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Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 03, 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
Prajaktta Question by Prajaktta on Jun 02, 2024Hindi
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Hello sir, I agree to what you suggest. I want to know one thing about emergency fund. When you said set aside funds : does that mean keep some monthly savings aside in bank or invest a particular amount and create contingency fund. - if so, which funds should I invest in to create contingency fund? Kind Regards, Prajaktta Patwardhan

Ans: Creating an Emergency Fund

For an emergency fund, investing in the liquid fund category is ideal. Liquid funds offer high liquidity and low risk, making them suitable for quick access during emergencies.

Recommended Category
Liquid Fund Category
These funds invest in short-term, high-quality debt securities, ensuring better returns than savings accounts while maintaining ease of access to your money.

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  |9648 Answers  |Ask -

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

Asked by Anonymous - May 17, 2024Hindi
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Hello sir. I want to build emergency fund. I can save 5,000 ? for month.I wish to build upto 3,00,0000 ? for my emergency needs. Kindly suggest better options for Emergency Fund.
Ans: Building an emergency fund is a crucial step towards financial security. Given your ability to save 5,000 rupees per month, let's explore the best options to build your emergency fund efficiently.

Setting Your Goal
You aim to build an emergency fund of 3,00,000 rupees. This will take some time and discipline, but it is achievable. Here are some strategies and options to help you build your emergency fund.

Savings Accounts
A traditional savings account is a safe and easily accessible option. While the interest rates are relatively low, the security and liquidity make it an excellent choice for emergency funds.

Benefits:
Liquidity: Easy access to funds when needed.
Safety: Minimal risk as it is insured by banks.
Drawbacks:
Low Interest Rates: Usually between 3-4% per annum.
Fixed Deposits (FDs)
Fixed Deposits provide higher interest rates compared to savings accounts. However, they may have penalties for early withdrawals, so choose an FD with a flexible tenure or partial withdrawal options.

Benefits:
Higher Interest Rates: Typically 5-7% per annum.
Low Risk: Safe investment with guaranteed returns.
Drawbacks:
Lock-in Period: May incur penalties for early withdrawal.
Recurring Deposits (RDs)
Recurring Deposits allow you to save a fixed amount every month, similar to your savings plan. They offer better interest rates than savings accounts and can be a good option for building an emergency fund.

Benefits:
Disciplined Savings: Regular monthly savings with interest.
Moderate Interest Rates: Around 5-6% per annum.
Drawbacks:
Fixed Tenure: Less flexibility in withdrawing funds early.
Liquid Mutual Funds
Liquid Mutual Funds invest in short-term debt securities and offer better returns than savings accounts with high liquidity. They are a good option for an emergency fund due to their ease of access and moderate returns.

Benefits:
Higher Returns: Typically 4-6% per annum.
High Liquidity: Can be withdrawn within 24-48 hours without significant penalties.
Drawbacks:
Market Risk: Although low, they are not completely risk-free.
Suggested Strategy
Combining different options can provide a balanced approach to building your emergency fund. Here’s a suggested allocation to diversify your savings and maximize returns:

Savings Account: Allocate 2,000 rupees per month.

Reason: Immediate liquidity and safety.
Recurring Deposit (RD): Allocate 2,000 rupees per month.

Reason: Encourages disciplined savings with moderate returns.
Liquid Mutual Funds: Allocate 1,000 rupees per month.

Reason: Higher returns with good liquidity.
Steps to Implement
Open Accounts:

Choose a savings account with good interest rates and easy access.
Open a recurring deposit with a reputable bank.
Invest in a liquid mutual fund through a trusted mutual fund provider.
Set Up Automated Transfers:

Automate monthly transfers to your savings account, RD, and liquid mutual funds to ensure consistent savings.
Monitor and Adjust:

Regularly check the progress of your emergency fund.
Adjust the allocation if needed based on your savings growth and financial situation.
Conclusion
By combining a savings account, recurring deposit, and liquid mutual funds, you can efficiently build your emergency fund of 3,00,000 rupees. This diversified approach balances liquidity, safety, and returns, ensuring you are well-prepared for any emergency.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Asked by Anonymous - Jun 18, 2024Hindi
Money
How to build emergency fund and where to park that fund. I mean in savings account or any liquid funds. Pls guide
Ans: building an emergency fund is an essential part of financial planning. It’s great that you’re taking this step to secure your financial future. Let’s go through the process in detail and understand where to park this fund.

Understanding the Need for an Emergency Fund
Having an emergency fund is like having a financial safety net. It helps you cover unexpected expenses without disrupting your long-term investments or taking on debt. This fund provides peace of mind and financial stability during tough times.

How Much Should You Save?
The amount you need depends on your monthly expenses. A common rule is to save 6 to 12 months of living expenses. This covers rent, utilities, groceries, and other essentials.

Assessing Your Monthly Expenses
Start by calculating your monthly expenses. Include rent, utilities, groceries, transportation, and any other recurring costs. Multiply this by the number of months you want to cover.

Setting a Savings Goal
Once you have your monthly expenses figured out, set a savings goal. For example, if your monthly expenses are Rs 50,000, aim to save between Rs 3 lakhs and Rs 6 lakhs.

Building Your Emergency Fund
Building an emergency fund takes time and discipline. Here’s how you can do it systematically.

Start Small and Build Gradually
Begin by saving a small amount each month. Even Rs 5,000 or Rs 10,000 a month can add up over time. Increase the amount as your income grows.

Automate Your Savings
Set up an automatic transfer from your salary account to your emergency fund. This ensures consistent savings without relying on willpower.

Cut Unnecessary Expenses
Identify areas where you can cut back. Redirect those savings to your emergency fund. Small sacrifices now can lead to big benefits later.

Where to Park Your Emergency Fund?
Choosing the right place to park your emergency fund is crucial. It should be easily accessible, safe, and provide some returns.

Savings Account
A savings account is the simplest and safest option. Your money is easily accessible, and you earn a modest interest. However, the returns are lower compared to other options.

Liquid Funds
Liquid funds are a type of mutual fund that invests in short-term instruments. They offer better returns than savings accounts and are relatively safe. You can access your money quickly, usually within 24 hours.

Advantages of Liquid Funds
Liquid funds provide higher returns than savings accounts. They are a good option for parking your emergency fund. Let’s explore their advantages.

Higher Returns
Liquid funds generally offer higher returns compared to savings accounts. This helps your money grow while still being accessible.

Liquidity
You can withdraw from liquid funds quickly. Most funds process withdrawals within a day, making them almost as accessible as a savings account.

Low Risk
Liquid funds invest in short-term, high-quality instruments. This makes them less risky compared to other mutual funds.

Risks and Considerations
While liquid funds are safe, they are not entirely risk-free. It’s important to understand these risks before investing.

Market Risk
Although minimal, there is some market risk. The value of the fund can fluctuate slightly based on market conditions.

Credit Risk
Liquid funds invest in debt instruments. There’s a small risk that the issuers might default. However, this risk is very low with high-quality instruments.

Combining Savings Account and Liquid Funds
You can use a combination of a savings account and liquid funds. This balances safety, accessibility, and returns.

Immediate Needs in Savings Account
Keep a portion of your emergency fund in a savings account. This covers immediate needs and unexpected expenses.

Remainder in Liquid Funds
Park the rest in liquid funds. This ensures higher returns while still being accessible within a short period.

Regular Review and Adjustments
Regularly review your emergency fund to ensure it meets your needs. Adjust the amount as your expenses change.

Annual Review
Review your emergency fund annually. Adjust for any changes in your monthly expenses or financial situation.

Rebalancing
If your emergency fund grows significantly, rebalance it. Move excess funds to long-term investments for better growth.

Benefits of Actively Managed Funds
While liquid funds are good for emergency savings, actively managed funds are better for long-term investments.

Professional Management
Actively managed funds have professional managers. They make investment decisions based on market conditions, aiming for higher returns.

Flexibility
Actively managed funds can adapt to market changes quickly. This flexibility helps in capturing growth opportunities and managing risks.

Avoiding Index Funds
Index funds track a market index and are passively managed. They have lower fees but may not provide the best returns.

Limited Growth
Index funds aim to match the market, not beat it. This limits their growth potential compared to actively managed funds.

Lack of Adaptability
Index funds cannot adapt to market changes quickly. They are less flexible compared to actively managed funds.

Role of a Certified Financial Planner
A Certified Financial Planner (CFP) can help you manage your emergency fund and overall financial plan.

Personalized Advice
CFPs provide tailored advice based on your specific needs and goals. They help you make informed decisions.

Long-Term Planning
A CFP helps you create a long-term financial plan. This ensures you have sufficient funds for emergencies and other financial goals.

Evaluating LIC and ULIP Policies
If you hold LIC or ULIP policies, assess their returns. These policies often provide lower returns compared to mutual funds.

Surrender and Reinvest
Consider surrendering low-yield LIC or ULIP policies and reinvesting the proceeds in mutual funds. This can enhance your overall returns.

Tax Efficiency
Investing in tax-efficient instruments can maximize your returns. Liquid funds are more tax-efficient compared to savings accounts.

Tax Benefits
Liquid funds may offer tax benefits, especially if held for more than three years. Consult with a CFP for personalized tax advice.

Emergency Fund Strategies for Different Life Stages
Your emergency fund needs may vary at different life stages. Let’s explore how to manage it effectively.

Young Professionals
Start small and build gradually. Automate your savings and cut unnecessary expenses. Use a combination of savings account and liquid funds.

Mid-Career
Increase your emergency fund as your expenses grow. Consider keeping a larger portion in liquid funds for better returns.

Nearing Retirement
Focus on safety and accessibility. Keep most of your emergency fund in a savings account. Maintain some in liquid funds for better returns.

Final Insights
Building an emergency fund is crucial for financial stability. Start by assessing your expenses and setting a savings goal. Use a combination of a savings account and liquid funds to balance safety and returns.

Regularly review and adjust your fund to ensure it meets your needs. Consult with a Certified Financial Planner for personalized advice and long-term planning.

Remember, the key is to stay disciplined and consistent in your savings efforts. This will ensure you have a robust financial safety net for any unexpected expenses.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 01, 2024

Asked by Anonymous - Jun 30, 2024Hindi
Money
Hi sir , iam 26 years unmarried having salary of around 1 lacs with expenses monthly with all emi,bills, groceries,parents health insurance and self ,term plan ,ppf,nps goes around 40k per month. So i have got to understand it's better to have an emergency fund like 6 times the expenses that goes like 2.4L so should I maintain this every year or should I keep it for a fixed period like RD investment. Please guide me sir
Ans: At 26, you’ve got a solid handle on your finances, which is impressive. Having an emergency fund is essential for financial security. This fund acts as a cushion during unexpected situations like medical emergencies, job loss, or urgent repairs. It's your financial safety net, allowing you to manage unforeseen expenses without disrupting your budget or taking on debt.

Determining the Size of Your Emergency Fund
You’ve correctly identified the need for an emergency fund covering six months of expenses. With your monthly expenses at Rs. 40,000, your target emergency fund is Rs. 2.4 lakhs. Here’s why this is a good benchmark:

Peace of Mind: Knowing you have funds set aside for emergencies reduces stress and anxiety about financial uncertainties.
Financial Stability: An emergency fund ensures you can handle unexpected costs without impacting your other financial goals.
Avoiding Debt: Having a fund prevents you from resorting to high-interest loans or credit cards in emergencies.
Maintaining the Emergency Fund
Lump Sum vs. Recurring Contributions
You can build your emergency fund through a lump sum or recurring contributions. Let’s explore both options:

Lump Sum: This involves saving a large amount at once until you reach your target. It provides immediate financial security but requires discipline to avoid using the fund for non-emergencies.

Pros: Quick way to reach your target, immediate availability of funds.
Cons: Requires significant savings initially, may tempt you to use it for other purposes.
Recurring Contributions: This method involves setting aside a portion of your monthly income until you reach the target. It’s easier to manage within your budget and builds the fund gradually.

Pros: Easier to budget, less financial strain, builds saving habit.
Cons: Takes longer to build the fund, requires consistent contributions.
Investment Options for Your Emergency Fund
Choosing the right place to keep your emergency fund is crucial. It should be easily accessible and low-risk. Here are some options:

Savings Account
A savings account is the most straightforward option for an emergency fund. It offers quick access to your money whenever you need it.

Pros: Highly liquid, low risk, no lock-in period.
Cons: Low-interest rates, minimal growth.
Fixed Deposits (FDs)
FDs offer higher interest rates than savings accounts. You can use a laddering strategy, which involves investing in multiple FDs with different maturity dates. This ensures liquidity while earning better returns.

Pros: Higher interest rates, predictable returns.
Cons: Lock-in period, penalties for early withdrawal.
Liquid Mutual Funds
Liquid mutual funds invest in short-term instruments, providing better returns than savings accounts with quick access to funds, typically within 24 hours.

Pros: Better returns, easy access to funds.
Cons: Some market risk, slight delay in accessing funds.
Fixed Period vs. Ongoing Maintenance
Fixed Period
Maintaining your emergency fund for a fixed period means setting aside Rs. 2.4 lakhs and reviewing it periodically. This method ensures you have a sufficient fund without actively contributing each month.

Pros: One-time effort, ensures immediate availability of funds.
Cons: May not grow with inflation, requires periodic review.
Ongoing Maintenance
Ongoing maintenance involves regular contributions to your emergency fund, adjusting for inflation and increased expenses. This approach keeps your fund up-to-date with your financial needs.

Pros: Grows with your needs, adjusts for inflation.
Cons: Requires continuous effort, may overlap with other savings goals.
Balancing Emergency Fund and Other Investments
Once your emergency fund is established, focus on other financial goals. Here’s how to balance your priorities:

Prioritizing Investments
Before investing in other goals, ensure your emergency fund is fully funded. It provides the foundation for your financial security. Only after that should you allocate resources to other investments.

Step 1: Fully fund the emergency fund.
Step 2: Allocate savings to long-term goals like retirement and education.
Diversifying Investments
Your emergency fund should be easily accessible. For other savings, diversify into mutual funds, PPF, NPS, and term plans. This diversification caters to different financial goals and risk levels.

Emergency Fund: Savings account, FDs, or liquid mutual funds.
Long-term Goals: Equity mutual funds, PPF, NPS.
Regular Review and Adjustment
Annual Review
Review your emergency fund annually. Assess changes in your expenses, inflation, and financial goals. Adjust the fund size to ensure it remains sufficient.

Expenses: Have your monthly expenses increased?
Inflation: Has the cost of living gone up?
Goals: Have your financial priorities changed?
Life Changes
Major life events like marriage, job change, or having children can impact your financial needs. Adjust your emergency fund accordingly to cover these new expenses.

Marriage: Plan for additional household expenses.
Job Change: Ensure you have enough buffer during transition periods.
Children: Increase the fund to cover potential child-related emergencies.
Role of a Certified Financial Planner (CFP)
Personalized Guidance
A CFP offers tailored advice based on your unique financial situation and goals. They help in creating a comprehensive plan that includes emergency fund management and long-term investments.

Personalized Plans: Develop a plan that suits your lifestyle and financial goals.
Comprehensive Advice: Get guidance on all aspects of financial planning.
Investment Strategy
CFPs recommend diversified investment strategies that align with your risk tolerance and financial objectives, ensuring optimal growth and security.

Risk Assessment: Understand your risk tolerance and invest accordingly.
Strategy: Create a balanced portfolio for growth and security.
Tax Efficiency
A CFP helps you maximize tax benefits through strategic investments, ensuring you retain more of your earnings for future needs.

Tax Planning: Invest in tax-efficient instruments.
Maximize Returns: Ensure you retain more of your income.
Building a Robust Financial Plan
Short-term Goals
Ensure liquidity for immediate needs through savings accounts and liquid funds. This covers unforeseen expenses without impacting long-term investments.

Emergency Fund: Prioritize liquidity for immediate access.
Short-term Savings: Use low-risk, accessible instruments.
Medium-term Goals
For goals like buying a car or planning a wedding, use balanced funds and recurring deposits. These offer moderate returns with manageable risks.

Balanced Funds: Mix of equity and debt for moderate returns.
Recurring Deposits: Consistent savings for medium-term goals.
Long-term Goals
Invest in equity mutual funds, PPF, and NPS for long-term growth. These instruments help build a substantial corpus for retirement and other significant expenses.

Equity Mutual Funds: Higher returns for long-term growth.
PPF and NPS: Secure investments with tax benefits.
Health Insurance and Term Plans
Adequate Coverage
Ensure comprehensive health insurance for yourself and your parents. This covers medical emergencies without depleting your savings.

Personal Health Insurance: Adequate coverage for your needs.
Parents’ Health Insurance: Ensure they are covered for medical emergencies.
Term Insurance
A term plan provides financial security for your dependents. Ensure the coverage is sufficient to cover liabilities and provide for your family in your absence.

Term Plan: Adequate coverage to protect your dependents.
Liability Coverage: Ensure it covers your debts and obligations.
Managing Debt
EMI and Loans
Ensure your EMIs and loan repayments are within manageable limits. Avoid taking on additional debt that could strain your finances.

Debt Management: Keep EMIs within a comfortable range.
Avoid Over-borrowing: Prevent financial strain from excessive debt.
Debt Reduction
Focus on paying off high-interest debt first. This reduces financial burden and frees up funds for savings and investments.

Priority Repayment: Clear high-interest debt quickly.
Free Up Funds: Use savings for investments.
Final Insights
Your proactive approach to financial planning at 26 is commendable. Here’s a summary of the key steps to guide you:

Establish Emergency Fund: Build a Rs. 2.4 lakh emergency fund through either lump sum or recurring contributions. Ensure it's liquid and easily accessible through savings accounts, FDs, or liquid mutual funds.

Maintain and Adjust: Regularly review and adjust your emergency fund to keep pace with inflation and changes in your expenses. An annual review is essential to ensure your fund remains adequate.

Diversify Investments: After establishing your emergency fund, focus on long-term investments. Diversify your savings into mutual funds, PPF, NPS, and term plans to achieve balanced growth.

Health and Term Insurance: Ensure comprehensive health insurance for yourself and your parents, and maintain adequate term insurance coverage. This protects against medical emergencies and provides financial security for your dependents.

Debt Management: Keep EMIs within manageable limits and prioritize debt reduction. Avoid taking on new high-interest debt to maintain financial stability.

Seek Professional Advice: Consult a Certified Financial Planner for personalized guidance and a comprehensive plan that aligns with your financial goals. They can help optimize your investment strategy and maximize tax benefits.

By following these strategies, you can achieve financial stability, maintain a robust emergency fund, and build a secure future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Money
Hello sir my age is 34 with monthly income 1lac j have a daughter of 2 years and planning for 2nd I have current emi of 34k and started investment in sip of 10k every month I have also started with lic of 10k every month How do i create saving and emergency fund plz help
Ans: Your financial planning shows you are thoughtful and committed. At 34, with a stable income of Rs 1 lakh per month, you are on the right path. You have a daughter and are planning for a second child, which means your financial responsibilities will grow.

Current Investments and EMI
You have an existing EMI of Rs 34,000 per month. Additionally, you have started a SIP of Rs 10,000 per month and an LIC policy of Rs 10,000 per month. This leaves you with Rs 46,000 after these commitments.

Importance of an Emergency Fund
An emergency fund is essential for financial security. It helps in unexpected situations like job loss, medical emergencies, or urgent repairs. Ideally, it should cover 6-12 months of living expenses.

Building an Emergency Fund
Start by saving a portion of your remaining monthly income. Aim to save at least 20% of your monthly income. This would be around Rs 20,000 per month.

Open a separate savings account for your emergency fund. This helps keep it separate from your regular spending.

Monthly Budgeting
Track your expenses to understand where your money goes. Create a budget to control unnecessary spending. Prioritize essential expenses and savings.

Enhancing Savings
With Rs 46,000 left after EMI and investments, allocate a portion for savings and emergency funds. Here’s a suggested allocation:

Rs 20,000 for emergency fund savings
Rs 10,000 for additional savings or investments
Rs 16,000 for living expenses and miscellaneous costs
Reviewing and Adjusting Investments
Your SIP of Rs 10,000 per month is a great start. SIPs in mutual funds provide long-term growth and are flexible. Continue this investment for wealth accumulation.

LIC policy is also part of your plan. However, evaluate its benefits. If it's an investment-cum-insurance policy, consider its returns. If returns are low, you might want to reconsider.

Benefits of Mutual Funds
Mutual funds are versatile and cater to various financial goals. Here’s why they are beneficial:

Professional Management: Managed by experts, offering better growth opportunities.
Diversification: Spreads risk by investing in various assets.
Liquidity: Easy to buy and sell, providing flexibility.
Tax Benefits: Certain funds offer tax advantages under sections like 80C.
Power of Compounding
Mutual funds benefit from the power of compounding. Reinvested earnings generate additional returns over time, accelerating your wealth growth. Regular investments in SIPs harness this power effectively.

Types of Mutual Funds
Equity Funds: Suitable for long-term growth. Higher risk but potential for higher returns.

Debt Funds: Ideal for short to medium-term goals. Lower risk and stable returns.

Hybrid Funds: Mix of equity and debt. Balanced risk and return, suitable for moderate risk-takers.

Risks and Considerations
Equity Funds: Subject to market fluctuations. Requires a long-term investment horizon to manage volatility.

Debt Funds: Exposed to credit and interest rate risks. Choose funds with good credit ratings to mitigate risk.

Hybrid Funds: Offers a balance, but not immune to market risks. Suitable for conservative investors seeking balanced growth.

Regular Funds vs. Direct Funds
Investing in regular funds through a Certified Financial Planner (CFP) offers guidance and expertise. CFPs help in selecting the right funds based on your risk tolerance and goals.

Direct Funds: May seem cost-effective due to lower expense ratios. However, lack of professional guidance can impact your investment decisions.

Regular Funds: Slightly higher expense ratios but offer professional advice and support. Ensures informed decisions and better management of your investments.

Planning for Your Children’s Future
With two children, education and other expenses will increase. Start planning early for their future needs.

Consider child education plans or dedicated mutual funds for long-term growth. Ensure these investments align with your financial goals and risk tolerance.

Life Insurance and Financial Security
Life insurance is crucial for your family’s financial security. Ensure you have adequate coverage to protect your family in case of unforeseen events.

Review your LIC policy. If it’s an investment-cum-insurance plan with low returns, consider surrendering it. Reinvest the amount in mutual funds for better growth and flexibility.

Financial Discipline and Review
Maintain financial discipline by sticking to your budget and savings plan. Regularly review your financial situation and adjust your plan as needed.

Track your investments’ performance and make necessary adjustments to align with your goals.

Engaging a Certified Financial Planner
A Certified Financial Planner (CFP) provides personalized advice based on your financial situation and goals. They help in creating a comprehensive financial plan, ensuring your investments align with your risk tolerance and objectives.

Final Insights
You are on the right track with your current investments and financial planning. Building an emergency fund and maintaining financial discipline are crucial.

Evaluate your LIC policy for returns. Consider reallocating to mutual funds for better growth.

A Certified Financial Planner can guide you in optimizing your investments and achieving your financial goals. Regular reviews and adjustments ensure your plan remains effective.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 22, 2024Hindi
Money
hello gurus, need advise on next step: I have 3 SIPs: Two 5k each and one 1.5k (total sum atm is 4 lakh) ppf ~ 11 lakh stocks worth ~ 3.4 lakh Currently i have no loans i am unmarried Dont own any real estate or vehicle. monthly expenses: 40-50k due to frequent travels salary in hand: 1.2 lakh i am having problem in saving apart from what has been mention above, i have a goal for next 3-4 month to create emergency fund. Please what should be done apart from my goal?
Ans: You have a stable financial base with SIPs, PPF, and stocks. Your goal to create an emergency fund in 3-4 months is practical and timely. However, saving more requires optimising expenses, investments, and setting clear financial priorities.

Let us assess your current finances and provide a detailed plan for your next steps.

Current Financial Overview
SIP Investments

Three SIPs totaling Rs. 11,500 per month with a current value of Rs. 4 lakhs.
SIPs provide disciplined equity investments with long-term growth potential.
PPF Investment

Rs. 11 lakhs in PPF is a secure and tax-efficient investment.
Continue annual contributions to maximise benefits.
Stocks

Rs. 3.4 lakhs in stocks is a good exposure to direct equities.
Ensure your portfolio has diversified and fundamentally strong stocks.
No Liabilities

You are debt-free, giving flexibility in managing your finances.
Monthly Expenses

Monthly expenses of Rs. 40,000-50,000 are reasonable given your travel needs.
Savings are limited after covering expenses and investments.
Income

Rs. 1.2 lakh in-hand salary provides scope to increase savings.
Building an Emergency Fund
Set a Target Amount

Aim for 6-12 months of expenses in your emergency fund.
Based on Rs. 50,000 monthly expenses, target Rs. 3-6 lakhs.
Choose the Right Investment Vehicle

Use liquid mutual funds for better returns and accessibility.
Alternatively, consider a high-yield savings account.
Allocate Monthly Savings

Save Rs. 40,000-50,000 monthly over the next 4 months.
Redirect discretionary travel expenses towards this goal temporarily.
Maintain Liquidity

Avoid locking funds in long-term investments for the emergency fund.
Optimising Your Savings
Review Travel and Discretionary Spending

Track travel expenses and identify areas for reduction.
Allocate savings from reduced discretionary spending to investments.
Set a Monthly Savings Target

Aim to save at least 30% of your monthly income (Rs. 36,000).
Automate savings to ensure consistency.
Increase SIP Contributions

After building your emergency fund, increase SIPs by 10%-15%.
Diversify into actively managed funds for consistent performance.
Leverage Salary Hikes

Allocate future salary increments to savings and investments.
Enhancing Your Investment Strategy
Diversify Equity Portfolio

Ensure your SIP portfolio includes large-cap, mid-cap, and hybrid funds.
Avoid index funds; actively managed funds outperform in volatile markets.
Add Debt Instruments

Invest in corporate bonds or short-term debt funds for stability.
This balances your equity-heavy portfolio.
Continue PPF Contributions

Maximise annual contributions (Rs. 1.5 lakhs) to grow the corpus tax-free.
Review Direct Stocks

Diversify your stock portfolio to minimise risk.
Avoid high-risk or speculative stocks.
Planning for Future Goals
Marriage and Vehicle Purchase

Start a goal-specific SIP for future milestones like marriage or buying a vehicle.
Allocate Rs. 10,000 monthly for these goals.
Retirement Planning

Begin planning for retirement through equity and balanced funds.
Target a corpus that supports post-retirement expenses adjusted for inflation.
Tax Efficiency

Plan investments to optimise tax savings under Section 80C and 80D.
Insurance Coverage
Health Insurance

Ensure adequate health insurance coverage beyond employer-provided plans.
A policy of Rs. 5-10 lakhs is essential for unforeseen medical expenses.
Life Insurance

Term insurance is unnecessary if you have no dependents currently.
Consider purchasing a term plan when you have dependents in the future.
Key Milestones
Emergency Fund

Achieve a Rs. 3-6 lakhs emergency fund in 3-4 months.
Post-Emergency Fund Investments

Redirect surplus income to increase SIP contributions.
Long-Term Planning

Regularly review and rebalance your investment portfolio annually.
Final Insights
Building an emergency fund should be your immediate priority. Post that, focus on optimising savings, diversifying investments, and planning for long-term goals like retirement. With discipline and a well-structured plan, you can achieve financial independence while enjoying your current lifestyle.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2025

Asked by Anonymous - Jun 25, 2025Hindi
Money
Hi , we are 31 years old married couple with total take home salary - 2.5 lpm. 1. From December we will only have a monthly expense of 50 k per month. 2. No loan or debt will be there . 3. Investment are as following : 3.1 Ulips - 20k pm (Accumulation - 4 lakhs) 3.2 MF - 25k pm ( Accumulation - 4 lakhs) 3.3 EPF - 20 k pm ( Accumulation - 6 lakhs) We want to start preparing for Retirement fund . After 5 years also will look to buy home costing today at 1 cr . Also planning children in near future. Please advise us how to approach for these goals.
Ans: ? Income and Expense Summary

Your total in-hand income is Rs 2.5 lakh per month.

Expenses from December will be Rs 50,000 monthly.

This gives you a surplus of Rs 2 lakh every month.

You have no loans or EMIs. This gives great financial flexibility.

? Current Investments Review

ULIPs: You invest Rs 20,000 per month. Current value is Rs 4 lakh.

Mutual Funds: You invest Rs 25,000 per month. Current value is Rs 4 lakh.

EPF: You contribute Rs 20,000 per month. Current value is Rs 6 lakh.

These investments show your disciplined saving habit.

But improvements are needed in structure and allocation.

? Immediate Action on ULIPs

ULIPs are expensive and inefficient investments.

They have high charges and give low flexibility.

Surrender the ULIP plan.

Reinvest the proceeds into mutual funds through a Certified Financial Planner.

Actively managed mutual funds will give better long-term growth.

Regular plans through a Certified Financial Planner and MFD give expert advice.

Direct plans don’t provide personal monitoring and adjustments.

? Build an Emergency Fund

Set aside 6 to 9 months of expenses in liquid funds.

This should be around Rs 4 lakh to Rs 5 lakh.

Emergency fund protects you during income disruptions.

? Approach for Retirement Planning

Start a separate SIP portfolio for retirement.

Allocate at least Rs 40,000 per month for this goal.

Use actively managed equity mutual funds for long-term growth.

Do not invest in index funds. They mirror the market and lack flexibility.

Active funds give better returns through skilled fund management.

Keep contributing to EPF regularly.

EPF will provide stability and safety in retirement.

Over the next 25 to 30 years, this portfolio will grow significantly.

Review and rebalance the retirement corpus every year.

? Home Purchase Strategy (After 5 Years)

A home costing Rs 1 crore today will cost more in 5 years.

Let’s estimate the future cost around Rs 1.3 crore to Rs 1.4 crore.

Save for a down payment of 30% to 35%. This means around Rs 45 lakh to Rs 50 lakh.

Allocate Rs 50,000 per month in a balanced hybrid fund or conservative equity fund.

Balanced funds reduce the risk for a medium-term goal like this.

Avoid investing the home fund in pure equity.

You will need this money in 5 years, so safety is important.

? Children Planning and Education Fund

Once your child is born, start an SIP for their education.

Start with Rs 5,000 monthly, increase gradually as income grows.

Over 15 to 18 years, this corpus will grow well.

Keep this fund separate from your retirement and home fund.

? Suggested Monthly Allocation of Surplus (Rs 2 lakh)

Retirement SIP: Rs 40,000

Home Purchase Fund: Rs 50,000

Children’s Future (start after birth): Rs 5,000 to Rs 10,000

Emergency Fund (for next 6 months): Rs 20,000 per month till you reach 5 lakh

EPF: Already contributing Rs 20,000 (mandatory)

Reinvest ULIP savings: Rs 20,000 into mutual funds after surrendering ULIP

Remaining surplus: Can be parked in debt funds or short-term funds temporarily.

? Insurance Correction

Buy a term insurance plan of at least Rs 2 crore for the earning member.

Premium will be low because you are young.

Once children arrive, increase life cover to Rs 3 crore.

Take family health insurance of Rs 10 lakh to Rs 15 lakh.

? Asset Allocation for Long-Term Stability

Equity Mutual Funds: 60% of your investments.

EPF and Debt Mutual Funds: 25%.

Balanced Hybrid Funds: 10% for home goal.

Gold and other safe assets: 5%.

Avoid investing more in gold or fixed deposits.

They give lower inflation-adjusted returns.

? Role of Certified Financial Planner

A Certified Financial Planner will help monitor your investments yearly.

They will adjust SIP amounts based on your changing goals.

They will help you review market risks and returns regularly.

Direct mutual fund plans won’t give this personalised hand-holding.

? Mutual Fund Taxation (Important During Withdrawals)

Equity mutual funds LTCG above Rs 1.25 lakh taxed at 12.5%.

Short-term capital gains taxed at 20%.

Plan redemptions smartly to minimise taxes.

Debt mutual fund gains are taxed as per your income slab.

? Avoid Real Estate for Investment

You are already planning a home for personal use.

Don’t buy additional real estate for investment.

Real estate is illiquid and difficult to exit quickly.

? Avoid These Mistakes

Do not continue with ULIPs. They give poor returns.

Don’t invest in index funds. They only mirror the market without active management.

Don’t pick direct mutual fund plans. No human support during market falls.

Avoid annuities. They give very low and locked returns.

? Step-by-Step Action Plan

Step 1: Build an emergency fund of Rs 5 lakh.

Step 2: Surrender ULIP and reinvest in mutual funds.

Step 3: Start separate SIPs for retirement and home purchase.

Step 4: Start education SIP after child birth.

Step 5: Increase term and health insurance cover.

Step 6: Review your portfolio yearly with a Certified Financial Planner.

? Lifestyle Management

Keep your monthly lifestyle expenses below Rs 50,000.

Save and invest the rest for wealth creation.

Increase your SIP amount as your salary grows every year.

? Children's Future Planning

Start an education SIP when your child is born.

Gradually increase this SIP every year.

Review the goal when the child reaches age 12.

Move the corpus to safe funds closer to college admission.

? Home Loan Planning in Future

If you take a loan for home, keep EMI below 35% of income.

Prefer to pay 30% to 35% of home cost as down payment.

Don't stretch your finances for a bigger house unnecessarily.

? Final Insights

You are financially strong with a high savings rate.

But your ULIP holding is inefficient. Please surrender and reinvest.

Focus on building retirement corpus through equity mutual funds.

For home purchase, use a balanced and safe approach.

Children’s education planning can start once the child is born.

Don’t mix your retirement, home, and kids’ goals.

Keep reviewing your portfolio every year with a Certified Financial Planner.

Avoid real estate and annuities. Focus on mutual funds and EPF.

You are on the right path. Stay disciplined and long-term focused.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2025

Asked by Anonymous - Jun 25, 2025Hindi
Money
I am 40 years old .I have 30 lakhs equity mutual fund.18 laksh ppf and 20 lakhs fd and 2 lakhs nps ,25 lakhs pf and vpf .I want to get 1.5 lakhs pm after my retirement,is it possible .don't have any loans
Ans: ? Age and Retirement Income Goal – A Clear Target Ahead
– You are 40 years old now.
– Your goal is to retire with Rs 1.5 lakhs monthly income.
– That equals Rs 18 lakhs annually.
– You are aiming for financial independence.
– The goal is strong, but must be backed by strategy.

? Existing Investments – Good Start but Needs More
– Rs 30 lakhs in equity mutual funds.
– Rs 20 lakhs in fixed deposit.
– Rs 18 lakhs in PPF.
– Rs 25 lakhs in PF + VPF.
– Rs 2 lakhs in NPS.
– You have no loans. That is excellent.
– Total corpus now is Rs 95 lakhs.
– At 40, this is a positive achievement.
– But more action is needed to reach retirement target.

? Retirement Expense Projection – Adjusting for Inflation
– Rs 1.5 lakhs today may become Rs 3 lakhs later.
– You may retire after 15–20 years.
– Inflation will increase all costs.
– Especially medical and lifestyle expenses.
– Your target corpus must be adjusted for this rise.
– That means you need a much larger retirement fund.

? Investment Style – Balanced but Requires Restructuring
– Your equity mutual fund amount is good.
– You are already using long-term growth assets.
– But you may need to improve fund selection.
– Direct mutual funds don’t offer advisory support.
– Shift to regular plans via MFD with CFP credential.
– That helps track, review, and improve consistently.
– Avoid index funds if you are holding any.
– Index funds don’t beat the market.
– They just copy it with no flexibility.
– In India, actively managed funds are more effective.

? Equity Mutual Fund Strategy – Core for Long-Term Wealth
– Your equity corpus should keep growing every year.
– SIPs must be continued and increased with income.
– Shift lump sum in FD to mutual funds using STP.
– Don’t invest entire amount at once.
– Spread it out in 12–18 months using liquid fund.
– Choose large-cap, flexi-cap, and multi-cap funds.
– Include hybrid funds if needed.
– Don’t touch equity funds for short-term use.
– Let them compound quietly for 15–20 years.

? PPF, PF and VPF – Safe but Slow
– Your PPF and PF total is Rs 43 lakhs.
– These are useful for stability.
– But they grow at slow pace.
– And returns are taxable in some cases like VPF interest.
– Continue contributing to PF.
– But focus new investments more on equity.
– Don’t treat PPF as retirement corpus alone.
– It should be part of debt allocation only.

? FD – Not a Wealth Creator
– Rs 20 lakhs in FD gives low returns.
– Interest is fully taxable.
– It cannot beat inflation over 15 years.
– FD is good only for short-term or emergencies.
– Slowly move surplus from FD to mutual funds.
– Don’t keep idle money locked at 6–7% return.
– You will lose growth opportunity.

? NPS – Tiny Allocation Needs Boost
– Rs 2 lakhs in NPS is too low.
– You can use it for additional retirement planning.
– But don’t depend only on it.
– Withdrawals are partially taxed at retirement.
– Mutual funds offer more liquidity and flexibility.
– Keep NPS contribution within tax limit section 80CCD(1B).

? Monthly Investment Plan – Bridge the Gap
– Your current corpus is good.
– But not enough for Rs 1.5 lakhs per month.
– You must grow your corpus to Rs 5–6 crores.
– That is needed to generate Rs 18 lakhs income per year.
– Invest minimum Rs 70,000 to Rs 1 lakh monthly now.
– Mix SIPs and STPs from existing FD funds.
– Make equity your core growth engine.
– Use regular mutual fund route with MFD and CFP.
– Keep increasing SIP every year by 10–15%.

? Health Insurance – Protect the Retirement
– Medical cost is the biggest risk after retirement.
– Don’t rely only on employer health cover.
– Take a family floater health insurance policy.
– Choose coverage of minimum Rs 10–15 lakhs.
– Buy early for lower premium.
– Include critical illness cover if possible.

? Asset Allocation – Long-Term Discipline Needed
– Maintain 70% in equity mutual funds.
– 20% in PPF, PF, or debt funds.
– 10% in gold or hybrid assets.
– Don’t add more in FD.
– Avoid further real estate or land buying.
– Real estate is not liquid or tax-efficient.
– You will not get regular income from it in retirement.

? Retirement Planning Phases – Structured Thinking
– Phase 1 (Age 40–50):

Aggressively grow investments.

Increase SIPs and reduce FD.

Don’t withdraw from equity.
– Phase 2 (Age 50–60):

Focus on rebalancing.

Increase debt portion gradually.

Prepare for income planning.
– Phase 3 (Post 60):

Start withdrawal from mutual funds.

Use SWP from hybrid or equity savings fund.

Withdraw from PF and PPF in planned way.

? Tax Planning – Keep More in Your Hands
– Mutual fund taxation rules are changing.
– LTCG above Rs 1.25 lakhs taxed at 12.5%.
– STCG taxed at 20%.
– For debt funds, gain is taxed as per your slab.
– Plan withdrawals and switches smartly.
– Don’t trigger gains unnecessarily.
– Avoid yearly redemptions unless needed.
– Use SWP structure in retirement.

? Investment Mistakes to Avoid – Stay Focused
– Don’t overinvest in FDs or post office schemes.
– Avoid traditional LIC or ULIP plans.
– Don’t go for index funds.
– They don’t offer downside protection.
– Don’t choose direct mutual fund plans.
– They lack rebalancing support.
– Use regular funds through MFD with CFP.
– Don’t delay health insurance.
– Don’t withdraw from equity too early.
– Don’t chase high-risk stocks or schemes.

? What You Should Do Now – Step by Step
– Review all your existing equity mutual funds.
– Exit index funds if any.
– Shift from direct plans to regular plans.
– Set up STP from FD to equity mutual fund.
– Increase SIPs to Rs 75,000 minimum per month.
– Take separate term insurance if not already taken.
– Buy health insurance for self and family.
– Fix Rs 1.5 lakh monthly as goal in today’s value.
– Adjust for inflation and project Rs 3 lakhs needed.
– Plan to build corpus of Rs 5–6 crores by age 58.
– Review and rebalance every year with help.
– Track progress towards the retirement goal.

? Finally
– You are on the right track at age 40.
– You have already built Rs 95 lakhs corpus.
– Keep the momentum with higher monthly investments.
– Shift idle FD into equity slowly and wisely.
– Restructure your mutual fund portfolio with expert guidance.
– Stay invested for the long term.
– Don’t take breaks or stop SIPs midway.
– Focus on your goal of Rs 1.5 lakh per month.
– Keep health and insurance protection in place.
– Keep tracking and adjusting every year.
– That is the way to build financial freedom.

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

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Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2025

Asked by Anonymous - Jun 25, 2025Hindi
Money
Hi sir I am getting in hand 1,2000 my household expenses are 30000 I have 2 policies yearly paying 100000 sip 20000 per month. Home loan of 600000 lakh. Paying 33000 emi. Having ppf 1000000. Policies 400000,400000, sip till now 200000. How to clear home loan early
Ans: You have shared key figures clearly. You are earning Rs. 1,20,000 in hand. Household expenses are Rs. 30,000 per month. You have a SIP of Rs. 20,000 monthly. Home loan is Rs. 60 lakh with Rs. 33,000 EMI. You are paying Rs. 1,00,000 yearly for two policies. You also have Rs. 10 lakh in PPF and two policies worth Rs. 4 lakh each. SIP corpus is Rs. 2 lakh till now. Let’s evaluate your situation and plan how to reduce your loan burden faster.

? Understanding Your Current Cash Flow

– You earn Rs. 1.2 lakh each month.
– Monthly fixed costs are Rs. 30,000.
– SIP takes Rs. 20,000 per month.
– Home loan EMI is Rs. 33,000.
– Yearly policy premium is Rs. 1 lakh. That’s Rs. 8,300 monthly.

– So total outgo monthly is around Rs. 91,300.
– You are left with around Rs. 28,000 monthly balance.
– From this, we can plan loan prepayment and future stability.

? Evaluate Your Investment Instruments First

– Rs. 10 lakh in PPF is a safe and long-term investment.
– It is locked and earns steady but low interest.
– Rs. 2 lakh in SIP is good. You are investing actively for future.
– Rs. 20,000 SIP is a good habit. Continue it if possible.

– The two insurance policies worth Rs. 4 lakh each need attention.
– If these are endowment or ULIP policies, please review them seriously.
– These policies give poor returns and low insurance coverage.
– Check surrender value and policy terms.

– If they are older than 3 years, you can exit them safely.
– Surrender and reinvest the proceeds in mutual funds.
– It will boost your returns and improve wealth building.

? Rework Your Insurance Strategy

– Policies offering insurance + investment are not efficient.
– Real insurance must only be term cover.
– You have not mentioned term insurance. Please take a pure term plan.
– It is cheaper and gives large risk cover.
– Surrender policies giving poor value and protect with term insurance.
– This saves premium and avoids mixing goals.

? Focus on Regular and Active Mutual Funds

– Continue with SIP in actively managed mutual funds.
– Do not shift to index funds.
– Index funds just mirror the market with no expert guidance.
– In volatile times, they fail to control loss.
– Actively managed funds are reviewed by expert fund managers.
– They reduce risk and capture opportunities better.

– Also, don’t use direct funds on your own.
– Direct funds give no tracking or expert input.
– Investors often panic and redeem early.
– That kills long-term return potential.
– Use regular funds through Certified Financial Planner only.
– You get full support and portfolio reviews.

? Strategies to Clear Home Loan Early

– You want to reduce loan faster. This is a wise goal.
– Loan of Rs. 60 lakh with Rs. 33,000 EMI will last long.
– Early closure will save huge interest outgo.
– Let’s explore smart ways to do this.

• Use policy surrender money:
– If you surrender two policies of Rs. 4 lakh each, total Rs. 8 lakh can come.
– Use part of that for partial loan prepayment.
– This reduces loan principal directly.
– Your EMI stays same but tenure drops.

• Channel SIP returns smartly:
– You already have Rs. 2 lakh invested.
– Avoid redeeming now unless urgent.
– Let this money grow in mutual funds.
– Later, after 3–4 years, redeem part of it.
– Use that to prepay a lump sum.
– Tax will apply based on holding time.
– Equity LTCG above Rs. 1.25 lakh taxed at 12.5%.
– STCG taxed at 20%. Use this rule only when redeeming.

• Review and pause SIP temporarily:
– If needed, reduce SIP by Rs. 5,000–10,000 per month for 2 years.
– Channel that money directly to loan prepayment.
– That gives short-term relief to reduce debt.
– Resume SIP once prepayment is done.

• Monthly surplus as prepayment:
– You are saving around Rs. 28,000 monthly.
– Use at least Rs. 10,000–15,000 from this for monthly prepayment.
– This small step adds up fast over a year.
– Even Rs. 1.5 lakh prepayment yearly reduces years from tenure.

• Avoid lifestyle inflation:
– As income grows, avoid increasing expenses.
– Put all future hikes into prepaying loan.
– This way, your EMI stays same but you gain freedom early.

? Reduce Home Loan Tenure Gradually

– Banks allow part payments without penalty.
– Do one-time part payment once a year if possible.
– Focus on the early years to pay more.
– Interest is highest in the early stage of loan.

– If you get any bonus or incentive, use that fully for loan.
– Don’t use it for unnecessary expenses.
– Every extra Rs. 1 lakh prepayment saves big interest.

? Emergency Fund is Still Important

– Don't empty all funds for loan repayment.
– Keep at least 6 months of expenses in liquid form.
– Use savings account or liquid mutual funds for this.
– Never use PPF or long-term SIP for emergency.

? Should You Touch PPF for Loan Closure?

– You have Rs. 10 lakh in PPF.
– Try not to withdraw or break this unless very urgent.
– PPF gives stable returns and is tax-free.
– It also works as retirement support.

– PPF withdrawal is allowed after 5 years but with conditions.
– Better to leave it untouched and plan loan from other sources.

? Avoid Real Estate as Investment Option

– Real estate may feel attractive, but not liquid or flexible.
– You need cashflow support, not locked assets.
– Mutual funds are more flexible, transparent and reviewable.
– Stick with them to build wealth and prepay loan.

? Tax Planning Should Align with Loan Strategy

– Ensure you claim full benefit under 80C using SIP in ELSS, PPF.
– Also claim Rs. 2 lakh interest deduction on home loan under section 24.
– This gives better tax refund and improves savings.
– Don’t over-invest in tax saving tools just for deduction.
– Balance returns and lock-in before committing more.

? Stay Consistent and Keep Reviewing Yearly

– Don’t try to rush loan closure in panic.
– Stay calm and consistent with prepayments.
– Avoid investing in products with poor liquidity or low return.
– Keep SIPs going where possible.
– Get yearly review with Certified Financial Planner.
– Adjust SIP, expenses and loan plan as income grows.

? Final Insights

– Your income and savings pattern is healthy.
– But mix of investments and insurance needs realignment.
– Surrender poor insurance plans and reinvest wisely.
– Increase SIP in actively managed mutual funds gradually.
– Use surplus monthly savings for part payments.
– Avoid touching long-term assets like PPF or equity SIPs early.
– Use yearly bonuses or gifts for reducing principal.
– Consult Certified Financial Planner every year for plan update.
– This way, you can close loan faster without hurting long-term goals.

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

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Ramalingam

Ramalingam Kalirajan  |9648 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2025

Asked by Anonymous - Jul 10, 2025Hindi
Money
Sir, I am 22 and just got placed in a company... My monthly take home is about 8.3L (monthly) from which about 2L goes in living and 50K goes to parents every month. I am looking to invest the rest... Have no idea about mutual funds or FDs and want to get started.... Pls recommend an investment plan which takes saving, wealth creation, and future development into consideration if we take a 15% increment in income every year.
Ans: ? Your Current Financial Snapshot

– You are 22 years old and just started earning.
– Monthly take-home salary is Rs. 8.3 lakh.
– You spend Rs. 2 lakh on living expenses.
– You support your parents with Rs. 50,000 monthly.
– Around Rs. 5.8 lakh per month is available for investing.

This puts you in a powerful wealth-building position early in life.

? Financial Planning is Not Just About Investing

– First step is not investing, but planning.
– You must secure your future before chasing returns.
– Create a plan for savings, safety, growth, and liquidity.
– Each part should serve a specific financial purpose.
– Focus on long-term goals, not just yearly returns.

Let your money grow while protecting your peace of mind.

? Step One: Build an Emergency Fund

– Save at least 6 months of expenses.
– That means Rs. 12–15 lakh in liquid funds.
– Use liquid mutual funds or short-term debt funds.
– This is not for investing. Only for emergencies.
– It acts like a financial shock absorber.

No investments should begin before this fund is set aside.

? Step Two: Start Term Insurance and Medical Insurance

– Buy a term plan for Rs. 1 crore minimum.
– Premium will be very low at your age.
– Choose only pure term, not investment plans.
– Take individual health insurance policy of Rs. 10 lakh.
– Do not depend on company health cover only.

Protection must always come before profit.

? Step Three: Avoid Loans or Credit Traps

– Never invest with borrowed money.
– Avoid personal loans or credit card EMIs.
– Clear all dues each month.
– Use credit cards only for benefits, not credit.
– Don’t build habits that spoil wealth creation.

Your habits will shape your financial future more than your salary.

? Step Four: Understand the Role of Mutual Funds

– Mutual funds pool your money with others.
– Experts invest it across different instruments.
– It’s suitable for long-term wealth creation.
– Choose equity mutual funds for long goals.
– Choose debt mutual funds for short goals.

Mutual funds give you access to professional investing at low cost.

? Step Five: Choose Only Actively Managed Funds

– Don’t use index funds.
– Index funds follow markets blindly.
– They fall fully in market crashes.
– They don’t manage downside risk.
– Actively managed funds adjust to protect capital.

Smart fund managers can save you during downturns.

? Step Six: Avoid Direct Mutual Funds

– Direct plans look cheaper but carry high risk.
– You’ll get no help when markets fall.
– There’s no one to guide rebalancing or switching.
– Use regular plans with Certified Financial Planner-backed MFD.
– The small extra cost saves huge mistakes.

Right advice creates more wealth than low-cost execution.

? Suggested Fund Types Based on Your Age

– Use large-cap and flexi-cap mutual funds.
– Add mid-cap or hybrid funds slowly.
– Use debt funds for emergency fund and short goals.
– Don’t invest in sectoral or thematic funds now.
– Stay away from small caps in early years.

Balanced risk gives you steady wealth.

? How Much to Invest Now

– From Rs. 5.8 lakh monthly surplus, start with Rs. 3 lakh SIP.
– Divide across 3–4 funds.
– Keep Rs. 1.5 lakh for emergency building.
– Keep Rs. 1 lakh for short-term liquidity.
– Increase SIP by 15% every year.

Start slow. But be regular. That builds real wealth.

? Review Investments Yearly

– Don’t check NAV daily.
– Once a year, check returns vs goal.
– Rebalance asset mix with guidance.
– Exit only if goals change.
– Don’t panic in temporary market falls.

Wealth grows when you stay invested during bad years too.

? Consider NPS for Long-Term Tax Saving

– After few years, start NPS if planning retirement in India.
– Gives tax benefit under 80CCD(1B).
– It has equity and debt mix.
– Lock-in till 60 years ensures long discipline.
– It’s optional now, but useful later.

You don’t need to rush into every option today.

? Do Not Chase Unregulated Assets

– Don’t invest in bitcoin or crypto now.
– Don’t buy gold in physical form.
– Stay away from chit funds or ponzi apps.
– Keep your money in transparent, SEBI-regulated products.
– Safety matters more than big return dreams.

Your money must work. But also stay safe.

? Plan for 3 Categories of Goals

– Short-term goals: Next 3 years (gadgets, vacation).
– Medium-term goals: 3–7 years (car, MBA, wedding).
– Long-term goals: 10+ years (house, retirement).
– Assign each goal a mutual fund type.
– Track goals separately with specific timelines.

Goal-based investing gives better clarity and motivation.

? SIP is the Best Way to Create Wealth

– SIP means Systematic Investment Plan.
– You invest monthly, like EMI.
– It builds habit and avoids timing risk.
– You buy more units in lows, fewer in highs.
– It smooths market ups and downs.

Even small SIPs work magic with time and discipline.

? Always Stay Liquid Before Going Long-Term

– Don’t lock all funds in SIPs.
– Keep 2 months’ worth in savings or liquid fund.
– Don’t break SIPs for small spending needs.
– Liquidity is as important as return.
– If income grows, increase SIP. Don’t spend it all.

Liquidity gives confidence to stay invested in tough times.

? Watch Out for Lifestyle Inflation

– Avoid increasing spending with every hike.
– Save first. Then spend what’s left.
– Increase SIP each time income grows.
– Don’t buy liabilities just to match friends.
– Future freedom matters more than present image.

Wealth is built silently. Lifestyle is just display.

? Don’t Mix Insurance with Investment

– ULIPs, endowment plans look attractive.
– But they give low returns with high lock-in.
– They are poor for both goals.
– Keep insurance and investments separate.
– If you hold any, consider surrendering them.

Your age allows you to correct early mistakes.

? Taxes on Mutual Fund Investments

– Equity mutual funds taxed at 12.5% for LTCG above Rs. 1.25 lakh.
– STCG taxed at 20%.
– Debt mutual funds taxed as per income slab.
– SIPs in equity are more tax-efficient long term.
– Plan redemptions to avoid unnecessary tax.

Tax planning helps you retain more wealth.

? Focus on Wealth Creation, Not Just Saving

– Savings protect, but investing grows money.
– Mutual funds beat inflation long term.
– Bank FDs are safe but give low returns.
– SIP in mutual funds is better for 10+ year goals.
– Your time is your biggest asset now.

Time + Discipline + SIP = Real Wealth.

? If You Want to Explore Beyond Mutual Funds Later

– Learn slowly about REITs, bonds, international funds.
– Add them once you reach Rs. 50 lakh portfolio.
– Don’t try everything in year one.
– Core portfolio should always stay in mutual funds.
– Keep 80% in simple long-term equity SIPs.

Simplicity protects better than complicated portfolios.

? Spend Time Learning from the Right People

– Don’t follow social media tips blindly.
– Use help from Certified Financial Planner.
– Ask questions and clear doubts.
– Stay informed without chasing hot tips.
– Learn personal finance like a skill.

Understanding your money is the best investment.

? Finally

– You are starting at the best age.
– Don’t waste the next 5 years.
– Build strong habits and safety net first.
– Use actively managed mutual funds via regular plans.
– Avoid index and direct funds for now.
– Create short, medium, and long-term goals.
– Stick to your SIP plan even in tough times.
– Review once a year with a Certified Financial Planner.
– Learn steadily. Adjust wisely. Grow confidently.
– With patience, you will build massive wealth.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
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Nayagam P

Nayagam P P  |8452 Answers  |Ask -

Career Counsellor - Answered on Jul 10, 2025

Career
" Sir l got 95% in class 10 and then I have two options 1.11-12 and MHT CET through BTech 2.Diploma and then BTech I was confused in this two options please tell me which one is good for my future"
Ans: Ved, Pursuing an engineering diploma immediately after Class 10 fast-tracks technical education through a three-year curriculum focused on hands-on workshops, industry-aligned modules and early employability via lateral-entry into the second year of B.Tech, enabling professional readiness by age 19 and reducing overall tuition costs. However, diploma holders may face gaps in advanced theory, additional bridging courses in mathematics for degree equivalence and competitive entry into top-tier engineering programs. Alternatively, completing 11th and 12th followed by MHT CET preserves a strong foundation in physics, chemistry and mathematics, keeps open all university options including premier institutes, and aligns with standard recruitment criteria for B.Tech admissions, albeit extending the timeline by two years and requiring intensive coaching for competitive state-level entrance exams.

Recommendation: Opt for the 11–12 + MHT CET route to ensure robust conceptual grounding, full access to prestigious engineering colleges and uninterrupted academic progression; consider the diploma pathway only if early industry entry and cost savings are paramount for your personal circumstances. All the BEST for Admission & a Prosperous Future!

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Nayagam P

Nayagam P P  |8452 Answers  |Ask -

Career Counsellor - Answered on Jul 10, 2025

Career
I have got 91 percentile in MHT-CET . Can I get Mechanical engineering in COEP or VJTI ? And can you suggest any good Mechanical Engineering colleges in Mumbai at my percentile??
Ans: Mann, With a 91 percentile in MHT-CET, seats for Mechanical Engineering at COEP (closing ~98.9–99.5) and VJTI (closing ~98.3–99.8) are out of reach. However, several reputable Mumbai institutions whose Mechanical cutoffs fall below 91 percentile guarantee admission, each offering accredited curricula, experienced faculty, modern workshops, industry linkages through MOUs and active placement cells averaging over 80% placements in the past three years. These include Vidyalankar Institute of Technology (Wadala), Fr. C. Rodrigues Institute of Technology (Vashi), Bharati Vidyapeeth College of Engineering (Navi Mumbai), SIES Graduate School of Technology (Nerul), St. Francis Institute of Technology (Borivali), Rizvi College of Engineering (Bandra), Don Bosco Institute of Technology (Kurla), Thadomal Shahani Engineering College (Bandra), Pillai College of Engineering & Technology (New Panvel) and VES Institute of Technology (Chembur). Each campus features dedicated Mechanical labs, hands-on project initiatives and placement records between 82% and 90%, ensuring both strong academic foundations and robust employability prospects.

Recommendation: Vidyalankar Institute of Technology (Wadala) tops for its cutting-edge CAD/CAM facilities and consistent 88–90% placements, Fr. C. Rodrigues Institute (Vashi) follows with strong automotive-sector tie-ups and 85% placements, then Bharati Vidyapeeth COE (Navi Mumbai) for its robust workshop infrastructure, active student chapters and 82–87% placement consistency. All the BEST for Admission & a Prosperous Future!

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Nayagam P

Nayagam P P  |8452 Answers  |Ask -

Career Counsellor - Answered on Jul 10, 2025

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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