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30-year-old single parent seeks advice on generating wealth for child's education and higher studies

Ramalingam

Ramalingam Kalirajan  |7645 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 29, 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
Aditya Question by Aditya on Jul 15, 2024Hindi
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Hello , My age is 30 and have investments as follows: 15 lacs in fd , 15 lacs in nsc, 5.5 lacs in ppf which will go upto 10 lacs in next 3 years (during maturity), 5 lacs in stocks and 2 sip 10k in quant elss tax saver fund & 6k in kotak elss tax fund , 5k/m contribution in nps.I have housing rent which is 35k/m and monthly expense upto ?6k. I am the only one earning at home. I want to generate wealth to cover my childs education and higher studies.

Ans: You have a good start in your investment journey. Your age is 30, and you have a well-diversified portfolio. Your goal is to generate wealth for your child's education and higher studies. Let's analyse your current investments and provide insights for future growth.

Current Investment Overview
Fixed Deposits: Rs 15 lakhs

National Savings Certificate (NSC): Rs 15 lakhs

Public Provident Fund (PPF): Rs 5.5 lakhs (expected to grow to Rs 10 lakhs in 3 years)

Stocks: Rs 5 lakhs

SIPs: Rs 10,000 in ELSS tax saver fund, Rs 6,000 in another ELSS tax fund

National Pension System (NPS): Rs 5,000 monthly

Housing Rent: Rs 35,000 monthly

Monthly Expenses: Rs 6,000

Analysis of Your Current Portfolio
Fixed Deposits and NSC: These are low-risk, but returns are often low. They provide stability but may not keep pace with inflation.

PPF: This is a safe and tax-efficient option. It is a good long-term investment.

Stocks: High-risk, high-reward. Requires careful selection and monitoring.

SIPs in ELSS Funds: These offer tax benefits and potential for good returns. However, avoid duplication in fund choices.

NPS: Good for retirement planning. Offers tax benefits and disciplined savings.

Recommendations for Wealth Generation
Diversify Investments: Avoid putting too much in low-return options. Consider increasing exposure to equity mutual funds for higher growth potential.

Review ELSS Funds: Having two ELSS funds is redundant. Opt for one well-performing ELSS fund. This simplifies management and can boost returns.

Increase Equity Exposure: Allocate more to equity mutual funds. These funds generally offer better returns over the long term.

Regular Fund Investing: Consider investing through regular funds with a Certified Financial Planner. This ensures professional guidance and avoids common investment mistakes.

Avoid Direct Funds: Direct funds lack professional advice. Regular funds with CFP help are better for most investors.

Benefits of Actively Managed Funds
Professional Management: Fund managers actively manage the portfolio for optimal returns.

Flexibility: They can adjust holdings based on market conditions.

Potential for Higher Returns: Actively managed funds often outperform index funds.

Additional Steps for Financial Security
Emergency Fund: Maintain an emergency fund equal to 6-12 months of expenses. This covers unexpected financial needs.

Insurance Coverage: Ensure adequate life and health insurance. This protects your family from unforeseen events.

Regular Portfolio Review: Regularly review and rebalance your portfolio. This keeps your investments aligned with your goals and market conditions.

Final Insights
Your investment portfolio is well-diversified but can benefit from adjustments. Shift some funds from low-return options to equity mutual funds. Simplify your ELSS investments and increase equity exposure. Regular funds with Certified Financial Planner guidance offer better returns and convenience. Maintain an emergency fund and ensure adequate insurance coverage. Regular reviews and rebalancing keep your portfolio on track. This approach will help you generate wealth for your child's education and secure your financial future.

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  |7645 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 17, 2024

Asked by Anonymous - Apr 17, 2024Hindi
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Dear Sir, I am 48 year old, having a monthly income of 4 lakh a month post tax. my current investments as follows . Mutual Fund - monthly contribution of 30k for the past 6 years and it has generated a corpus of 20lac so far. LIC jeevan saral yearly payment of 1lakh and this has generated a value of 31lakh so far.. FD currently to the tune of 1.20 crore and couple of other investments to the tune of 3 lakh. I need an advice as am targeting to get 1.5 crore more in next 5 years over and above the current wealth i have. I have no loan commitment. my monthly expenses around 1.5 lakh on an average
Ans: You're in a great financial position with a good monthly income, consistent savings, and a diversified portfolio. Here are some strategies to help you achieve your goal of accumulating an additional Rs. 1.5 crore in the next 5 years:

1. Increase Monthly Investment Amount:

You're currently saving Rs. 30,000 per month in mutual funds. Consider increasing this amount to accelerate your wealth accumulation. You have a significant disposable income (Rs. 4 lakh - Rs. 1.5 lakh = Rs. 2.5 lakh) after expenses.
2. Review Mutual Fund Allocation:

After 6 years, your chosen mutual fund has generated a corpus of Rs. 20 lakh. Analyze the fund's performance and risk profile. Consider consulting a financial advisor to ensure your mutual fund aligns with your goals and risk tolerance.
3. Explore Equity Investment Options:

While FDs offer stability, their returns may not outpace inflation. Consider allocating a portion of your increased savings to equity-based instruments like stocks or aggressive mutual funds for potentially higher growth. However, remember the inherent risk associated with equity investments.
4. Invest in Tax-Saving Instruments:

Utilize tax-saving instruments like Equity Linked Savings Schemes (ELSS) to save taxes while potentially earning higher returns compared to FDs.
Here's a possible breakdown of increased savings:

Increase monthly SIP by Rs. 50,000 (Rs. 30,000 existing + Rs. 50,000 increase)
Invest Rs. 1,00,000 per month in aggressive mutual funds or direct stock picking (if you have the expertise or consult a financial advisor).
Important Considerations:

Risk Tolerance: Equity investments carry higher risk. Ensure your overall portfolio aligns with your risk tolerance.
Diversification: Maintain diversification across asset classes (equity, debt, gold etc.) to mitigate risk.
Financial Advisor: Consulting a financial advisor can provide personalized investment strategies based on your goals and risk profile.
Additional Tips:

Track and Review: Regularly track your investments and review your portfolio to adapt to market conditions and your evolving goals.
Emergency Fund: Maintain an emergency fund to cover unexpected expenses.
By increasing your savings, considering higher growth investment options, and maintaining a diversified portfolio, you can significantly increase your chances of achieving your target of Rs. 1.5 crore in the next 5 years. Remember, this is a general guideline, and consulting a financial advisor can provide a more personalized roadmap for your specific situation.

..Read more

Ramalingam

Ramalingam Kalirajan  |7645 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 2024

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hello sir, I am 51 years, I have a corpus of 1cr in mutual funds , 5 lacs in PPF , my PF is 25 lacs, KVP 10 lacs, monthly sip in mutual funds is 27000, daughter is employed and have set a side 40 lacs for her marriage , my son is still studies in Bcom hrs . 3rd years. have an agricultural land of worth 1 crores . Have three flats worth , 25 lacs 40 lacs and 80 lacs and the one i am living in is 20 lacs. I want to generate a corpus of 5cr at the age of 60. Apart from this I want to generte an extra income of around 1 lacs per month. from the age of 55. Prsently my income is 1lacs per month.
Ans: At 51, you have built a significant corpus. You’ve invested wisely in mutual funds, PPF, PF, KVP, and real estate. Your current situation includes:

Mutual Funds: Rs 1 crore, which is a substantial investment.

PPF: Rs 5 lakhs, a secure, tax-saving investment.

Provident Fund: Rs 25 lakhs, a reliable source of retirement income.

Kisan Vikas Patra (KVP): Rs 10 lakhs, providing safe and guaranteed returns.

Real Estate: Three flats worth Rs 25 lakhs, Rs 40 lakhs, and Rs 80 lakhs. Plus, the one you live in is worth Rs 20 lakhs.

Agricultural Land: Worth Rs 1 crore, a valuable asset.

You’ve also set aside Rs 40 lakhs for your daughter’s marriage, which is prudent planning. Your son is in his final year of B.Com, so his education is almost complete.

Assessment of Your Financial Goals
You have two main financial goals:

Building a Corpus of Rs 5 Crores by Age 60: This is your retirement goal.

Generating an Extra Income of Rs 1 Lakh per Month from Age 55: This will supplement your retirement.

Evaluating Your Investment Strategy
To achieve your goals, we need to assess and possibly enhance your current investment strategy.

Increasing Your SIP Contributions
Your current SIP of Rs 27,000 per month is good, but you may need to increase this amount to reach your Rs 5 crore target. Consider raising your SIP to Rs 50,000 or more. This will give your portfolio the boost it needs over the next 9 years.

Focus on Actively Managed Funds
It’s crucial to focus on actively managed mutual funds rather than index funds. Actively managed funds have the potential to outperform the market, especially over a long period. These funds are managed by experienced professionals who can make strategic decisions to maximize returns.

Review Your Asset Allocation
Your current allocation includes mutual funds, PPF, PF, KVP, and real estate. While these are good, it’s important to ensure your portfolio is well-diversified and aligned with your risk profile.

Equity Funds: Continue with your mutual fund investments, but ensure you are diversified across large-cap, mid-cap, and flexi-cap funds. This will balance risk and return.

Debt Funds: As you approach retirement, gradually increase your exposure to debt funds. These funds are less volatile and provide steady returns, which is essential for preserving capital as you near retirement.

Avoid Direct Funds: Direct funds may seem cost-effective, but regular funds offer the advantage of professional advice. Certified Financial Planners can guide you in selecting the best funds, tailored to your goals.

Consider Hybrid Funds
Hybrid funds, which invest in both equity and debt, can provide a balanced approach. They offer moderate growth with reduced risk, making them ideal as you get closer to retirement.

Generating an Extra Income of Rs 1 Lakh Per Month
To generate Rs 1 lakh per month from age 55, you need to create a reliable income stream.

Systematic Withdrawal Plans (SWPs)
SWPs from your mutual fund investments can provide a steady monthly income. This allows you to withdraw a fixed amount regularly, while the remaining investment continues to grow.

Dividend-Paying Mutual Funds
Consider investing in dividend-paying mutual funds. These funds distribute dividends regularly, providing you with an additional income stream. However, remember that dividends are subject to market performance and are not guaranteed.

Fixed Deposits and Debt Instruments
You can also consider placing a portion of your corpus in fixed deposits or debt instruments that provide regular interest income. While these offer lower returns, they are secure and can provide a steady income.

Tax Efficiency
As you plan for retirement, it’s important to keep tax efficiency in mind.

Long-Term Capital Gains (LTCG) Tax: Ensure your equity investments are held for more than one year to benefit from LTCG tax advantages.

Tax-Efficient Withdrawals: Plan your withdrawals in a tax-efficient manner. For example, SWPs are generally more tax-efficient than lump-sum withdrawals.

Managing Your Real Estate Assets
Your real estate assets are valuable, but they may not generate significant income unless sold or rented out. Since you’re not looking to invest further in real estate, consider the following:

Rent Out Your Flats: If you haven’t already, renting out your flats can provide additional monthly income. This income can be reinvested or saved for future needs.

Diversify Away from Real Estate: As you approach retirement, consider selling one or more properties. The proceeds can be reinvested in more liquid and income-generating assets like mutual funds or debt instruments.

Final Insights
You’ve done an excellent job of building a strong financial foundation. To reach your Rs 5 crore goal and generate Rs 1 lakh monthly income, consider increasing your SIP contributions, focusing on actively managed funds, and exploring hybrid and debt funds. Additionally, create a reliable income stream through SWPs, dividend-paying funds, and fixed deposits.

Keep in mind the importance of tax efficiency and gradually shift your focus from growth to capital preservation as you approach retirement. Regular reviews with a Certified Financial Planner will help you stay on track and adjust your strategy as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7645 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 2024

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hello, my age is 31 year old married. wife is house wife and we have 1 year old daughter alo, i am freelance interior designer, architect from mumbai and earning aprroximate 1.25 lac per month and monthly expenses are approc 30000. i dont have any loan/ dept to pay. currently i have 15 lac in equity market, 10 lac in mutual funds monthly SIP 25000, 2lac in FD, 5lac of gold jewellary, 20 lac of health insurance and 20 lac of Life insurance. please send good planning to make wealth by the age of 50.
Ans: Current Financial Overview
Age: 31 years

Family: Married with a homemaker wife and a 1-year-old daughter

Profession: Freelance interior designer and architect

Location: Mumbai

Monthly Income: Rs 1.25 lakh

Monthly Expenses: Rs 30,000

Savings: Rs 95,000 per month

Existing Investments:

Rs 15 lakh in equity market
Rs 10 lakh in mutual funds
Rs 2 lakh in fixed deposits
Rs 5 lakh in gold jewellery
Rs 20 lakh health insurance
Rs 20 lakh life insurance
Financial Goals
Corpus Goal: Rs 5 crore in the next 12-15 years
Wealth Accumulation Goal: By age 50
Financial Strategy
Evaluation of Existing Investments
Equity Market: Rs 15 lakh

Equity investments earn high returns over a long period.
Invest in different sectors to minimize risk.
Mutual Funds: Rs 10 lakh with Rs 25,000 SIP on a monthly basis

One can continue investing through SIP in actively managed funds.
These funds would perform better than index funds as it is expertly managed funds.
Get the services of a CFP to select funds periodically.
Fixed Deposits: Rs 2 lakh

Fixed deposits offer safety but only ordinary returns.
Some of the money could be shifted to betterperforming instruments.
Gold Jewellery: Rs 5 lakh
Gold is an excellent hedge against inflation.
No more money needs to be put into gold as the returns are only good.
Health and Life Insurance: Rs 20 lakh each
Adequate coverage ensures financial security.
Review periodically to check on adequacy of coverage.
Optimising Investments
Increase SIP Amount:

The monthly SIP should be increased from Rs 25,000 to Rs 50,000.
Now, invest in a mix of large-cap, mid-cap and multi-cap funds.
Since actively managed funds have an added advantage in terms of the possibility of higher returns.
Diversify Equity Investments:

Sectors in which you can diversify your Rs 15 lakh equity investments.
You can add in blue-chip stocks for stability.
Invest in sectors that will grow significantly for better returns.
Emergency Fund:

Maintain emergency funding equivalent to 6 months to 12 months of expenditure.
Consider keeping Rs 3-5 lakh in liquid funds or saving bank accounts.
Regular Review:

Review your investment portfolio regularly.
Flow with the market and adjust by financial goals.
Shun Index Funds:

Index funds closely follow the market index and tend to be inferior to active funds
Active funds can adjust to changes in the market and deliver superior returns
Take the help of a Certified Financial Planner
Engage a CFP for customized investment plans
He helps with the right fund choices and portfolio management
Investment Planning for the Long-term
Systematic Transfer Plan (STP):

Get the help of STP to transfer money from low-risk to high return investments.
This will ensure gradual exposure to equity markets.
Child's Education and Future Needs:

Open a separate fund for the education of your daughter.
You can look at some mutual funds that are specifically for children or PPF.
Retirement Planning:

Start retirement planning through targeted investments.
Diversify into retirement-specific mutual funds with steady growth expectations.
Tax Planning:

Invest in tax-saving products such as ELSS mutual funds.
Save on taxes through deductions available under Section 80C.
Final Words
Monitoring Regularly: Track your financial goals and performance of your investments regularly.

Discipline in Savings: Save and invest Rs 95,000 every month regularly.

Avoid Low-Yield Investments: Avoid investing in low-return instruments like excessive fixed deposits.

Professional Guidance: Consult a Certified Financial Planner to optimize your investment strategy.

With these steps, you will be able to achieve your aim of creating a corpus of Rs 5 crore in a span of 12-15 years. A disciplined approach and expert guidance will ensure steady growth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7645 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 28, 2024

Asked by Anonymous - Aug 27, 2024Hindi
Money
I am 24 years old..My current inhand salary is 27000 per month...I have 4 LIC including my parents ..for which I pay 1.1 lakh per annum as premium..I am also investing 6000 rupees in mutual fund. 1 large cap(2000 ruppes)..2 small cap(1000 each) and 1 large and mid cap(2000 rupees) fund...I also recently started investing in ppf....have 30000 in bank account..Pls suggest if I am in right track for wealth creation or need further approach ...Thank You..
Ans: You have a good start in managing your finances. Your income is Rs. 27,000 per month. You have four LIC policies, with an annual premium of Rs. 1.1 lakh. You are investing Rs. 6,000 per month in mutual funds, covering large-cap, small-cap, and large and mid-cap funds. Additionally, you’ve started investing in PPF and have Rs. 30,000 in your bank account.

Insurance Coverage and Premiums
LIC Policies: Paying Rs. 1.1 lakh annually for LIC policies is a significant portion of your income. It's important to ensure that the coverage provided by these policies meets your needs. LIC policies often combine insurance with investment, which may not be the most efficient use of your money.

Term Insurance: If you do not have a term insurance policy, consider one. Term insurance provides pure life coverage at a much lower cost than traditional LIC policies. It would free up funds for other investments.

Investment Strategy Evaluation
Mutual Fund Investments: Your Rs. 6,000 per month investment in mutual funds is a good step. You’ve diversified across large-cap, mid-cap, and small-cap funds. This approach balances risk and potential returns. However, given your age, consider increasing your contribution to small and mid-cap funds. These funds have the potential for higher returns over the long term, which aligns with your goal of wealth creation.

Avoiding Index Funds: It’s good you’re investing in actively managed funds rather than index funds. Actively managed funds can outperform the market, especially in the Indian context. Index funds, while lower in fees, may not offer the same growth potential.

Regular Funds vs. Direct Funds: If you’re investing in direct funds, consider the benefits of regular funds. Regular funds, through a Certified Financial Planner, offer professional guidance. This can help you navigate market fluctuations and ensure your portfolio is well-balanced. Direct funds, while cheaper, require a more hands-on approach.

PPF and Bank Savings
PPF Investments: Starting a PPF account is a smart move. PPF offers tax benefits and a secure, long-term savings option. Continue investing in PPF regularly. This will build a solid foundation for future financial goals, like buying a house or funding retirement.

Bank Savings: Keeping Rs. 30,000 in your bank account is a good start for an emergency fund. However, aim to build this up to at least three to six months of living expenses. This will ensure you’re prepared for any unexpected financial challenges.

Recommendations for Wealth Creation
1. Reassess Your Insurance Portfolio

Review LIC Policies: Consider whether the investment component of your LIC policies is giving you adequate returns. If not, it may be worth exploring the possibility of surrendering some policies and redirecting the funds to mutual funds or PPF.

Add Term Insurance: If you haven’t already, consider getting a term insurance plan. It provides higher coverage at a lower premium, allowing you to allocate more towards investments.

2. Optimize Your Mutual Fund Investments

Increase SIP Amount: If possible, try to increase your monthly SIPs. Even a small increase can have a significant impact over time due to compounding.

Focus on Growth Funds: Given your age, prioritize investments in growth-oriented funds like small and mid-cap funds. These funds are more volatile but offer higher potential returns over the long term.

3. Build a Robust Emergency Fund

Increase Savings: Aim to build your bank savings to Rs. 1.5 lakh, which would cover about six months of expenses. You can keep this in a high-interest savings account or a liquid mutual fund for easy access.
4. Long-Term Financial Planning

PPF as a Long-Term Tool: Continue investing in PPF regularly. Over 15 years, this will grow into a significant corpus, thanks to the power of compounding.

Consider Retirement Goals Early: Even though retirement is far away, starting to plan now will give you a huge advantage. Continue your PPF contributions and mutual fund SIPs, and consider gradually increasing your investments as your income grows.

Final Insights
You’re on the right track, especially at such a young age. However, optimizing your insurance and investment strategy will help you achieve your wealth creation goals more effectively. Keep reviewing and adjusting your financial plan as your income and circumstances change. This proactive approach will ensure you build a strong financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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