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Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 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
Brahmendra Question by Brahmendra on Nov 24, 2023Hindi
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Hello Investment rediffGuru(s), I have two sons, age 15 & 13. I would like to invest 5 lakhs for each of them (preferably as lumpsum). The objective of the investment is to generate monthly second income when they turn 45 (kind of annuity when they become 45, auto convert to annuity at 45 is much better). Since I have 30+ years, I would like to invest in market linked products but without any insurance (family is sufficiently covered via a term plan). Pls suggest if there any such funds/plans. If there are no such schemes available in the market pls suggest Mutual Funds for the same objective, so they can withdraw when they turn 45 and use that for annuity. Reason for this ask: I have turned 45 and from last couple of years, I feel that I am no more interested to work in IT (working from last 20 years) but does not posses any other skill other than IT and has not generated sufficient second income to call it a day. So want to avoid this kind of a situation to my children. Best Regards, Brahmendra

Ans: Dear Brahmendra,

It's commendable that you're planning ahead for your children's financial future. While there are no specific market-linked products designed for generating a monthly second income with an auto-conversion to annuity at a certain age, you can achieve similar objectives through strategic investments in mutual funds.

For long-term wealth accumulation, consider equity-oriented mutual funds with a mix of large-cap, mid-cap, and small-cap exposure. These funds have the potential to generate significant wealth over a 30+ year horizon, which your sons can later utilize for creating a monthly income stream or purchasing an annuity.

Ensure a diversified portfolio across asset classes and periodically review and rebalance the investments based on their age, risk tolerance, and financial goals.

Remember, while it's essential to plan for financial security, it's also crucial to encourage your sons to develop their skills and passions, which can provide them with alternative income sources and fulfillment in the future.

Best wishes for your children's financial journey.
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  |8334 Answers  |Ask -

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

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hi sir i am 41 years old, now i want invest in mutual fund for my retirement and for my two sons one of it is 15 years and second is 10 years old. i can invest 5000 rs per month please suggest me funds that can i invest.
Ans: Given your investment horizon for retirement and your sons' education, you have a long-term horizon which allows you to consider equity-oriented mutual funds for potentially higher returns. Here are some suggestions tailored to your needs:

For Retirement (Long-Term):
Large Cap Funds: These funds invest in well-established companies, offering stability and growth potential. Given your longer investment horizon, consider allocating a portion to large-cap funds to provide stability to your portfolio.
Multi-Cap Funds: These funds offer diversification across market capitalizations and are suitable for long-term wealth creation. They can adapt to different market conditions, providing flexibility to the fund manager.
For Sons' Education (Medium to Long-Term):
Balanced Funds or Hybrid Funds: These funds invest in both equities and debt, offering a balance between growth and stability. They can be suitable for medium to long-term goals like your sons' education.
Children's Gift Funds or Children's Education Funds: Some mutual funds offer specific funds designed for children's future needs, providing a tailored solution for education expenses.
Considering your investment amount and goals, you can consider investing in a combination of the above-mentioned funds to achieve diversification and align with your financial goals. Here's a potential allocation:

Large Cap Funds: 40%
Multi-Cap Funds: 40%
Balanced or Hybrid Funds: 20%
Remember, it's essential to review your investments periodically and adjust your portfolio as needed based on performance, changing financial goals, and market conditions. Consult with a financial advisor to ensure your investment strategy aligns with your financial goals, risk tolerance, and investment horizon.

..Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

Asked by Anonymous - Dec 18, 2023Hindi
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I have two daughters and their age is 16 and 15 and i own 50 lakhs bank FD , 9 lakhs invested in MF me and my wife have invest 60 lakhs in share market and my age 51 year old. Can you plz suggest the best option for investment . for my future education of two kids and my and my wife upcoming old age( My family ) i have 3 lakhs mediclaim and have few LIC policies. I request you to give me the best advice or suggest the best investment for my growth of money and as a monthly income ( Home expenses ) plz reply
Ans: Given your family's financial situation and goals, it's crucial to create a comprehensive investment plan that considers both growth and stability. Here's a suggested approach:

Education Fund for Daughters: Since your daughters are nearing college age, consider setting aside a portion of your investments specifically for their education expenses. You may allocate a portion of your bank FDs and MF investments towards this goal, ensuring it grows over time to meet their educational needs.
Retirement Planning: As you and your wife approach retirement, it's essential to prioritize building a sufficient corpus to support your lifestyle in old age. Consider diversifying your investment portfolio to include a mix of equity, debt, and balanced funds, along with retirement-focused instruments like the National Pension System (NPS) or Senior Citizen Savings Scheme (SCSS).
Health and Insurance: Ensure you have adequate health insurance coverage for your family's medical needs. Additionally, review your existing LIC policies to ensure they align with your current financial goals and provide adequate coverage for your family's future needs.
Monthly Income: To generate regular income for your household expenses during retirement, consider investing in dividend-paying stocks, mutual funds with dividend options, or fixed income instruments like Senior Citizen Savings Scheme (SCSS) or Post Office Monthly Income Scheme (POMIS).
Regular Review and Adjustment: Regularly review your investment portfolio to track its performance, make necessary adjustments, and ensure it remains aligned with your financial goals and risk tolerance.
Consulting with a Certified Financial Planner can provide personalized guidance tailored to your family's specific financial situation and goals. Together, you can create a customized investment plan that addresses your needs for growth, income, and financial security.

..Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

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

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I want to invest a lumpsum of Rs. 4 lac for a period of 15 years for son higher education and also retirement plan. Please suggest. I am 40 and my son is 5 year old. Regards Devashish
Ans: Investing a lump sum for your son’s higher education and your retirement requires careful planning. Given your age and your son’s current age, a 15-year investment horizon provides a good opportunity for growth. Here’s how you can approach this investment in a safe and structured manner.

Investment Strategy for Son’s Education
Diversified Mutual Funds
Equity Mutual Funds: These are suitable for long-term growth. They provide potential for higher returns.

Debt Mutual Funds: These add stability to the portfolio. They are less volatile than equity funds.

Systematic Transfer Plan (STP)
Regular Transfers: Use STP to move money from debt to equity funds. This reduces the risk of market timing.

Balanced Allocation: Start with more in debt funds. Gradually move to equity funds over time.

Child Education Plans
Education Focused: These plans are designed for future education needs. They provide both investment and insurance benefits.

Goal-Oriented: Choose plans with specific maturity aligned with your son’s education timeline.

Investment Strategy for Retirement
Public Provident Fund (PPF)
Safe and Secure: PPF offers guaranteed returns. It is backed by the government.

Tax Benefits: Contributions are tax-deductible. Interest earned is also tax-free.

National Pension System (NPS)
Retirement-Focused: NPS is designed to build a retirement corpus. It offers equity and debt exposure.

Tax Benefits: Contributions are eligible for tax deductions. Partial withdrawals are allowed for specific purposes.

Employee Provident Fund (EPF)
Work-Based: If you are salaried, EPF is a good option. It offers secure and stable returns.

Employer Contribution: Employers also contribute to EPF. This boosts your retirement savings.

Combined Strategy
Balanced Portfolio
Diversification: Spread your Rs 4 lakh across different asset classes. This reduces risk and enhances returns.

Regular Monitoring: Review your investments annually. Make adjustments based on performance and goals.

Insurance Cover
Term Insurance: Ensure you have adequate term insurance. This secures your family’s future in case of any unforeseen events.

Health Insurance: A comprehensive health insurance plan is crucial. It protects your savings from medical emergencies.

Additional Considerations
Inflation Protection
Inflation Impact: Consider inflation while planning. Ensure your investments grow faster than inflation.

Real Returns: Focus on real returns, which are returns minus inflation. This ensures your purchasing power is maintained.

Risk Tolerance
Assess Risk: Understand your risk tolerance. Choose investments that match your risk appetite.

Adjust Over Time: As you get closer to your goal, reduce exposure to risky assets. This ensures safety of the corpus.

Emergency Fund
Safety Net: Maintain an emergency fund. This covers unforeseen expenses without disturbing your investments.

Liquid Assets: Keep this fund in liquid assets like savings accounts or liquid mutual funds.

Final Insights
Investing for your son’s education and your retirement requires a balanced approach. Diversify your investments across different asset classes. Regularly review and adjust your portfolio to stay on track with your goals. Ensure you have adequate insurance cover for unforeseen events. Maintaining an emergency fund is also crucial to avoid dipping into your investments during emergencies.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Asked by Anonymous - May 12, 2025
Money
I am 38 years old and self-employed, earning an average of 1.8 to 2 lakhs per month. I have a home loan of 44 lakhs (EMI is 46,000, tenure 15 years). There is no other liabilities. My investments include 11 lakhs in mutual funds, 3 lakhs in fixed deposits, and 1.5 lakh in gold. Should I focus on prepaying the home loan given my irregular income, or keep my investments intact and continue with EMIs?
Ans: You are doing quite well, especially with your investments and controlled liabilities. Your financial discipline is truly appreciable.

You are 38, self-employed, with Rs.1.8 to 2 lakhs monthly income.
Your current home loan is Rs.44 lakhs with EMI of Rs.46,000 for 15 years.
You have Rs.11 lakhs in mutual funds, Rs.3 lakhs in FDs, and Rs.1.5 lakhs in gold.
Your income is irregular, but you have no other liabilities.

Let us now do a 360-degree evaluation of whether to prepay the loan or stay invested.

 

Step-by-Step Financial Assessment
1. Evaluate the Stability of Your Income First
You earn between Rs.1.8 to Rs.2 lakhs per month.

 

But income is irregular. That needs caution.

 

Loan EMI is Rs.46,000 — about 25% of your average income.

 

If income drops in any month, EMI pressure will increase.

 

So we must first ensure EMI is always affordable, without stress.

 

Hence, liquidity is more important for you right now than aggressive loan prepayment.

 

2. Evaluate Your Emergency Reserve
You have Rs.3 lakhs in FD and Rs.1.5 lakhs in gold.

 

That makes it Rs.4.5 lakhs total liquid safety.

 

Your EMI is Rs.46,000, and personal expenses will also be there.

 

Ideal emergency fund for you = 6 to 9 months of expenses + EMI.

 

That is around Rs.6 to Rs.8 lakhs minimum.

 

So current emergency fund is slightly lower than ideal.

 

Please don’t use this for loan prepayment now.

 

3. Assess the Role of Mutual Funds
You have Rs.11 lakhs in mutual funds. That’s a solid step.

Now let’s assess whether to redeem this and prepay loan.

 

Should You Redeem Mutual Funds to Prepay?
Mutual funds, over long term, give better post-tax return than loan savings.

 

Loan interest is 8% to 9%, whereas mutual funds can give 11–13% in long term.

 

Especially if funds are equity-oriented and held for 5+ years.

 

You will also get capital gains tax exemption on Rs.1.25 lakhs LTCG annually.

 

If you redeem funds, you lose growth potential and compounding.

 

That hurts long-term wealth building.

 

So, do not redeem the entire Rs.11 lakhs in mutual funds.

 

4. Disadvantage of Early Loan Prepayment in Your Case
Prepaying early will reduce interest over time, yes.

 

But you may run into cash flow stress in slow months.

 

Once money is used to prepay, it cannot be taken back easily.

 

Liquidity once lost = flexibility lost.

 

Also, income tax benefit under Section 24(b) gets reduced if loan balance drops.

 

So it’s better to maintain balance between repayment and investment.

 

5. Best Strategy for You – A Balanced Approach
Let’s now craft the best plan for you.

 

Maintain Strong Liquidity First
Keep FD and gold untouched.

 

Increase emergency fund to at least Rs.6–Rs.7 lakhs.

 

For that, set aside extra Rs.2.5–Rs.3 lakhs from savings over time.

 

This makes your EMI safe even in low-income months.

 

Continue Your Mutual Fund SIPs Without Stopping
SIPs give long-term growth and beat loan interest in most cases.

 

Don’t stop mutual fund investments to prepay loan.

 

Stay invested. Let wealth compound.

 

Start Small and Periodic Prepayments
Don’t do bulk prepayment now. Do systematic small prepayments.

 

For example, Rs.25,000 to Rs.50,000 extra every 3–4 months.

 

When income is higher, use that surplus to prepay in parts.

 

Target 1–2 bulk part-payments per year.

 

This reduces tenure and interest slowly, without affecting liquidity.

 

Track Your Loan Amortisation Every 6 Months
Use netbanking or get a fresh loan statement every 6 months.

 

Check how each prepayment is reducing principal.

 

Adjust your strategy accordingly.

 

Avoid One-Time Full Prepayment
That would kill your long-term investment compounding.

 

Also removes your income tax benefit under Section 24(b).

 

Stay flexible. You are self-employed.

 

You need cash buffers more than salaried people.

 

Final Insights
Do not do bulk home loan prepayment from mutual funds now.

 

Keep SIPs going and maintain your compounding.

 

Grow your emergency fund to Rs.6–7 lakhs minimum.

 

Use surplus months to make small part-payments towards home loan.

 

This protects your peace and builds wealth at the same time.

 

Reassess in 2–3 years. You may be able to prepay more later.

 

You are already in a good financial position. Your thoughtful approach is praiseworthy.

 

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Money
i wish to purchase new car i10, should i purchase the same through own money or should i take a vehicle loan from bank and the money own by my to be kept as FDR or liquid mutual fund
Ans: It’s a good sign that you’re thinking before buying a car. You’re not rushing into it. That shows maturity and smart thinking.

We will now evaluate own money vs vehicle loan — from every angle.

 

Understanding the Nature of a Car Purchase
A car is not an investment.

 

It is a consumption asset, not a growth asset.

 

It depreciates every year. Its value goes down, not up.

 

So the cheaper the total cost, the better for your wealth.

 

Option 1: Use Own Money Fully
Pros

No interest cost. You save on total expenses.

 

You are free from monthly EMI pressure.

 

Car becomes fully yours from day one.

 

No need to deal with bank, forms, hypothecation etc.

 

Cons

Your liquid money reduces.

 

You may not have enough cash for emergencies.

 

Opportunity loss if you had invested that money.

 

Option 2: Take Vehicle Loan & Keep Own Money in FDR or Liquid Mutual Fund
Let’s evaluate this with care.

Vehicle Loan Pros

You can preserve your savings for emergencies.

 

EMI can be budgeted monthly, if income is stable.

 

Some banks offer competitive interest rates.

 

Vehicle Loan Cons

You will pay interest on a depreciating item.

 

Loan adds to your monthly obligations.

 

You must pay insurance, EMI, fuel, and service together.

 

FDR and Liquid Mutual Funds give lower returns than loan cost.

 

So you will likely lose more in interest than you gain.

 

Let's Compare: Interest Rate vs Investment Return
Vehicle loan interest is usually 9% to 11% per year.

 

FDR gives around 6% to 7% before tax.

 

Liquid mutual funds give 6% to 7.5% on average.

 

So you pay more to the bank than you earn from investment.

 

Tax on interest or gains reduces actual return further.

 

This means taking a car loan and investing your own money leads to net loss.

 

Best Option for You: Smart Compromise Approach
Let me share a wise solution.

 

Don’t use full own money. Don’t take full loan either.

 

Instead, pay 70–80% from own funds.

 

Take a small car loan for the remaining 20–30% only.

 

This keeps EMI low and retains some liquidity.

 

You reduce interest cost and also keep Rs.50,000–Rs.1 lakh aside.

 

Park that in liquid fund for any urgent need.

 

Repay this small loan fast in 1–2 years.

 

Only Take a Car Loan If:
Your job income is stable.

 

You already have 3–6 months emergency fund ready.

 

You don’t have big loans running now.

 

You can pay EMI without affecting savings.

 

You commit to close the loan early.

 

Avoid This Mistake:
Never buy a more expensive car because loan makes it “feel affordable.”

 

Loan should not expand your car budget.

 

Whether you buy with loan or cash, pick a simple car within limits.

 

i10 is a wise, middle-ground choice. Good thought.

 

Tax Angle (If Business Use)
If you are using the car for business, vehicle loan interest may be tax-deductible.

 

But for personal use, there is no tax benefit.

 

So do not take loan just for imagined tax saving.

 

Final Insights
A car is a need, not an investment.

 

Using your own money fully keeps things simple and cheap.

 

Taking a full car loan and investing the money gives net negative return.

 

Best option is a split approach — pay major part from own funds.

 

Take small loan only if needed and close it early.

 

Always keep emergency money aside before buying.

 

Avoid emotional buying or overbudget cars.

 

Your financially balanced approach is very appreciable.

 

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

...Read more

Anu

Anu Krishna  |1600 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on May 12, 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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