 lac. At present I am residing in parents home. Sourav Pranjal
Ans: Financial Overview and Assessment
Your financial profile shows a solid income and manageable expenses. However, acquiring a home loan requires careful consideration. Let's break down your financial situation and evaluate the feasibility of a Rs 50 lakh home loan.

Income and Expenses
Primary Income: Rs 81,000/month

Secondary Income: Rs 25,000/month

Total Monthly Income: Rs 1,06,000

Monthly Expenses: Rs 35,000

Net Savings Potential: Rs 71,000

Existing Financial Commitments
Health Insurance: Ensures medical security

Term Loan: Provides life cover

LIC Policy: Sum assured of Rs 25 lakh

Evaluating Home Loan Feasibility
Home Loan Requirement: Rs 50 lakh

EMI Calculation: The EMI for a Rs 50 lakh home loan for 20 years at an 8% interest rate would be approximately Rs 41,822.

Analysis of EMI Affordability
Net Savings Potential: Rs 71,000

Expected EMI: Rs 41,822

You can comfortably afford the EMI. Your net savings post-EMI payment would be Rs 29,178, which provides a good cushion for emergencies and additional savings.

Planning for Future Expenses
Children’s Education: Planning is crucial for your children's education expenses. Start a SIP in a diversified equity mutual fund to build a corpus for this.

Emergency Fund: Maintain an emergency fund equivalent to 6 months of expenses, including EMI.

Investment Strategy
Mutual Funds SIPs: Invest in diversified mutual funds to grow your wealth over time.

Stocks SIP: Direct stock SIPs can offer higher returns but come with higher risk. Balance with mutual funds for stability.

Insurance and Savings Recommendations
Increase Term Insurance: Ensure your term insurance covers at least 10 times your annual income.

Review LIC Policy: Evaluate the performance and consider if switching to mutual funds can yield better returns.

Advantages of Mutual Fund SIPs Over Direct Stock SIPs
Professional Management: Managed by experts who make informed decisions.

Diversification: Reduces risk by spreading investments across multiple stocks.

Ease of Investing: Less time-consuming and easier to manage.

Liquidity: Easy to redeem units when needed.

Final Insights
Home Loan Feasibility: You can afford the home loan. Ensure you have a buffer for emergencies.

Children’s Education: Start saving through SIPs to build a corpus.

Emergency Fund: Maintain 6 months of expenses as a buffer.

Term Insurance: Increase coverage to secure your family’s future.

Investment Strategy: Diversify between mutual funds and stocks. Prioritise mutual funds for stability and professional management.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9407 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 05, 2025

Asked by Anonymous - Jun 01, 2025
Money
Dear Sir, 1) I am 40 yrs old working for CPSU. Post deduction of monthly CPF + VPF contribution 39000/- ( Corpus: 80 Lacs) & NPS : 28900 (Corpus : 18 Lacs). I am getting in hand salary of 1 Lacs per month. 2) PPF investment - 1.5 Lacs/year ( Corpus: 14 Lacs).Sukanya Samriddhi Yojana- 1.5 Lacs/year 3)Monthly Investment in MFs is 35000/- (PPFAS: 10000/-, Axis Blue Chip: 5000/-;ICICI Prudential Nifty 50: 5000/-; PGIM Large and Mid Cap direct growth:5000/-; Quant MID Cap & Small Cap: 5000/- each ) with corpus 10.5 lacs . 4) Equity Shares worth 18 lacs. Equity SIP: 20000/- Per Month 5)I have taken Home loan on 50 lacs with repayment period of 20 yrs, EMI approx: 37000/-. 6) I have 4 -5 LIC Policies of which yearly premium is 175000/- 7) I want to repay the Home in 15 yrs. I have miscellaneous expenses of about 7000/- PM. Please suggest the ways to pay the loan early and build corpus of 8 crore at 60 yrs age.
Ans: Your disciplined investment habits and clarity on goals are truly inspiring.
You wish to:

Pay off a Rs. 50 lakh home loan in 15 years (currently on a 20-year term)

Build a retirement corpus of Rs. 8 crore by age 60 (currently age 40)

Let’s work out a 360-degree financial plan that supports both these goals efficiently.

Understanding Your Financial Setup
Monthly in-hand salary is Rs. 1 lakh after CPF, VPF and NPS deductions

Monthly SIP of Rs. 35,000 in mutual funds

Equity investment of Rs. 18 lakh and equity SIP of Rs. 20,000

Rs. 14 lakh in PPF with Rs. 1.5 lakh annual contribution

Rs. 1.5 lakh/year in Sukanya Samriddhi

Home loan of Rs. 50 lakh; EMI is Rs. 37,000 for 20 years

Annual LIC premium of Rs. 1.75 lakh across 4–5 policies

Monthly expense of Rs. 7,000

This gives a solid platform to build a long-term strategy.

Focus Area 1: Home Loan Prepayment Strategy
1. Step-up your EMI every year

Increase EMI by 5% to 10% every year, based on salary increments

This will reduce interest cost and cut loan tenure to under 15 years

EMI step-up is more efficient than one-time lump sum prepayment

2. Use salary hikes and bonuses for prepayment

Allocate 50% of every increment or bonus towards home loan prepayment

Make one lump sum prepayment every year if possible

Target prepayment of Rs. 1 lakh per year at least, in initial years

3. Avoid PPF or NPS withdrawals

Don’t touch your PPF or NPS for home loan prepayment

These are retirement-oriented, tax-efficient long-term instruments

Keep these safe for post-retirement income and compounding benefits

4. Avoid premature closure of equity or MF assets

Do not liquidate your equity or mutual fund holdings for loan prepayment

Equity assets are expected to deliver superior returns over 15–20 years

Use salary surplus and annual cash flows instead of redeeming investments

Focus Area 2: Retirement Corpus of Rs. 8 Crore at 60
1. Maintain and increase SIP every year

Current SIP of Rs. 35,000 + Rs. 20,000 = Rs. 55,000 per month

Increase SIP by 10% each year as income rises

This systematic hike will help you reach the Rs. 8 crore goal without strain

2. Switch from direct mutual funds to regular through CFP+MFD route

Direct plans lack advisory support, often leading to poor decisions

Regular plans through a qualified CFP give access to periodic review

A Certified Financial Planner ensures proper rebalancing and discipline

3. Avoid index funds; prefer actively managed funds

Index funds lack downside protection during market crashes

They do not rebalance based on changing fundamentals or valuations

Active funds can outperform across market cycles with dynamic strategies

4. Ensure right mix of large, mid and small cap funds

Your SIPs are spread across large cap, mid cap and large+mid cap

Maintain a 60:30:10 ratio across large, mid and small cap

Review and rebalance the mix once every year or after market changes

5. Equity SIP to be continued till retirement

Continue Rs. 20,000 SIP in equity for long-term wealth creation

Over 20 years, this can build a substantial corpus if left uninterrupted

Direct equity may be volatile, so keep risk-reward under regular review

Focus Area 3: Insurance Portfolio Review
1. LIC policies need performance evaluation

Annual premium of Rs. 1.75 lakh is high for low-return products

Check policy surrender value and benefits carefully

Most LIC policies offer returns of only 4% to 5% annually

2. Surrender and redirect into mutual funds if suitable

If surrender values are reasonable, reinvest into long-term mutual funds

This shift can give returns of 11%–13% with long-term SIP discipline

Only do this after analysing each policy separately with a Certified Planner

3. Ensure adequate term life cover

LIC endowment policies do not provide sufficient term cover

Buy a pure term plan equal to at least 15–20 times your annual income

Premium will be low and cover will be very high

4. Health insurance should be comprehensive

Don’t rely only on company health cover

Buy a personal health policy covering self and dependents

Choose a policy with minimum Rs. 10 lakh sum insured

Focus Area 4: Efficient Tax Planning
1. Continue PPF and SSY contributions

These are EEE (Exempt-Exempt-Exempt) instruments

Help in long-term tax-free compounding

Also fulfill Section 80C requirements fully

2. NPS contribution adds under Section 80CCD(1B)

Your contribution of Rs. 28,900/month in NPS is excellent

Don’t withdraw till retirement age to enjoy tax-free annuity-like benefits

Asset allocation in NPS can also be reviewed annually

3. Use mutual fund tax strategy smartly

For equity mutual funds: LTCG over Rs. 1.25 lakh taxed at 12.5%

STCG is taxed at 20% on equity funds if held less than one year

Debt funds are taxed as per income slab for both STCG and LTCG

Plan redemptions smartly to reduce tax impact

Focus Area 5: Emergency and Short-Term Liquidity
1. Emergency fund is essential

Keep 6–9 months of expenses in liquid or ultra-short debt funds

Can be used for health emergencies, job loss, or family needs

Avoid dipping into investments or taking loans during emergencies

2. Avoid using credit cards or personal loans

If expenses increase, don’t rely on credit cards or EMIs

Build a buffer fund for occasional big-ticket needs

Stick to a budget and automate savings first

Focus Area 6: Monitoring and Rebalancing
1. Do a full review every 6 months

Revisit your asset allocation and fund performance twice a year

Identify underperforming funds and shift to better options with professional help

Ensure goals are still on track and risk is under control

2. Use tools like goal trackers and net worth calculators

These tools help to track your wealth journey

Maintain a clear spreadsheet or app-based tracker

Review your progress toward 8 crore goal each year

Finally
Your structure is solid, and your intentions are clear

A few tweaks will boost your efficiency and goal achievement

Focus on annual increases in SIP and EMI to fast-track both goals

Review insurance and direct equity investments through professional eyes

Stick to long-term discipline and avoid short-term reactions

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

..Read more

Ramalingam

Ramalingam Kalirajan  |9407 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 02, 2025

Asked by Anonymous - Jun 01, 2025
Money
Dear Sir, 1)I am 40 yrs old working for CPSU.Post deduction of monthly CPF + VPF contribution 39000/- ( Corpus: 80 Lacs) & NPS : 28900 (Corpus : 18 Lacs). I have in hand salary of 1 Lac per month. 2) PPF investment - 1.5 Lacs( Corpus: 14 Lacs).Sukanya Samriddhi Yojana- 1.5 Lacs 3)Monthly Investment in MFs is 35000/- (PPFAS: 10000/-, Axis Blue Chip: 5000/-;ICICI Prudential Nifty 50: 5000/-; PGIM Large and Mid Cap direct growth:5000/-; Quant MID Cap & Small Cap: 5000/- each )with corpus 10.5 lacs. 4)Equity Shares worth 18 lacs. Equity SIP: 20000/- Per Month 5)I have taken Home loan on 50 lacs with repayment period of 20 yrs, EMI approx: 37000/-. 6) LIC Policies Annual Premium: 1.7 Lacs 7) I have Post retirement benefit scheme corpus of 48 Lacs 8)I want to repay the Home in 15 yrs. I have miscellaneous expenses of about 7000/- PM.please suggest the ways to pay the loan early and build corpus of 8 crore at 60 yrs age.
Ans: You have built a solid base with multiple income streams and disciplined investing.

At 40, you are in a strong position to create a secure and abundant retirement corpus.

Your goals are clear:

Repay your home loan in 15 years instead of 20.

Build Rs. 8 crore corpus by age 60.

This plan needs structured action and disciplined execution. Let’s assess everything carefully from a 360-degree view.

Salary and Cash Flow – A Good Start
Your in-hand salary is Rs. 1 lakh per month.

After Rs. 39,000 CPF + VPF and Rs. 28,900 NPS deduction, you save a big portion.

You are already investing Rs. 35,000 in mutual funds.

Equity SIP of Rs. 20,000 shows higher risk appetite.

Miscellaneous expense of Rs. 7,000 is low and controlled.

Overall, your income-to-expense ratio is strong.

There is good scope for maximising returns and building wealth faster.

Home Loan – Strategy to Close in 15 Years
EMI of Rs. 37,000 on Rs. 50 lakh loan is well within limits.

Goal: Close this loan 5 years earlier without stress.

First, increase EMI gradually every year by 5-10%.

Use annual bonuses or salary increments to make part-prepayments.

Even Rs. 1 lakh extra per year can reduce term by 3-4 years.

Review loan structure with lender once in 3 years to get best rate.

Do not stop SIPs or equity investment for loan closure. Balance both together.

LIC Policies – Immediate Assessment Needed
You pay Rs. 1.7 lakhs yearly as LIC premium.

These are investment cum insurance plans.

These offer low returns and poor liquidity.

Surrender policies and reinvest money into mutual funds for better growth.

Get a simple term insurance of Rs. 1 crore for family safety.

This will reduce premium cost and improve overall wealth creation.

This one decision alone can add lakhs to your final corpus.

Direct Mutual Funds – Not the Right Choice
You are investing through direct plans in some mutual funds.

This looks cost-saving but can become risky in long term.

Direct funds do not offer any ongoing guidance.

Market changes are frequent. Without advice, you may exit or switch wrongly.

Wrong timing can damage your entire portfolio.

A Certified Financial Planner with MFD code gives portfolio strategy.

Regular fund investments give peace of mind and better asset allocation.

Charges are marginal but value is high.

Please shift your funds to regular plans through an MFD having CFP credentials.

Index Fund Exposure – Needs Reevaluation
You are investing in Nifty 50-based index fund.

Index funds are low-cost but not always right.

They follow the market passively.

No option to reduce exposure in weak sectors.

No active strategy during corrections or crashes.

Actively managed funds perform better in Indian market conditions.

They provide risk-adjusted returns with more flexibility.

Certified Financial Planners can help select best actively managed schemes.

Avoid depending on index funds for long-term goals.

Your Existing Investment Mix – Analysis
Your investments are well diversified across multiple asset classes.

Let us evaluate one by one:

CPF + VPF Corpus – Rs. 80 lakhs

Very stable and safe.

Good for post-retirement pension-like benefit.

No changes needed.

NPS Corpus – Rs. 18 lakhs

Another strong pillar for retirement.

Tax-efficient and low-cost.

Suggest keeping equity allocation at 50%-60%.

PPF Corpus – Rs. 14 lakhs

Excellent for safe long-term returns.

Tax-free and fixed interest.

Continue till maturity.

Sukanya Samriddhi – Rs. 1.5 lakhs/year

Good for daughter’s education or marriage goals.

Stay invested till maturity.

Mutual Fund SIPs – Rs. 35,000/month

Right asset for long-term wealth creation.

Some funds may need rebalancing.

Mid-cap and small-cap should not cross 30% of portfolio.

Equity Shares – Rs. 18 lakhs

Good wealth-building asset.

High risk, but can deliver higher returns.

Do annual review with a Certified Financial Planner.

Target Rs. 8 Crore at 60 – What You Need to Do
You are now 40 years old.

You have 20 years to build Rs. 8 crore.

Let us look at possible actions:

Continue current SIPs of Rs. 35,000 monthly.

Increase this by 10% every year.

Shift direct funds to regular funds.

Rebalance mid-cap/small-cap exposure to keep risk moderate.

Reinvest LIC surrender value in long-term equity mutual funds.

Keep NPS equity allocation between 50%-60%.

Avoid index funds. Choose high quality actively managed funds.

Use Certified Financial Planner for long-term monitoring.

With this discipline, your Rs. 8 crore goal is very realistic.

Insurance – Only Term Plan is Enough
You are spending Rs. 1.7 lakhs yearly on LIC.

These policies mix insurance with investment.

Returns are around 4%-5% only.

Do this instead:

Surrender LIC policies after checking surrender value.

Buy a pure term insurance of Rs. 1 crore.

Annual premium will be around Rs. 15,000 only.

Invest balance Rs. 1.55 lakhs in equity mutual funds.

This will protect family and create higher wealth.

Tax Planning – Ensure You Don’t Overlap Sections
You are contributing to PPF, CPF, NPS, Sukanya.

All these are eligible under Section 80C and 80CCD(1B).

Ensure not to exceed maximum allowed limits.

Use balance funds for equity mutual funds or debt funds.

Emergency Fund and Short-Term Goals
Maintain 6 months’ expenses in a liquid fund.

Do not mix emergency fund with investments.

Plan separately for near-term goals like car, vacation, etc.

Use short-term debt funds for such goals.

Portfolio Rebalancing – Do it Yearly
Every 12 months, review and rebalance your portfolio.

Reduce exposure in overgrown asset classes.

Adjust between large-cap, mid-cap, and debt.

Track performance with support of Certified Financial Planner.

Exit poor performers and reallocate.

This keeps your goal aligned and risk under control.

Final Insights
You are already on a strong foundation at age 40.

Your income is good, savings rate is healthy, and investments are well spread.

But a few corrections are needed to maximise outcomes.

Shift LIC policies to equity mutual funds.

Avoid direct and index funds.

Work with a Certified Financial Planner for guidance.

Stay invested, increase SIPs yearly, and control unnecessary spending.

Your Rs. 8 crore goal is possible with this roadmap.

Stay focused, track yearly, and adapt as needed.

You are moving in the right direction.

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

..Read more

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Career Counsellor - Answered on Jul 05, 2025

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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