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48-Year Old Investor Needs Help Building Corpus, Funding Education, and Minimizing Taxes

Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 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 Rohit on Jul 04, 2024Hindi

Hello Sir, I am 48 yrs old, and I have been investing in the following MFs since 2017. These are the only investments I have currently. SBI Magnum Midcap Fund Regular - 3k monthly Nippon India Growth Fund - 3k monthly ICICI Prudential Midcap Fund - 3k monthly Axis Midcap Fund - 3k monthly HDFC Midcap Opportunities Fund - 3k monthly Franklin India Prima Fund - 4k monthly Aditya Birla Sun Life Midcap Fund - 3k monthly Nippon India Power and Infra Fund - 3k monthly HDFC Top 100 Fund - 2K monthly Please advice if these MFs are feasible for a long run. I am looking to accumulate a 2 Cr corpus by the time I am 60 (in @ 12 yrs). Also, these will be used to fund my son's education, which I am hoping should not exceed about 20 lakhs (he is currently in the 10th std). These will also be used to fund our yearly holidays (family of 3). Please advice on how I can get maximum returns, if there is anything else I can invest in, and how to minimize tax hits for everytime I withdraw from the MFs (currently I guess its 10% for a lakh, with the first lakh being tax free).

Ans: Current Investment Analysis

Your investments are diversified in various mutual funds. You are investing Rs 27,000 monthly in nine different funds. Most of your funds are mid-cap focused, which is good for long-term growth. Let’s evaluate and suggest a strategy to achieve your financial goals.

Investment Feasibility

Your current funds are mostly mid-cap funds. Mid-cap funds can offer high returns but come with higher risk. Diversification within different types of funds is important. You need a balanced approach for long-term stability and growth.

Equity Mutual Funds

Equity mutual funds, especially mid-cap funds, have potential for high returns. Continue with a mix of large-cap, mid-cap, and multi-cap funds. Large-cap funds offer stability, mid-cap funds provide growth, and multi-cap funds balance both.

Debt Funds

Investing in debt funds can reduce risk. Debt funds provide stable returns. They are less volatile than equity funds. Consider allocating 20-30% of your portfolio to debt funds. This ensures some stability in your investments.

Balanced Funds

Balanced funds invest in both equity and debt. They provide moderate returns with controlled risk. Consider allocating 20% of your portfolio to balanced funds. This can provide a good mix of growth and stability.

Review and Rebalance

Review your portfolio every six months. Rebalance your investments to align with your goals. Adjust your allocations based on market conditions and performance.

Tax Efficiency

Investing in equity mutual funds provides tax efficiency. Long-term capital gains up to Rs 1 lakh per year are tax-free. Gains above Rs 1 lakh are taxed at 10%. Plan your withdrawals to minimize tax hits. Consider spreading withdrawals over multiple years.

Additional Investment Options

Systematic Investment Plan (SIP)

Continue your SIPs for consistent investments. SIPs help in averaging out market volatility. Increase your SIP amounts as your income grows.

Systematic Withdrawal Plan (SWP)

Use SWP for regular withdrawals during your son's education and family holidays. SWP helps in managing cash flow and tax efficiency.

Insurance Review

Ensure you have adequate life and health insurance. Consider term insurance for life cover and a good health insurance plan. This safeguards your family’s financial future.

Final Insights

To reach a Rs 2 crore corpus in 12 years, diversify wisely. Continue with a mix of large-cap, mid-cap, and multi-cap funds. Add debt and balanced funds for stability. Review and rebalance your portfolio regularly. Use SIPs for consistent investments and SWPs for efficient withdrawals. Work with a Certified Financial Planner (CFP) for professional guidance. Ensure you have adequate insurance coverage.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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