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Advait

Advait Arora  | Answer  |Ask -

Financial Planner - Answered on May 03, 2023

Advait Arora has over 20 years of experience in direct investing in stock markets in India and overseas.
He holds a masters in IT management from the University Of Wollongong, Australia, and an MBA in marketing from Charles Strut University, NewCastle, Australia.
Advait is a firm believer in the power of compounding to help his clients grow their wealth.... more
mukesh Question by mukesh on May 02, 2023Hindi
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I hold 500 nos LIC @ 650 Rs/share - should I hold or exit

Ans: not a big fan of LIC and insurance sector in general. there are better options in the market mr. mukesh
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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Mr Advait Arora, I am 36 Years Old and just got introduced to MF. I have started RD 80K/Month , FD 7.5Lcs, 32.5K/Month MF (SBI Magnum Mid Cap Direct Plan Growth 5k, Tata Small Cap Fund Direct growth 10 K, SBI PSU Direct Plan Growth 5K,Aditya Birla Sun Life PSU Equity Fund Direct growth 5 K,Quant Small cap Fund Direct Plan Growth 5k & Quant Mid Cap Fund Direct growth 2.5k. Additionaly have started LIC INdex Plan 30K/Month for 20 years, 2.5 Lcs / year HDFC ULIP Click to invest 10 years plan and 10 K/Month on Max life Saving an Ulip Plan Again for 5 years invest and 20 years plan . I wanted to target 10 Crores in 15 Years. Please let me know if am on the right track or is there some changes to be made .All this are started in year 2024. I am an NRE working in Middile east Thanks in advance Deepu
Ans: Your commitment to financial discipline and long-term goals is praiseworthy. However, your portfolio requires optimisation to ensure you reach your Rs 10 crore target in 15 years. Here's a detailed assessment and strategic recommendations.

Evaluating Your Current Portfolio
Recurring Deposit (RD): Rs 80,000/Month
Recurring deposits are low-risk but offer limited returns.
The post-tax return is unlikely to match inflation.
Fixed Deposit (FD): Rs 7.5 Lakh
Fixed deposits are safe but have similar challenges as RDs.
Long-term wealth creation is difficult with these instruments.
Mutual Funds (MF): Rs 32,500/Month
Investments in small-cap and mid-cap funds indicate a high-risk appetite.
However, all your investments are in direct funds.
Disadvantages of Direct Funds:

Direct funds require active monitoring and market knowledge.
Any wrong decision can lead to lower returns.
Benefits of Regular Funds via CFP:

Professional guidance ensures better fund selection.
Regular reviews and rebalancing optimise performance.
LIC Index Plan: Rs 30,000/Month for 20 Years
Index-based plans offer limited growth due to market-cap weighting.
Returns may not beat inflation consistently.
HDFC ULIP Click to Invest: Rs 2.5 Lakh/Year for 10 Years
ULIPs combine insurance and investment, leading to suboptimal growth.
High charges during the initial years impact returns.
Max Life Saving ULIP: Rs 10,000/Month for 5 Years, 20-Year Plan
Long lock-in and high charges are similar drawbacks as the above ULIP.
Insurance cover may not suffice for your financial needs.
Optimising Your Portfolio for Growth
1. Mutual Fund Investments
Shift from direct plans to regular funds through a Certified Financial Planner.
Diversify across equity, hybrid, and debt categories for better stability.
2. Recurring Deposit and Fixed Deposit
Gradually move RD and FD funds into debt and equity mutual funds.
Debt funds offer tax efficiency and better post-tax returns.
3. LIC Index Plan and ULIPs
Surrender these policies after consulting with your Certified Financial Planner.
Reinvest proceeds into mutual funds for higher long-term returns.
4. Adequate Term Insurance
Buy a pure term insurance plan for financial protection.
Ensure the sum assured is at least 10-15 times your annual income.
Building a Rs 10 Crore Corpus in 15 Years
Step 1: Monthly SIP Investments
Increase monthly SIPs gradually to match your cash flow.
Allocate more funds to equity-oriented mutual funds for growth.
Step 2: Balanced Portfolio Allocation
Maintain 60% in equity, 30% in debt, and 10% in other instruments.
Equity funds drive growth, while debt funds provide stability.
Step 3: Monitor and Rebalance
Regularly review your portfolio with a Certified Financial Planner.
Rebalance yearly to maintain the desired asset allocation.
Tax Efficiency
1. Mutual Fund Taxation
Equity funds have LTCG taxed at 12.5% above Rs 1.25 lakh.
Plan withdrawals to minimise tax liability.
2. Debt Fund Taxation
Gains are taxed as per your income slab.
Use systematic withdrawals for efficient tax management.
Final Insights
You have a strong savings habit and a clear financial goal. However, some adjustments are necessary to optimise your portfolio. Surrender low-yield plans like ULIPs and LIC and reinvest in growth-oriented mutual funds. Shift from direct funds to regular funds with professional guidance.

With disciplined investing, proper diversification, and consistent reviews, achieving Rs 10 crore in 15 years is possible. Stay focused and work closely with a Certified Financial Planner.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

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Mutual Funds, Financial Planning Expert - Answered on Nov 25, 2024

Asked by Anonymous - Nov 24, 2024Hindi
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I have retired at 55, funds available 1.7 cross, monthly expenses 1.5 lacs per month. 1.00 dr required after 5 years for daughters marriage. PLease advise additional corpus required.
Ans: You have retired at 55 with Rs. 1.7 crores corpus. Your monthly expenses are Rs. 1.5 lakhs. Additionally, Rs. 1 crore is needed in five years for your daughter's marriage. Let us determine the adequacy of your current corpus and the additional amount required for long-term financial stability.

Financial Observations
Monthly Expenses

Your current monthly expenses are Rs. 1.5 lakhs.
This translates to Rs. 18 lakhs annually.
Marriage Fund Requirement

Rs. 1 crore is required in five years.
Allocating a portion of the corpus now can ensure it grows to Rs. 1 crore.
Corpus Sustainability

The existing corpus of Rs. 1.7 crores is insufficient to sustain Rs. 1.5 lakhs monthly.
The gap between income and expenses will drain the corpus quickly.
Inflation Impact

Inflation will increase your expenses over the next 20–30 years.
Adequate planning is essential to preserve purchasing power.
Recommendations to Address the Corpus Gap
Marriage Fund Planning

Invest Rs. 70-75 lakhs in debt mutual funds or fixed-income instruments.
These options can grow steadily to Rs. 1 crore in five years.
Monthly Expense Management

Create a systematic withdrawal plan from the remaining corpus.
Focus on balanced or hybrid funds to sustain monthly cash flow.
Estimate Additional Corpus Required

Considering inflation and long-term expenses, an additional Rs. 4-5 crores is needed.
Start building this corpus through systematic investments.
Invest Additional Corpus for Growth

Invest new funds in equity-heavy portfolios for higher returns.
Diversify into large-cap, flexi-cap, and balanced funds.
Portfolio Allocation Strategy
Debt Allocation for Stability

Allocate 40–50% of the corpus to debt instruments.
Focus on short-term debt funds or fixed-income securities.
Equity Allocation for Growth

Invest 50–60% of the corpus in equity mutual funds.
Choose actively managed funds with consistent long-term performance.
Hybrid Funds for Balanced Growth

Allocate a portion to balanced advantage funds.
These provide stability and reduce volatility.
Emergency Fund

Maintain six months’ expenses in a liquid fund.
This ensures liquidity for emergencies.
ESOP or Stock Diversification

Avoid high concentration in single-company ESOPs.
Diversify into broader markets or mutual funds.
Tax Planning for Withdrawals
Minimise LTCG Tax on Mutual Funds

Long-term capital gains over Rs. 1.25 lakh are taxed at 12.5%.
Time withdrawals to reduce taxable gains.
STCG Tax Consideration

Short-term capital gains are taxed at 20%.
Avoid premature redemptions to save on taxes.
Debt Fund Taxation

Debt fund gains are taxed as per your income tax slab.
Plan redemptions strategically to reduce tax outgo.
Steps to Build the Additional Corpus
Increase Investment Allocation

Contribute Rs. 1.5–2 lakhs monthly to new investments.
Use systematic investment plans for disciplined investing.
Focus on Long-Term Equity Growth

Allocate a significant portion to equity for compounding growth.
Include international equity for diversification.
Review and Adjust Portfolio Regularly

Conduct half-yearly reviews to align with goals.
Rebalance the portfolio to manage risks.
Seek Professional Guidance

Work with a Certified Financial Planner to create a tailored plan.
Regular monitoring ensures you stay on track.
Final Insights
Your current corpus and monthly expenses require careful management. An additional Rs. 4-5 crores is necessary to ensure long-term financial stability. Focus on strategic investments and tax-efficient withdrawals. Plan proactively for the marriage fund and sustain your lifestyle comfortably.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner

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

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Asked by Anonymous - Nov 24, 2024Hindi
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I am 66 years old and retired in 2019 with a retirement settlement corpus of 70 lakhs. I also inherited 50lakhs. I own a flat in MP valued at 1.4 cr. This is mortgaged as collateral for my daughter's international education to the tune of 32 lakhs. I also own a flat in mumbai worth 2.4 crores and another small real estate investment worth 25 lakhs. Due to improper investments and no income for last five years and also the fact that I have been living in MP while my wife with two adult kids was living in mumbai, we have consumed most of the corpus on living and managing two homes and now have only about 40 lacs in savings.. We dont have any other loans. My one child is 25 yrs and is abroad and other is 29 and earning good income.. My wife has to take care of her 85 yr old mother who has willed my wife her flat located in another city which is worth 1.2 crore and has about 50 lacs in FDs... Please advise on what is the best way ahead to secure our future and most important, generate a monthly income of 1 lac. I understand I have to consolidate my properties but unsure how to take the right decision.. Your advise will be valuable.
Ans: At 66 years of age, your primary focus should be to generate a steady income. Your current financial position, including properties and savings, offers opportunities for consolidation. Here is a detailed plan to secure your financial future and achieve a monthly income of Rs 1 lakh.

Understanding Your Current Position
Savings: Rs 40 lakh
Properties:
Flat in MP (Rs 1.4 crore, mortgaged for Rs 32 lakh)
Flat in Mumbai (Rs 2.4 crore)
Smaller real estate investment (Rs 25 lakh)
Family Dependency:
Wife with an 85-year-old mother requiring care
Two adult children (one earning, one studying abroad)
This diverse portfolio requires strategic consolidation for optimal returns.

Assessing Financial Needs
Target Monthly Income: Rs 1 lakh
Expenses: Consolidate family living to reduce redundant expenses.
Liquidity: Immediate access to funds for unforeseen needs.
Strategic Property Consolidation
1. Flat in MP
Sell the MP flat for Rs 1.4 crore.
Use Rs 32 lakh to close the loan taken for your daughter’s education.
The remaining Rs 1.08 crore becomes liquid for investments.
2. Flat in Mumbai
Retain this flat for family residence.
Consolidate living expenses by shifting your family from MP to Mumbai.
3. Small Real Estate Investment
Sell this property for Rs 25 lakh.
Add proceeds to your investment pool for income generation.
4. Future Inheritance
Your wife's future inheritance (Rs 1.2 crore flat and Rs 50 lakh FDs) adds security.
Avoid depending on this for immediate financial decisions.
Building a Monthly Income Stream
1. Immediate Investments
Allocate Rs 1.4 crore (from property sales) to a mix of instruments for income and growth:

Debt Mutual Funds: Invest Rs 1 crore in dynamic bond funds or monthly income plans.

These funds offer stable returns.
Withdraw systematically for monthly income.
Equity-Oriented Hybrid Funds: Invest Rs 40 lakh.

These funds balance growth with moderate risk.
Provide capital appreciation to beat inflation.
2. Emergency Fund
Keep Rs 10 lakh in liquid funds.
Ensure immediate access for unforeseen medical or family needs.
3. Insurance
Ensure adequate health insurance for yourself and your wife.
This reduces financial stress during medical emergencies.
Reducing Expenses
1. Family Consolidation
Move your wife and mother-in-law to Mumbai.
This reduces duplicate household expenses.
2. Simplify Lifestyle
Evaluate discretionary expenses and minimise unnecessary outflows.
Generating Rs 1 Lakh Monthly Income
Use the systematic withdrawal plan (SWP) from mutual funds.
Withdraw Rs 75,000 monthly from debt funds.
Use dividends or growth from equity hybrid funds for the remaining Rs 25,000.
This method ensures steady income without depleting the corpus.
Tax Efficiency
Mutual Fund Withdrawals
Debt Funds: Gains taxed as per your slab rate. Plan withdrawals carefully.
Equity Hybrid Funds: Gains above Rs 1.25 lakh annually taxed at 12.5%.
Strategies to Minimise Tax
Spread withdrawals across multiple financial years.
Utilise exemptions and deductions for senior citizens.
Role of a Certified Financial Planner
Regularly review the portfolio with a Certified Financial Planner.
Adjust investments based on market performance and financial needs.
Plan tax-efficient withdrawals and rebalancing.
Final Insights
Consolidating your properties and strategically investing the proceeds will ensure a secure retirement. A mix of debt and equity funds can generate Rs 1 lakh monthly. Simplify your living arrangement to save costs and reduce stress.

Consistent reviews and disciplined financial decisions will keep you on track. Focus on maintaining liquidity and protecting your wealth for a comfortable future.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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