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Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 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
Asked by Anonymous - May 15, 2024Hindi
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Hello Sir, am 50 years old and kind of semi retired. I have 2 kids age 9 and 16. The following is my asset portfolio as of now: 1) Savings - Cash - around 15 L 2) Real estate property - multiple - total of around 4 Cr. 3) MF investments - around 1 Cr - primarily spread across Index funds, Balanced Advantage Funds, Large, Mid, Small and Micro cap funds 4) Equity investments - around 30 L 5) SGB - around 10 L. I do have a health insurace coverage of 10 L yearly for my family and additional 10 L for my parents. Am able to generate around 12-15% / year XIRR from my MF's and Equity investments. My yearly expenses are around 12 L - excluding any vacation travel. The future pending money flow would be for kids education and marriage.. for which I need to plan. Will this suffice? Should I divest from real estate and invest in the equity market? Please advise. Regards

Ans: Your detailed portfolio and thoughtful concerns reflect a proactive approach to financial management, especially considering your semi-retired status and responsibilities towards your children's future. Let's delve into your current situation and chart a course forward.

Assessing Asset Portfolio
Your asset allocation showcases a well-diversified portfolio, encompassing cash, real estate, mutual funds, equity investments, and Sovereign Gold Bonds (SGBs). This diversified approach provides stability and growth potential across various asset classes.

Analyzing Returns and Expenses
Generating a healthy XIRR of 12-15% from your mutual funds and equity investments is commendable, indicating sound investment decisions and portfolio management. Your yearly expenses of 12 lakhs are well within your means, ensuring financial sustainability.

Planning for Future Expenses
With children's education and marriage on the horizon, it's prudent to strategize to meet these financial obligations. Assessing the projected costs and timelines for these expenses will facilitate effective planning and allocation of resources.

Real Estate vs. Equity Investments
Considering the illiquidity and management overhead associated with real estate, it's worth evaluating whether divesting from some properties and reallocating the proceeds into the equity market aligns with your goals and risk appetite. Equity investments offer liquidity, potential for higher returns, and ease of portfolio management.

Crafting a Strategic Approach
Review Real Estate Holdings: Assess the performance and potential of each property in your portfolio. Consider divesting from underperforming or non-strategic properties to unlock liquidity and rebalance your portfolio.

Allocate Proceeds: Allocate the proceeds from real estate divestment strategically, considering your risk tolerance, investment horizon, and financial goals. Diversifying into mutual funds, direct equity, or other investment avenues can optimize returns and align with your objectives.

Monitor and Adjust: Regularly review your portfolio performance, expenses, and financial goals. Adjust your asset allocation and investment strategy as needed to adapt to changing market conditions and life circumstances.

Conclusion
Your conscientious approach to financial planning and investment management lays a strong foundation for achieving your future goals and aspirations. By reassessing your asset allocation, strategically divesting from real estate, and optimizing your investment portfolio, you can further enhance your financial well-being and secure a prosperous future for yourself and your family.

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  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Asked by Anonymous - May 08, 2024Hindi
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I am 40, a single parent with 2 daughters aged 2 and 1. I have following assets that i have accumulated over my employment 1. 1.6 Cr in Indian equity 2. 60L in indian MFs 3. 2 Cr in EPF 4. 72L in PPF 5. 12L in NPS 6. 51 L in SGBs 7. 72L in Gold/diamond jewellery 8. 5Cr in company stocks. These are from the 2 employers i have worked for, almost equally distributed and are mostly vested (trading publicly) 9. Real estate - 3 houses worth 8.7 Cr. Primary house is 6 Cr 10. I have 4 term insurance schemed running, in around 7 years, they will start generating an average income of 60L annually till 2043 11. 60L in Bank/FDs 12. 8L in SSYs for girls While i feel i am doing well, at times with hugely inflation in medical and education fees, i feel its just so hard to estimate what will i need to plan for when my children are ready to go to college in 16 odd years. I keep on hearing mind boggling college fees from my friends, so an approx assessment of education corpus will help. Also i feel keeping equity in single stock as in case with my 2 employers is highly risky, so any suggestion on how to systematically withdraw and invest elsewhere will help. Also looking at my portfolio, do you have any rebalancing advice. I am planning to work as long as possible so have another 18 to 20 years of work life left but given the volatile job market nowadays, want to be mentally and financially prepared.
Ans: Wow, it's commendable how diligently you've built your assets while balancing the responsibilities of being a single parent. Managing such a diverse portfolio shows your financial acumen and dedication to securing your family's future.
Navigating the uncertainties of inflation, especially in medical and education expenses, can indeed be daunting. But fret not, as a Certified Financial Planner, I'm here to help ease your worries and chart a clear path forward.
Let's address your concerns step by step:
Assessing Education Corpus:
Estimating future education expenses can be challenging due to inflation. However, we can create a rough estimate based on current trends and projected inflation rates. It's crucial to factor in not just tuition fees but also accommodation, books, and other related costs. With your assets and income streams, we can devise a systematic savings plan to build a robust education corpus for your daughters.
Managing Single Stock Risk:
Having a significant portion of your equity tied to single stocks can indeed expose you to high risk. Diversification is key to mitigating this risk. We can gradually liquidate your holdings in the single stock and reinvest the proceeds into a well-diversified portfolio of mutual funds or other suitable investment avenues. This approach will help spread risk and potentially enhance returns over time.
Portfolio Rebalancing:
Given the size and diversity of your portfolio, periodic rebalancing is essential to ensure it remains aligned with your financial goals and risk tolerance. We'll review each asset class's performance and make adjustments as needed to maintain the desired asset allocation. This will help optimize returns while managing risk effectively.
Preparing for Volatile Job Market:
With another 18 to 20 years of work life ahead, it's wise to prepare for potential job market volatility. Building a robust emergency fund equivalent to at least 6-12 months of living expenses can provide a financial safety net during uncertain times. Additionally, continue investing in your skills and staying abreast of industry trends to remain competitive in the job market.
You're already on the right track with your prudent financial planning and disciplined savings habits. Remember to review your financial plan periodically and adapt it to changing circumstances. Stay focused on your long-term goals, and don't hesitate to reach out whenever you need assistance or guidance. You're doing an incredible job, and I'm here to support you every step of the way. Keep up the excellent work!

..Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 16, 2024

Asked by Anonymous - May 09, 2024Hindi
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I am 39 Years. Started investing in 38K in 10K PPAS flexi cap,10K Quant Momentum fund, 5K Nippon Index Fund,1K SBI smallcap Fund,1K Canara Robaco emerging equity,3KQuant Quantamental fund,1K Quant infrastructure fund,1K Whiteoak Large and Midcap fund,2K Tata Midcap Momentum fund,1K Mirare asset Multicap,1K Eddelwise Multicap, 1K Nippon Multicap and 1K Quant Multiasset fund in SIP mode. I have also around 2.5 Lacs Lumps MF in various MF invested. Besides I have RD of monthly 35K. I have corpus in NPS around 33 Lacs. Also I have direct equity around 2Lacs. I have one housing loan 17 lacs. Monthly emi 15k. I have health insurance of 15Lacs. My monthly income is 2Lacs. I have 2 son. One is 1oYr and another one is 2 yr. I need to retire early and want to expense in my child education. Does my portfolio is in right track or I should think differently.
Ans: Crafting a Comprehensive Financial Roadmap for Early Retirement and Children's Education
As a 39-year-old with a robust investment portfolio and a clear vision for early retirement and children's education, your proactive approach towards financial planning is commendable. Let's conduct a thorough review of your current portfolio and chart a strategic path towards achieving your aspirations.

Evaluating Your Investment Portfolio
Your investment portfolio exhibits a diversified mix of mutual funds, direct equity, NPS, and recurring deposits, reflecting a well-rounded approach to wealth accumulation. With a monthly SIP commitment across various funds and a substantial lump sum investment, you've positioned yourself for long-term growth potential.

Analyzing Asset Allocation and Risk Management
The allocation towards mutual funds spanning flexi-cap, momentum, index funds, and multi-cap categories demonstrates a balanced approach towards capital appreciation and risk mitigation. Additionally, the inclusion of direct equity and NPS further enhances portfolio diversification and resilience against market volatility.

Assessing Debt Obligations and Financial Commitments
While your housing loan entails a manageable monthly EMI of ?15,000, it's essential to evaluate its impact on your overall financial health and retirement planning. Striking a balance between debt repayment and wealth accumulation is paramount to ensure sustained progress towards your financial goals.

Planning for Early Retirement and Children's Education
Your aspiration for early retirement necessitates a proactive savings and investment strategy, augmented by prudent asset allocation and systematic contributions to long-term wealth-building avenues. Additionally, earmarking funds for your children's education underscores your commitment to their future well-being and academic pursuits.

Providing Strategic Recommendations
To align your portfolio with your overarching objectives of early retirement and children's education, consider the following recommendations:

Optimize Asset Allocation: Review and rebalance your portfolio periodically to ensure alignment with your risk tolerance and investment horizon.

Prioritize Debt Repayment: Explore strategies to expedite housing loan repayment while maintaining a steady pace of wealth accumulation towards retirement and education goals.

Maximize Tax-Efficiency: Leverage tax-saving opportunities offered by instruments like NPS and equity-linked savings schemes (ELSS) to optimize your tax liabilities and enhance overall returns.

Enhance Contingency Planning: Ensure adequate emergency funds and insurance coverage to safeguard against unforeseen expenses and mitigate financial risks.

Conclusion: Navigating Towards Financial Freedom and Family Well-being
In conclusion, your proactive approach towards financial planning, coupled with a diversified investment portfolio and clear goals, lays a solid foundation for achieving early retirement and securing your children's education. By adhering to a disciplined savings regime, prudent asset allocation, and strategic decision-making, you're well-positioned to navigate the journey towards financial freedom and family well-being with confidence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

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

Asked by Anonymous - Dec 01, 2024Hindi
Money
I am 40, a single parent with 2 daughters aged 2 and 1. I have following assets that i have accumulated over my employment 1. 1.6 Cr in Indian equity 2. 60L in indian MFs 3. 2 Cr in EPF 4. 72L in PPF 5. 12L in NPS 6. 51 L in SGBs 7. 72L in Gold/diamond jewellery 8. 5Cr in company stocks. These are from the 2 employers i have worked for, almost equally distributed and are mostly vested (trading publicly) 9. Real estate - 3 houses worth 8.7 Cr. Primary house is 6 Cr 10. I have 4 term insurance schemed running, in around 7 years, they will start generating an average income of 60L annually till 2043 11. 60L in Bank/FDs 12. 8L in SSYs for girls While i feel i am doing well, at times with hugely inflation in medical and education fees, i feel its just so hard to estimate what will i need to plan for when my children are ready to go to college in 16 odd years. I keep on hearing mind boggling college fees from my friends, so an approx assessment of education corpus will help. Also i feel keeping equity in single stock as in case with my 2 employers is highly risky, so any suggestion on how to systematically withdraw and invest elsewhere will help. Also looking at my portfolio, do you have any rebalancing advice. I am planning to work as long as possible so have another 18 to 20 years of work life left but given the volatile job market nowadays, want to be mentally and financially prepared
Ans: The cost of education, especially higher education, has been rising significantly. Assuming a 16-year horizon for your daughters, we need to estimate the corpus required for both domestic and international education.

Domestic Education Costs: Presently, premier institutions in India charge around Rs 25–50 lakh for undergraduate courses. Factoring an annual inflation of 8–10%, this amount may grow to Rs 1.5–2 crore per child for a 4-year course.

International Education Costs: For studies abroad, current fees range between Rs 1–2 crore for undergraduate programs. Adjusted for inflation, this could increase to Rs 3–5 crore per child in 16 years.

Considering both scenarios, you should aim for a total education corpus of Rs 6–8 crore. This amount provides flexibility for either domestic or international options.

Recommendations for Your Employer Stock Holdings
Your company stocks form a significant portion of your portfolio (Rs 5 crore). Holding large amounts in single stocks increases risk. Here's how to diversify systematically:

Gradual Divestment Plan: Avoid selling all shares at once. Instead, divest 10–15% annually over the next 5–7 years.

Reinvest in Diversified Assets: Allocate the proceeds into actively managed equity mutual funds, fixed-income instruments, and sovereign gold bonds. This ensures diversification across asset classes.

Tax Considerations: Plan divestment to optimise tax liabilities. Gains from these stocks may be subject to long-term capital gains (LTCG) tax at 12.5% after Rs 1.25 lakh.

Portfolio Rebalancing Advice
Your portfolio shows strong accumulation across multiple asset classes. However, rebalancing is necessary to manage risks and align with goals.

Asset Allocation Overview
Equity Investments:

You have Rs 1.6 crore in Indian equities and Rs 60 lakh in mutual funds. Including Rs 5 crore in employer stocks, equity dominates your portfolio.
Gradually reduce exposure to individual stocks and shift to actively managed equity mutual funds.
Fixed Income Investments:

Your EPF (Rs 2 crore), PPF (Rs 72 lakh), and NPS (Rs 12 lakh) provide stable, low-risk returns.
Keep these investments as a core part of your portfolio to ensure stability.
Precious Metals:

You have Rs 72 lakh in gold/diamond jewellery and Rs 51 lakh in sovereign gold bonds.
Jewellery has sentimental value but does not generate returns. Focus on financial gold like SGBs.
Real Estate:

Your real estate portfolio (Rs 8.7 crore) is substantial, with Rs 6 crore in your primary home.
Avoid adding further real estate investments due to low liquidity and high maintenance costs.
Cash and Bank Deposits:

Rs 60 lakh in FDs and Rs 8 lakh in SSYs are good for short-term needs and children's savings.
Suggested Reallocation Strategy
Increase Mutual Fund Investments:

Channel proceeds from employer stocks into equity mutual funds. Use SIPs or STPs for a gradual investment approach.
Actively managed mutual funds offer better returns and professional management.
Diversify into Balanced Assets:

Allocate a portion of your equity proceeds into balanced advantage or hybrid mutual funds.
These funds reduce risk and provide moderate growth.
Build an International Equity Portfolio:

Explore international equity funds to benefit from global diversification.
Strengthen Fixed Income Investments:

Invest in high-quality corporate bonds or debt mutual funds for additional stability.
Emergency Fund Allocation:

Ensure you have at least Rs 30–50 lakh as an emergency fund in liquid instruments like ultra-short-term debt funds.
Optimise SSY Contributions:

Continue annual contributions to the Sukanya Samriddhi Yojana (SSY) for tax-free growth.
Planning for Income Stability
You plan to work for 18–20 more years, but the volatile job market can be unpredictable.

Term Insurance Payouts:

In 7 years, your term plans will generate Rs 60 lakh annually till 2043.
Use these payouts to fund living expenses and reinvest the surplus for long-term goals.
Passive Income Generation:

Consider creating a passive income stream through investments in dividend-paying mutual funds.
Avoid single stocks for dividends as they are riskier compared to mutual funds.
Retirement Corpus Growth:

Your EPF and PPF are excellent retirement tools. Avoid withdrawals to maximise compounding benefits.
Additional Financial Goals
Healthcare Planning:

Rising medical costs make comprehensive health insurance essential.
Ensure sufficient health coverage for yourself and your daughters.
Estate Planning:

Create a will to safeguard your assets for your daughters.
Consider setting up a trust for seamless asset transfer.
Tax-Efficient Withdrawals:

Use tax-saving strategies while withdrawing from investments. Consult a Certified Financial Planner for guidance.
Some Final Insights
Your portfolio is well-diversified across asset classes, but equity exposure to single stocks poses risks.
Focus on systematically reallocating from employer stocks to actively managed mutual funds.
Aim for a robust education corpus of Rs 6–8 crore to meet your daughters' future needs.
Strengthen your financial plan with proper healthcare coverage and estate planning.
Regularly review and rebalance your portfolio to ensure alignment with goals.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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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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