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Ramalingam Kalirajan |6290 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 08, 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 08, 2024Hindi

Hello, I am 39 and I earn 1.5 lacs per month after Tax and Mandatory PF deduction. I have a total Loan EMI of around ?60,000 which will continue for the next 9 yrs. I have 38 lacs in provident Fund, 5 lacs in PPF, 5 lacs in Bank FD and 15 lacs in Equity MF(?40000/- SIP in 5 Different High Risk Portfolio). I am planning to retire at 50. Kindly guide me how to reach ?3 Crore Savings/nvestment in the quickest way.?

Ans: It's great that you are planning for your future. You’ve done well with your finances so far. Let's break down your current financial situation and find the best path to reach your goal of Rs. 3 crore by age 50.

Current Financial Snapshot
Income and Expenses:

Monthly Income: Rs. 1.5 lakh (after tax and PF deduction)
Loan EMI: Rs. 60,000 per month (for the next 9 years)
Investments:

Provident Fund: Rs. 38 lakh
PPF: Rs. 5 lakh
Bank FD: Rs. 5 lakh
Equity MF: Rs. 15 lakh (Rs. 40,000 SIP in 5 high-risk portfolios)
You’re doing well with a diversified portfolio and a disciplined approach. Let’s see how we can achieve your Rs. 3 crore target.

Assessing Your Financial Goals
You aim to retire at 50, which gives you 11 years to reach your goal of Rs. 3 crore. This requires a strategic and disciplined investment approach.

Increasing SIPs and Investments
1. Increase Monthly SIPs:

Your current SIP of Rs. 40,000 is a good start. Try to increase your SIP amount gradually. Even a 10% increase annually can significantly boost your corpus.

2. Diversify Your Investments:

Diversify into different mutual fund categories. Balance between high-risk and moderate-risk funds. This ensures growth and stability.

Power of Compounding
1. Mutual Funds:

Mutual funds are excellent for long-term growth. They provide diversification, professional management, and compounding benefits.

2. Equity Funds:

Equity funds can offer high returns but come with high risk. Since you have 11 years, equities can play a significant role in growing your corpus.

3. Debt Funds:

Debt funds are more stable and provide moderate returns. They balance the risk in your portfolio.

Regular Monitoring and Rebalancing
1. Monitor Investments:

Regularly review your portfolio. Ensure it aligns with your goals. Adjust allocations as needed.

2. Rebalance Portfolio:

Rebalance your portfolio annually. This helps maintain the desired asset allocation and reduces risk.

Leveraging Existing Assets
1. Provident Fund:

Your PF is a significant amount. Continue contributing to it. It’s a safe and steady investment.

2. PPF:

PPF is also safe and tax-efficient. Consider increasing your contributions to the maximum limit.

3. Bank FD:

FDs are stable but offer lower returns. You might want to move some of this into higher-yielding investments.

Debt Management
1. Loan EMI:

Your Rs. 60,000 EMI is a significant expense. Ensure you don’t default. Pay off the loan as per schedule.

Tax Planning
1. Tax-efficient Investments:

Utilize tax-saving investments like ELSS. They provide equity exposure and tax benefits under Section 80C.

Insurance and Risk Management
1. Term Insurance:

Ensure adequate term insurance. It protects your family’s financial future.

2. Health Insurance:

Adequate health insurance is crucial. It prevents medical emergencies from derailing your financial plans.

Discipline and Patience
1. Stay Invested:

Avoid withdrawing investments unless necessary. The power of compounding works best with time.

2. Regular Investments:

Maintain regular investments. Consistency is key to achieving your financial goals.

Scenario Analysis
Let’s look at some scenarios to see how your investments can grow.

1. Mutual Fund Growth:

Assuming a conservative annual return of 10% for your mutual funds:

Current MF Corpus: Rs. 15 lakh can grow to approximately Rs. 42 lakh in 11 years.
Monthly SIPs: Increasing your SIP to Rs. 50,000 can accumulate around Rs. 1.1 crore in 11 years.
2. Provident Fund Growth:

Assuming an 8% annual return for your PF:

Current PF Corpus: Rs. 38 lakh can grow to approximately Rs. 89 lakh in 11 years.
3. PPF Growth:

Assuming a 7% annual return for your PPF:

Current PPF Corpus: Rs. 5 lakh can grow to approximately Rs. 10.5 lakh in 11 years.
4. Bank FD Growth:

Assuming a 6% annual return for your FD:

Current FD Corpus: Rs. 5 lakh can grow to approximately Rs. 9.5 lakh in 11 years.
Potential Total Corpus
Combining all these investments, you can achieve your Rs. 3 crore goal:

Mutual Funds: Rs. 1.52 crore
Provident Fund: Rs. 89 lakh
PPF: Rs. 10.5 lakh
Bank FD: Rs. 9.5 lakh
Total: Approximately Rs. 2.61 crore

Bridging the Gap
1. Additional Investments:

You need to bridge a gap of around Rs. 40 lakh. Increase your SIPs and consider lump-sum investments when possible.

2. Bonuses and Increments:

Utilize bonuses and salary increments to invest more. Every additional investment helps.

3. Cost-cutting:

Review expenses and find ways to save more. Small savings can add up over time.

Final Insights
Achieving Rs. 3 crore in 11 years is challenging but possible with disciplined planning. Increase your SIPs, diversify investments, and regularly review your portfolio.

Stay patient and committed to your plan. The power of compounding and strategic investments will help you reach your goal.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

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