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40-Year-Old With Rs. 2.15 Lakh Salary Seeks Guidance on Investments for Daughter's Education and Retirement

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 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
Suresh Question by Suresh on Jul 06, 2024Hindi
Money

Hello Sir, I am a 40 yr old Zonal Sales Head in a private organisation having monthly take home salary of Rs.2.15 lakhs. I now invest Rs.81,500/month in diversified mutual funds SIP. I have a mutual fund Corpus of Rs.67.5 lakhs. I have Rs.16 lakhs in Shares in equity market & Rs.28 lakhs in PF, Rs.8 lakhs in PPF, Rs.8.5 lakhs in LIC Jivan Anand. I keep Rs.3 lakhs in Bank account. I have a 6 yr old daughter. I would like to have 2.5 Cr for my daughters' higher education in 15 yrs & i need to have a corpus of 8 crores for my retirement in 18 yrs. Please suggest, am i on the right path.

Ans: I understand that you want to ensure your daughter's higher education and a secure retirement. With a structured plan and consistent efforts, you're on the right path to achieving your financial goals. Let's dive deeper into your current investments and future needs.

Current Financial Standing
You have an impressive monthly salary of Rs. 2.15 lakhs. Out of this, you are investing Rs. 81,500 in diversified mutual funds SIPs. Your mutual fund corpus stands at Rs. 67.5 lakhs, and you have Rs. 16 lakhs in equity shares. Additionally, you have Rs. 28 lakhs in your Provident Fund (PF), Rs. 8 lakhs in Public Provident Fund (PPF), and Rs. 8.5 lakhs in LIC Jivan Anand. You also maintain Rs. 3 lakhs in your bank account for liquidity. This is a robust financial foundation.

Assessing Your Goals
Your financial goals are clear and ambitious. You aim to have Rs. 2.5 crores for your daughter's higher education in 15 years and a retirement corpus of Rs. 8 crores in 18 years. Let's break down how your current investments align with these goals and what adjustments may be necessary.

Mutual Fund Investments
Your substantial investment in mutual funds is commendable. Diversified mutual funds are a solid choice for long-term growth. Given your current SIPs, ensure that your portfolio remains balanced across large-cap, mid-cap, and small-cap funds. Diversification reduces risk and enhances growth potential.

Regular Monitoring and Rebalancing
It is crucial to monitor your mutual fund portfolio periodically. Market conditions change, and your investments may need rebalancing to maintain the desired asset allocation. Regular reviews with a Certified Financial Planner can help optimize your portfolio.

Benefits of Actively Managed Funds
Actively managed funds often outperform index funds, especially in the Indian market. Professional fund managers make strategic decisions to maximize returns, adapting to market fluctuations. This expertise can potentially provide higher returns compared to passive index funds.

Equity Shares
Your Rs. 16 lakhs in equity shares is a good investment. Direct equity investment can offer substantial returns but also comes with higher risk. Ensure that your equity portfolio is well-diversified across different sectors to mitigate risk. Consider periodically reviewing and possibly reallocating your investments based on market performance.

Provident Fund (PF) and Public Provident Fund (PPF)
Your investments in PF and PPF are prudent for long-term security. These instruments offer safety and tax benefits. Continue contributing to these funds to ensure a stable, risk-free component in your portfolio.

Life Insurance Policies
You have Rs. 8.5 lakhs in LIC Jivan Anand. While traditional insurance plans provide security, they often yield lower returns compared to mutual funds. Given your substantial investment in insurance, consider evaluating the returns and possibly reallocating to higher-yielding investments.

Surrendering Investment-cum-Insurance Policies
If the returns from LIC Jivan Anand are not meeting your expectations, consider surrendering the policy. Reinvesting the proceeds into diversified mutual funds can potentially offer better growth, aligning with your long-term goals.

Emergency Fund
Maintaining Rs. 3 lakhs in your bank account for emergencies is wise. This fund should cover at least six months of your expenses. Given your monthly salary and expenses, ensure that this emergency fund remains liquid and easily accessible.

Daughter's Higher Education Goal
To achieve Rs. 2.5 crores in 15 years for your daughter's higher education, your investments need to grow at a healthy rate. Diversified mutual funds can help achieve this target. Ensure that you regularly review and adjust your SIPs to stay on track with this goal.

Education Savings Plan
Consider setting up a dedicated education savings plan. This plan can focus on high-growth mutual funds with a mix of equity and debt to balance risk and returns. Regular contributions and compounding growth will help you reach the Rs. 2.5 crore target.

Retirement Planning
Your goal of Rs. 8 crores for retirement in 18 years is ambitious but achievable with disciplined investing. Let's evaluate how your current investments align with this goal.

Building a Retirement Corpus
Continue with your diversified mutual fund SIPs and equity investments. Additionally, consider increasing your SIP contributions periodically to match inflation and salary increments. This will help grow your corpus faster.

Role of Provident Funds
Your investments in PF and PPF will provide a stable and secure base for your retirement corpus. These funds should continue to form a core part of your retirement plan due to their safety and tax benefits.

Long-Term Investment Strategy
Adopt a long-term investment strategy focusing on equity mutual funds for growth. As you approach retirement, gradually shift to more conservative investments like debt funds to protect your corpus from market volatility.

Tax Planning
Efficient tax planning can enhance your savings and investment returns. Utilize tax-saving instruments like ELSS (Equity Linked Savings Scheme) mutual funds. They offer tax benefits under Section 80C and potential for higher returns.

Maximizing Tax Benefits
Ensure that you are fully utilizing the Rs. 1.5 lakh deduction limit under Section 80C through investments in PPF, EPF, and ELSS. Additionally, consider tax-saving options under Sections 80D for health insurance and 24(b) for home loan interest.

Health Insurance
Adequate health insurance is crucial for financial security. Ensure that you and your family are covered under a comprehensive health insurance plan. This will protect your savings and investments from unforeseen medical expenses.

Estate Planning
Consider creating a will to ensure your assets are distributed according to your wishes. Estate planning helps avoid legal complications and ensures your family's financial security.

Education and Retirement Goal Alignment
Balancing your daughter's education and your retirement goals is key. Prioritize and allocate investments towards both goals. A Certified Financial Planner can help structure a plan that aligns both objectives without compromising either.

Final Insights
You are on a commendable path with your disciplined investment approach. Your diversified portfolio and regular investments are key to achieving your financial goals. Regular reviews and rebalancing of your portfolio will ensure you stay on track.

Consulting with a Certified Financial Planner can provide tailored advice and strategies to optimize your investments. Stay focused, and your financial goals are well within reach.

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  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 11, 2024

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Hi my age is 34 earning 1.30l per month, my saving are monthly 26k in different sips, 12.5k monthy ppf, 2 policies total amount of 15-16lakhs paying 30 and 70k premium yearly ( mature in 2035), investing montly in gold - 500 and 50,000 yearly in nps. Rest 5 to 10k in saving account. I have 2 questions 1.Should I need to invest more if i want total corpus of 3 crore? 2. I have 2 daughters so i should have enough amount for their education and their marriage
Ans: Planning for Your Financial Future: Building a Rs 3 Crore Corpus and Securing Your Daughters' Futures

Congratulations on your disciplined saving and investment habits. Your current financial strategy is commendable, and it’s clear you’re committed to securing a prosperous future for yourself and your daughters. Let’s address your questions and develop a comprehensive plan.

Understanding Your Current Financial Situation
To start, let’s review your existing financial commitments and investments:

Monthly Income: Rs 1,30,000
Monthly Savings and Investments:
SIPs: Rs 26,000
PPF: Rs 12,500
Policies: Rs 30,000 and Rs 70,000 annually (equivalent to Rs 8,333 per month)
Gold: Rs 500
NPS: Rs 50,000 annually (equivalent to Rs 4,167 per month)
Savings Account: Rs 5,000 to Rs 10,000
Your total monthly investments sum up to approximately Rs 51,500, excluding the savings account contributions.

Setting Clear Financial Goals
You have two primary goals:

Accumulating a Rs 3 Crore Corpus
Ensuring Funds for Your Daughters’ Education and Marriage
Goal 1: Accumulating a Rs 3 Crore Corpus
Calculating the Future Value of Your Investments
To determine if you need to invest more, we must project the future value of your current investments. Let’s assume an average annual return of 12% for your SIPs, considering they are likely invested in equity mutual funds.

Formula for Future Value of SIP:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 26,000)
r = Annual interest rate (0.12)
n = Number of times interest is compounded per year (12)
t = Number of years (26, assuming retirement at age 60)
Future Value Calculation for SIPs
Using the formula above:

FV = 26,000 * [(1 + 0.12/12)^(12 * 26) - 1] / (0.12/12)

FV = 26,000 * [(1 + 0.01)^(312) - 1] / 0.01

FV = 26,000 * [(1.01)^312 - 1] / 0.01

FV = 26,000 * [36.786 - 1] / 0.01

FV = 26,000 * 35.786 / 0.01

FV = 26,000 * 3,578.6

FV = 9,30,43,600

So, the future value of your SIPs after 26 years would be approximately Rs 9.3 crores.

Future Value Calculation for PPF
The PPF has a fixed rate of return. Assuming an average annual return of 7.1%:

Formula for Future Value of PPF:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 12,500)
r = Annual interest rate (0.071)
n = Number of times interest is compounded per year (1)
t = Number of years (15, due to PPF maturity period)
FV = 12,500 * [(1 + 0.071/1)^(1 * 15) - 1] / (0.071/1)

FV = 12,500 * [(1 + 0.071)^15 - 1] / 0.071

FV = 12,500 * [(1.071)^15 - 1] / 0.071

FV = 12,500 * [2.847 - 1] / 0.071

FV = 12,500 * 1.847 / 0.071

FV = 12,500 * 26.014

FV = 3,25,175

So, the future value of your PPF after 15 years would be approximately Rs 3.25 lakhs.

Future Value Calculation for NPS
NPS investments typically yield around 10% annually. Assuming the annual contribution is Rs 50,000:

Formula for Future Value of NPS:

FV = P * [(1 + r/n)^(nt) - 1] / (r/n)

Where:

P = Monthly investment (Rs 4,167)
r = Annual interest rate (0.10)
n = Number of times interest is compounded per year (1)
t = Number of years (26)
FV = 4,167 * [(1 + 0.10/1)^(1 * 26) - 1] / (0.10/1)

FV = 4,167 * [(1 + 0.10)^26 - 1] / 0.10

FV = 4,167 * [(1.10)^26 - 1] / 0.10

FV = 4,167 * [10.835 - 1] / 0.10

FV = 4,167 * 9.835 / 0.10

FV = 4,167 * 98.35

FV = 4,09,445

So, the future value of your NPS after 26 years would be approximately Rs 4.09 lakhs.

Additional Investments
Your existing policies (LIC, ULIP) may not offer the best returns. Consider surrendering them and redirecting the premiums into mutual funds for potentially higher growth.

Goal 2: Funding Your Daughters’ Education and Marriage
Estimating Future Expenses
Education Costs: Assume a need of Rs 20 lakhs for each daughter’s higher education.
Marriage Costs: Assume Rs 20 lakhs for each daughter’s marriage.
Let’s estimate the inflation-adjusted cost of education and marriage in the future.

Formula for Future Value of Education Costs:

FV = PV * (1 + r)^t

Where:

PV = Present value (Rs 20 lakhs)
r = Inflation rate (0.06)
t = Number of years until the expense (assume 10 years for education)
Future Value Calculation for Education
FV = 20,00,000 * (1 + 0.06)^10

FV = 20,00,000 * (1.06)^10

FV = 20,00,000 * 1.791

FV = 35,82,000

So, the future value of education costs after 10 years would be approximately Rs 35.82 lakhs.

Future Value Calculation for Marriage
Assuming marriages in 20 years:

FV = 20,00,000 * (1 + 0.06)^20

FV = 20,00,000 * (1.06)^20

FV = 20,00,000 * 3.207

FV = 64,14,000

So, the future value of marriage costs after 20 years would be approximately Rs 64.14 lakhs.

Investment Strategy for Daughters’ Future
Child Education Funds: Invest in dedicated mutual funds for child education. These funds typically offer higher returns and are tailored for education expenses.
Systematic Transfer Plan (STP): Use STP to gradually move funds from equity to debt as the expense time nears to minimize risk.
Sukanya Samriddhi Yojana (SSY): Consider SSY for long-term savings for your daughters, offering tax benefits and secure returns.
Monitoring and Adjusting Investments
Regularly review your investments to ensure they align with your goals. Rebalance your portfolio annually to maintain the desired asset allocation.

Periodic Reviews
Annual Performance Review: Evaluate the performance of your investments and adjust as necessary.
Adjusting Asset Allocation: Shift funds between equity and debt based on market conditions and your risk tolerance.
Risk Management
Diversification is crucial to minimize risks. Spread investments across various asset classes to safeguard against market volatility.

Market Risk
Equity Investments: High returns but subject to market fluctuations. Diversify across sectors and companies.
Debt Investments: Lower returns but more stable. Include high-quality debt instruments for stability.
Tax Considerations
Maximize tax efficiency by leveraging tax-saving instruments under Section 80C. Ensure investments align with your overall financial strategy.

Tax-Efficient Investments
Equity-Linked Savings Scheme (ELSS): Provides tax benefits and good returns. Suitable for long-term goals.
Public Provident Fund (PPF): Safe and tax-efficient. Ideal for conservative investors.
Professional Guidance
Consider consulting a Certified Financial Planner (CFP) for personalized advice. A CFP can help tailor your investment strategy to meet your specific goals.

Advantages of CFP
Expertise in Financial Planning: Offers professional insights and strategies.
Personalized Advice: Tailored to your financial situation and goals.
Final Insights
Achieving a Rs 3 crore corpus and securing funds for your daughters’ education and marriage requires disciplined investing and strategic planning. Your current investments are a strong foundation, but consider increasing contributions for higher returns.

Diversify your investments, monitor performance regularly, and adjust your portfolio as needed. Consulting a Certified Financial Planner can provide valuable guidance and help you stay on track.

Stay committed to your goals, and with careful planning, you can achieve financial security and ensure a bright future for your daughters.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 14, 2024

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Money
I am 44 years old, married with a monthly salary of 4.5 lakhs after tax. I own a debt-free house. My daughter is 9 and my son is 4. I am looking to build a corpus of 2 crores for my children's education, 1 crore for their marriages, and to buy two additional houses. I also aim to accumulate a retirement corpus of 10 crores. Please advise on how I can achieve these goals in the next 10-15 years. Current Savings: • Fixed Deposit: 16 lakhs • Shares: 72 lakhs • Provident Fund (PF): 1.4 crores • Mutual Funds: 15 lakhs • Public Provident Fund (PPF): 10.5 lakhs • ULIP: 21 lakhs Ongoing Investments: • ULIP: 3 lakhs/year (for the next 3 years) • PPF: 1.5 lakhs/year (for the next 8 years) • Provident Fund (PF): 82,000/month Including company contribution. • Mutual Fund SIP: 60,000/month • Shares SIP: 30,000/month • Additional Shares Investment: 5 lakhs/year
Ans: Your current savings add upto 2.745 Cr.

Assuming you keep them invested and considering composite moderate return of 8% this will grow upto a sum of 8.71 Cr after 15 years.

Ongoing investments will lead you to a corpus of 6.66 Cr after 15 years(Appropriate conservative returns considering the various investment instruments)

6.66+8.71=15.37 Cr

Retirement corpus goal 10 Cr?
Children education fund goal 2Cr?
Children wedding goal 1Cr?
Additional home(2) buy 2Cr?

Keep reviewing and rationalising your stock holdings and hedge it if necessary as per advice from investment advisor.

Consider SSY in the name of your daughter (8.2% currently with quarterly review by GOI)since it's an E-E-E tax exempt scheme.

Do consider suitable family floater health cover apart employer group coverage.

You may follow us on X at @mars_invest for updates

Happy Investing

..Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 21, 2025

Money
Hi sir. I am 42 yrs of age. Have a 2.2 lacs as monthly take home. I live in my own house whose value is 1.25 cr. As corpus i have 15 lacs in PF, 7 lacs in NPS, 30 lacs in MF and 20 lacs in KVP which will mature in 2032 yielding 40 lacs. I also have several insurance policies which will give me 25 lacs in 2031. Monthly , i invest 37000 in PF, 11000 in NPS and 30000 in MF. I also pay 7000 as insurance premium which will mature in 2031. My only daughter will also complete 12th on 2031. My aim is to create a corpus of around 5-6 crores when I retire after 17 years. I do not wish to buy any real estate. Am i on the right path. I have some gold worth 20 lacs which i do not count in corpus. Have car laon for which emi is 20 k dor next 55 months. With household expenses, i am not able to increase my per month savings as of now.
Ans: You have a strong income, live in your own house, and already built a solid base. Your thinking is structured. Your clarity of not counting gold or real estate is excellent. Let us now assess everything from a 360-degree angle.

Reviewing the Current Financial Structure

You are 42 and earn Rs 2.2 lakhs in hand monthly.

Your house is fully owned. It gives you freedom from rent burden.

You have built a good mix of assets:

Rs 15 lakhs in PF

Rs 7 lakhs in NPS

Rs 30 lakhs in mutual funds

Rs 20 lakhs in KVP (will become Rs 40 lakhs in 2032)

Rs 25 lakhs from insurance plans (maturing in 2031)

Rs 20 lakhs worth of gold (you rightly excluded it)

Your regular investments are also consistent:

Rs 37,000 into PF

Rs 11,000 into NPS

Rs 30,000 into mutual funds

Rs 7,000 insurance premium

You also have a car loan EMI of Rs 20,000 for 55 more months.

Household expenses are high, and that’s limiting extra savings.

You aim for Rs 5 to 6 crore retirement corpus in 17 years.

Now let’s evaluate if your current strategy will get you there.

Clarity Around Investment Contributions

Your monthly total investments add up to Rs 78,000.

That’s around 35% of your income. Very healthy and ideal.

Still, not all of it works equally well towards wealth creation.

We must see where real growth is coming from.

PF gives steady but slow growth. Its return is fixed and taxable at withdrawal.

NPS gives good long-term growth, but 40% is compulsorily annuitised at maturity.

KVP is safe but gives low return, and interest is taxed.

Insurance maturity offers low return. It is a weak wealth builder.

Mutual funds are your best engine for future wealth.

We must now prioritise future cash flow towards mutual funds.

Insurance, PF, and NPS are support tools, not primary engines.

Assessing Car Loan and EMI Pressure

Rs 20,000 EMI on car loan will continue for 55 months.

That means another 4.5 years of liability.

If possible, prepay it earlier after 2 years.

Once loan is closed, use that Rs 20,000 for mutual fund SIP.

That one small switch will change your future returns.

Avoid using KVP maturity for debt clearance. Let it grow till 2032.

Car loan prepayment must come from surplus cash flow only.

Investment Style Matters More Than Numbers

You’re doing Rs 30,000 monthly in mutual funds.

But the style of fund matters more than just the amount.

Please ensure that your funds are:

Actively managed (not index funds)

Equity-oriented for long-term growth

Diversified across large, flexi, mid, and small cap

Avoid index funds.

Why?

Index funds follow fixed weights. They can’t protect downside.

They are rigid during volatility. They don't rebalance for quality.

Active funds use fund managers to manage risk and chase return.

Especially in Indian markets, active funds work better for long-term goals.

Also avoid direct funds.

Why?

Direct funds give no review support or handholding.

You miss rebalancing, tax guidance, and emotional stability during corrections.

Choose regular plans via a Certified Financial Planner.

This gives you structured guidance, updated asset mix, and peace of mind.

Your Insurance Strategy Needs a Rethink

You mentioned Rs 25 lakhs from insurance policies maturing in 2031.

And you are paying Rs 7,000 per month premium.

These are likely traditional endowment or money-back policies.

They offer very poor returns, often under 5% post-tax.

If you hold LIC, ULIPs, or any insurance-cum-investment policy, please surrender.

Reinvest that Rs 7,000 monthly into mutual funds.

Buy a pure term insurance separately.

That costs much less and gives full protection.

Don’t mix insurance and investment.

They perform better when separated.

Also check if you have personal health insurance.

If not, take Rs 15 to 20 lakhs family floater immediately.

Even if employer provides cover, have a separate one.

Child’s Education Planning is on Track

Your daughter will complete class 12 in 2031.

That means higher education starts then.

Your KVP (Rs 40 lakhs in 2032) and insurance maturity (Rs 25 lakhs in 2031) can help fund that.

Together that’s Rs 65 lakhs. This should be sufficient.

But please start a separate child-focused mutual fund SIP now.

Even Rs 5,000 to Rs 10,000 monthly for 6 years will give a good buffer.

Don’t depend only on insurance or KVP.

Mutual funds give more flexibility.

Forecasting Your Retirement Corpus

Let’s now see the big picture for retirement in 17 years:

You already have:

Rs 15 lakhs in PF

Rs 7 lakhs in NPS

Rs 30 lakhs in mutual funds

By 2031-2032, you will also get:

Rs 40 lakhs from KVP

Rs 25 lakhs from insurance

Your monthly investment will continue for 204 months.

Your mutual fund SIP may grow faster than your PF or NPS.

If you increase SIP by even Rs 5,000 every 2 years, you will comfortably reach Rs 5.5 to 6 crore.

In fact, most of your wealth will come from mutual funds if SIPs are sustained and reviewed.

Just ensure SIPs are well allocated and reviewed every 6 months.

Avoid pausing SIPs for short-term expenses.

And once your car loan ends, increase SIP by Rs 20,000.

This single step can add Rs 1 crore to your future corpus.

Where to Adjust for Better Output

You have limited scope to increase savings now.

That is fine.

Instead of looking to save more, focus on:

Reducing low-return products (insurance, KVP)

Reinvesting those into mutual funds

Using future freed-up EMI for SIPs

Avoiding wasteful spends during bonus time

Avoiding new debt unless critical

Also plan every future increase in income with a 50-30-20 rule:

50% for SIP/top-up

30% for lifestyle

20% for buffer

This gives balance without guilt.

Don’t Count Real Estate or Gold

You already mentioned not counting gold or house.

This shows mature financial thinking.

Property and gold are not income generators.

They don’t give you monthly return.

Do not add them to retirement corpus.

Focus only on financial assets for your goals.

Even after retirement, liquid assets are more useful than gold.

Review Strategy and Tax Awareness

Once a year, review these five things:

Are SIPs growing at good pace?

Are any funds underperforming?

Are you on track to Rs 5 crore target?

Are tax savings used wisely (80C, 80CCD)?

Is your debt (car loan, insurance policies) reducing?

Also, be aware of mutual fund taxation:

Equity fund LTCG above Rs 1.25 lakh taxed at 12.5%

STCG taxed at 20%

Debt mutual funds taxed as per income slab

A Certified Financial Planner will help you structure exits accordingly.

Checklist for Next 2 Years

Surrender low-return insurance plans and shift to term plan

Redirect Rs 7,000 insurance premium to SIP

Add Rs 5,000 SIP for child education

Once car loan closes, add Rs 20,000 SIP

Review asset mix and rebalance funds every 6 months

Avoid direct and index mutual funds

Always invest through regular plans via CFP-guided MFD

Maintain term and health insurance without break

Keep minimum 6 months expense as emergency fund in debt mutual funds

Create nomination and Will for all assets

These steps will protect you and boost your corpus over time.

Finally

You are on a very good path.

Your discipline, awareness, and asset mix are all solid.

Just make minor corrections to move faster.

Avoid insurance-based savings. Rely more on mutual funds.

Review your journey yearly with a Certified Financial Planner.

Your Rs 5 to 6 crore goal is achievable well before retirement.

With steady hands and guided action, you’ll reach financial independence peacefully.

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2025

Money
Hi Sir, I am 32 years old, married and have a 4 month old daughter. I am working in a defense based private company. I earn 53K in hand. My monthly expenses come to around 20K. I have just started investing in mutual funds and doing a SIP of Rs.8000 per month. I have invested around 1.5 lakhs across multiple funds by now. I also have around 1.2lakhs in my EPFO account. I have saved 20K per month for my daughter for the past year which totals around 2 lakhs right now which I want to invest in her name for the long term. Besides these, I do not own any assets or have any liabilities as of now. Please suggest where to invest the amount I have saved for my daughter for best returns. And also please suggest how to plan for my retirement considering similar monthly expenditure with addition of daughters education and marriage.
Ans: You are in a very important phase of life. At 32, with a young child and a steady income, you have made a solid beginning. Your habit of saving and investing early will give you a big edge. Your family is depending on you, and your discipline will secure their future.

Let’s look at everything in a structured and simple way.

? Understanding Your Current Financial Situation

– Your income is Rs.53000 in hand.
– You spend Rs.20000 monthly.
– You save and invest the rest, which is very good.
– You already do SIP of Rs.8000 per month.
– You have Rs.1.5 lakhs in mutual funds.
– You have Rs.1.2 lakhs in EPFO.
– You have Rs.2 lakhs saved for your daughter.
– You have no loans.
– You have no assets like house or gold.

This is a healthy start. You are already spending only 40% of your income. That gives room to build wealth. Now, let us look at what to do next.

? Investing Your Daughter’s Rs.2 Lakhs: Long-Term View

This is for your daughter’s future. Likely uses could be higher education or marriage. Both are long-term goals.

– She is only 4 months now.
– You have 15 to 20 years time.
– This gives scope for growth-based investing.

Here’s what you can do:

– Invest this Rs.2 lakhs in 2 or 3 equity mutual funds.
– Choose actively managed funds for better long-term returns.
– Avoid index funds. They only copy the market and don’t beat inflation.
– Actively managed funds have expert fund managers.
– They adjust based on market opportunities.
– Over 15 years, they usually outperform index funds.

Also,

– Use Regular Plans through a CFP-backed Mutual Fund Distributor.
– Avoid Direct Plans unless you can manage and review investments on your own.
– Direct plans don’t provide support, review, or portfolio balancing.
– Regular Plans through a Certified Financial Planner help you stay disciplined.
– A qualified planner monitors the market and guides rebalancing.
– You avoid costly emotional mistakes.

Strategy for daughter’s funds:

– Divide Rs.2 lakhs across 2 or 3 good equity mutual funds.
– Stay invested for 15 years minimum.
– Do not withdraw in between.
– Review yearly with help of Certified Financial Planner.
– This can grow into a good education or marriage corpus.

Also, since you are already saving Rs.20000 every month for her, keep it up.
Even Rs.5000 or Rs.10000 monthly in SIP for her will make a big difference over time.

? Planning Your Retirement: Long-Term but Needs Focus

Retirement planning should start now. You have time, but the earlier, the better.

– You are 32 now.
– You can aim to retire at 60.
– That gives you 28 years to save.
– But inflation reduces the value of money.
– So Rs.20000 expenses today will grow a lot by retirement.

You need to plan for:

– Your own expenses after retirement
– Your wife’s needs
– Medical costs in old age
– Travel and emergencies
– No income after retirement

What you should do:

– Increase your SIP gradually as income rises.
– Right now, you invest Rs.8000 in mutual funds.
– Increase it by Rs.1000 every year.
– Also start a new SIP only for retirement.
– Separate from daughter’s goal.

Why equity mutual funds help:

– Equity mutual funds beat inflation over long term.
– They build wealth over 20+ years.
– Don’t choose debt mutual funds for retirement goals.
– Debt funds give stable returns but low growth.
– They are good for short-term goals.

Continue EPFO contribution:

– EPFO is a good long-term tool.
– It gives safe and tax-free corpus at retirement.
– Don’t withdraw EPF for other uses.
– Let it grow till retirement.

? Tracking Your Monthly Budget and Investing Discipline

Your expenses are only Rs.20000.
You save nearly Rs.30000 each month.
This gives you enough to grow wealth for all goals.

– Continue SIP of Rs.8000 or increase it.
– Start SIP of Rs.5000 for daughter.
– Start SIP of Rs.5000 for retirement.
– Keep Rs.5000 to Rs.7000 for emergency savings.
– Maintain Rs.1 lakh as emergency fund.
– Park it in liquid fund or FD for easy access.

This way:

– You cover child’s needs.
– You build retirement wealth.
– You stay ready for emergencies.

? Life Insurance and Health Insurance: Non-Investment but Vital

These are not investments. But they are must-haves.
They protect your family and finances from sudden shocks.

– Buy a term insurance of Rs.50 lakhs to Rs.1 crore.
– Choose only pure term insurance.
– Do not take ULIPs or endowment policies.
– They give low returns and high costs.
– If you already have such products, you may consider surrendering.
– Reinvest that amount in mutual funds.

– Also buy family floater health insurance.
– You, your wife and daughter should be covered.
– Minimum Rs.5 lakhs coverage.
– Health costs rise every year.

? Education and Marriage Planning for Daughter

These are big goals. But they are long-term, so time is your friend.

Education Planning:

– Higher education needs large funds.
– Start a separate SIP of Rs.5000 per month.
– Use equity mutual funds.
– Review every year and increase SIP.
– Don’t touch this investment for any other need.

Marriage Planning:

– This is 20+ years away.
– You can use lumpsum investments here.
– The Rs.2 lakhs you saved can be for this.
– Also, build this goal slowly after education fund is stable.

Do not mix marriage and education planning.
Treat them as two different goals.

? Building Assets for Financial Stability

You currently do not have any physical assets. That’s not a problem.

Focus on building financial assets.

– Mutual funds are liquid and can grow well.
– EPFO adds stability and long-term safety.
– Emergency fund ensures peace of mind.
– Term insurance covers family needs.
– Health insurance protects savings.

Stick to these. Do not get distracted by gold or real estate.

Real estate has low liquidity and high maintenance.
Also, resale or rental is not easy and returns are uncertain.

? Why You Should Avoid Index Funds

Index funds may look cheap. But they have limitations.

– They only copy the market index like Nifty.
– They don’t outperform the market.
– In falling markets, they fall fully.
– No active fund manager to manage risk.
– Inflation can beat index fund returns.

On the other hand:

– Actively managed funds have experienced managers.
– They reduce exposure to weak sectors.
– They increase exposure to strong sectors.
– Over long term, they create better value.

Always go with active mutual funds through a CFP-led advisor.
They help you rebalance and stay on track.

? Why Direct Mutual Funds Are Not Ideal

Direct funds have low expense ratio. But they lack guidance.

– No help with fund selection.
– No review or rebalancing support.
– No risk profiling.
– No hand-holding during market falls.

Investors often panic or stay emotional.
This hurts long-term returns.

On the other hand:

– Regular plans give guidance.
– Through Certified Financial Planner, you get yearly reviews.
– You get portfolio alignment based on goals.
– Mistakes are avoided.

The slightly higher cost is worth the value it brings.
Long-term discipline beats small cost difference.

? What To Review Every Year

Every year, review these points:

– SIP amount and growth
– Fund performance
– Daughter’s goal progress
– Retirement corpus projection
– Changes in income or expenses
– New responsibilities or medical needs
– Emergency fund adequacy

Your planner can guide this review well.
This ensures all your goals stay on track.

? Finally

You are doing very well for your stage in life.

– You have no loans.
– You are disciplined in savings.
– You are planning for your daughter.
– You are thinking of retirement.

This mindset will help you build wealth peacefully.

Follow these steps:

– Stay invested for long term.
– Don’t chase returns.
– Review yearly.
– Invest goal-wise.
– Increase SIPs as income grows.
– Avoid distractions like gold and real estate.
– Avoid mixing insurance and investment.
– Take professional help where needed.

With this, you can confidently build your financial future.

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

...Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2025

Money
Sirji I had claimed 54 F last financial year ie 2023-24 of Rs. 74,58,474 shares sold on 10/08/2023 flat purchased on 25/08/2023 I purchased another flat in FY 2024-25 on 18/11/2024 . since i have purchased another flat ( on 18/11/2024 ) within TWO years of sale of original asset ( sold on 10/08/2023) Undertsand that the LTCG caimed in last fy 23-24 of rs 74.58 lacs will be disallowed and added back to fy 24-25 income QUERRY - Since the sale of shares transaction took place before 23 july 2024 ( on 10/08/2023) will I be taxed at 10 % LTCG tax ?? Or at 12.50 % since the condition was broken on 18/11/2024( after 23 rd July 2024) Regards Narayanan
Ans: ? Your Transaction in Brief

– You sold listed shares on 10th August 2023.
– You claimed exemption under capital gains against purchase of a flat on 25th August 2023.
– You have now bought another flat on 18th November 2024.
– You are aware this may disallow the earlier exemption of Rs. 74.58 lakhs.
– You are rightly asking if tax will be 10% or 12.5%.

This is a very thoughtful and forward-looking question. Let’s decode it point by point.

? When is the Exemption Reversed?

– Capital gains exemption is condition-based.
– One such condition is – you should not buy another residential flat within 2 years.
– You violated this condition on 18th November 2024.
– So, the exemption taken earlier gets reversed.
– The amount of Rs. 74.58 lakhs becomes taxable again.
– This reversal happens in the financial year when condition is broken.
– So, this income will be added back in FY 2024-25.

? Which Tax Rate Will Apply on this Reversed LTCG?

– You sold shares in August 2023, that is before 23rd July 2024.
– This date is very important for taxation rules.
– The new LTCG rate of 12.5% is applicable only for transactions on or after 23rd July 2024.
– Your original transaction happened before this cut-off.
– Hence, the older LTCG tax rule of 10% applies in your case.

So, even though the exemption is reversed now, tax rate remains at 10%.
This is because the transaction date is the deciding factor.
Not the date of exemption being withdrawn.
So your understanding is correct, and that’s appreciated.

? Should You Worry About Indexation or STCG?

– No. Since shares were held for more than 1 year, it is clearly LTCG.
– Short-term capital gain rules will not apply here.
– Also, no indexation benefit is available for equity shares.
– But 10% rate on LTCG above Rs. 1 lakh is fair and reasonable.

? How Will This Affect FY 2024-25 Tax Filing?

– The Rs. 74.58 lakhs will now show as LTCG income in FY 2024-25.
– You should report this under capital gains section in ITR.
– Pay advance tax on this if not yet paid.
– Otherwise, you may end up paying interest under sections 234B and 234C.
– Please coordinate with your Chartered Accountant for the tax filing part.

This is important to keep your records clean and avoid scrutiny.

? Will This Impact Your Overall Financial Goals?

– A one-time tax outgo of 10% on Rs. 74.58 lakhs = approx. Rs. 7.45 lakhs.
– If you had planned this well, it can be absorbed easily.
– But if not planned, it could dent liquidity.
– You should relook at your emergency corpus and contingency planning.
– A Certified Financial Planner can help rebalance your goals accordingly.

? Why This Tax Rule Exists – An Insight

– The law allows you to reinvest LTCG into one residential flat.
– This benefit is to encourage home buying, not to speculate.
– That’s why, buying another home within 2 years is seen as a misuse.
– So exemption is withdrawn and LTCG is added back.
– This keeps the rule balanced and fair for all taxpayers.

? Should You Surrender Insurance Policies if Any?

– If you have ULIPs or traditional LIC policies with investment tag, please review.
– These give very low return and poor flexibility.
– If they are more than 5 years old, you may surrender them.
– Reinvest those amounts in mutual funds through a MFD-CFP route.
– That can give you better return, liquidity and transparency.

? Why Not to Go for Direct Mutual Funds?

– Direct funds look cheap, but they come with risks.
– No guidance, no risk-mapping, no goal alignment.
– They expose you to poor fund selection and wrong SIP allocation.
– MFD with CFP gives handholding and better fund filtration.
– Also, regular plans have built-in advisory value.
– This cost is worth paying for financial peace.

? Why Index Funds Are Not the Best Route

– Index funds are passive. They just follow market trend.
– They don’t outperform or give alpha returns.
– In volatile or falling markets, they give poor protection.
– They don’t adapt to sectoral changes or economic cycles.
– Actively managed funds adjust portfolio as per market moves.
– They have research backing, fund manager intelligence, and alpha generation.

In your case, where capital gains are involved, risk-managed returns are key.
So actively managed funds through regular route is more suitable.

? How to Absorb This LTCG Tax Impact

– Start an SIP-based STP to gradually invest surplus in balanced mutual funds.
– Create a buffer fund equal to 6 months’ living expenses.
– Maintain a separate fund for LTCG tax impact of Rs. 7.45 lakhs.
– Don't keep it in equity or risky instruments.
– Use ultra-short or low duration fund for this.

? Tax Planning Insight for You Going Ahead

– Before taking exemption, always review lock-in and restriction period.
– Never buy second property within 2 years unless you're ready to pay tax.
– Document all property purchases and sales in a simple Excel sheet.
– Keep timelines and lock-in periods marked.
– This avoids surprises and ensures smooth tax planning.

Also, keep your CA and Certified Financial Planner in sync.
They must work as a team for your financial health.

? What Could Have Been Done Differently

– You could have waited beyond 2 years to buy second property.
– Or, you could have avoided claiming exemption initially.
– Then invested gains in active mutual funds and booked 10% tax.
– This could have kept your financial strategy more flexible.
– But yes, past cannot be changed. Let’s focus ahead.

You still have ample time to plan FY 2024-25 tax outflow.
You’ve also gained clarity from this experience. That itself is an asset.

? What Should Be Your Next Steps

– Set aside Rs. 7.45 lakhs for LTCG tax.
– Inform your CA in advance for FY 2024-25 tax projection.
– Avoid buying another residential property again for next few years.
– Reassess your long-term asset allocation.
– Avoid ULIPs, traditional LICs, direct funds and index funds.
– Stay focused on goal-based MF portfolio managed via MFD with CFP.

? Finally

You are thinking ahead and keeping track of taxation. That is highly appreciated.
You have acted with good intent. The tax law has its own constraints.
But this clarity now gives you the power to act wisely.
Take a few right steps today, and you can still stay fully on track.
Please don’t panic. The 10% rate is a relief in this scenario.
Keep your documents clean and your CA informed.

For your long-term wealth journey, stay with a Certified Financial Planner.
They will help you stay aligned to your goals, taxes and peace of mind.

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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