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Ramalingam Kalirajan |7290 Answers |Ask -Follow
Mutual Funds, Financial Planning Expert - Answered on Oct 29, 2024
Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Oct 28, 2024Hindi
Iam 50 yrs old,widow.I have 2 kids,both are doing graduation.Iam working in health care in contract basis.I have my own house.15 laks savings,2 Lic policies of 10 and 8 Lakh and some gold worth 3 lakhs.My salary is 40k. Pls give me a financial guidance
Ans: At 50, you have a significant responsibility as a widow with two children in college.
You have a home, which provides security and stability, and savings of Rs 15 lakh, two LIC policies, and some gold.
Your income is Rs 40,000 per month from contract work in healthcare.
Given your position, here’s a comprehensive financial guide to support your goals and build security for you and your children’s future.
Build an Emergency Fund
Setting up an emergency fund is a priority to cover any unforeseen expenses.
This should equal 6–12 months of essential expenses, ensuring you have a cushion if you face job uncertainties.
Consider liquid funds for this purpose, as they offer easy access and moderate returns.
Review Existing LIC Policies
You currently hold LIC policies of Rs 10 lakh and Rs 8 lakh.
Insurance policies are traditionally low in returns, especially if they are investment-oriented.
To maximize returns, consider surrendering these and reinvesting in mutual funds, if they don’t have significant penalties or surrender charges.
Reinvesting these into well-chosen, actively managed mutual funds could yield better growth, helping meet your financial needs more effectively.
Optimise Savings for Growth
To make the most of your Rs 15 lakh savings, consider dividing the amount into various investment avenues.
Fixed Deposits (FDs) are safe but have limited growth potential. A mix of debt and equity mutual funds can offer better returns.
Debt funds are ideal for stable growth, while balanced equity funds offer a moderate risk-return balance.
Mutual Fund Investments
Since you’re looking for long-term growth, actively managed mutual funds could be a suitable choice.
Actively managed funds allow for expert supervision, adjusting investments to optimize returns based on market trends.
It’s beneficial to consult with a Certified Financial Planner (CFP) for guidance on selecting these funds, which will help in growing wealth over time.
Avoid Direct Mutual Funds
Direct funds may seem economical due to lower expense ratios, but managing them independently requires expertise.
A regular plan, managed through a CFP, includes advisory services that can help you make informed decisions and adjust to market changes.
This assistance can be invaluable, especially for someone managing various responsibilities alone.
Disadvantages of Index Funds
Index funds may sound attractive due to lower costs and simplicity, but they have limitations.
These funds mirror the index and can’t respond to market fluctuations effectively. This could lead to lower returns compared to actively managed funds.
Actively managed funds, by contrast, adjust their portfolios to aim for better returns, which can benefit you in the long term.
Allocate for Children’s Education
Both of your children are in graduation, so education expenses will continue for a few more years.
It’s wise to set aside funds specifically for this purpose, perhaps in a debt mutual fund for safer returns.
Debt funds offer stable growth and can be easily liquidated as education expenses arise.
Retirement Planning
With no retirement fund mentioned, it’s crucial to establish one now.
Since you may not have a regular pension or provident fund as a contract worker, you’ll need to rely on personal investments for post-retirement income.
Setting up a systematic investment in a balanced equity fund is a wise way to build a corpus over the next few years.
Generate Passive Income through SWP
A Systematic Withdrawal Plan (SWP) in mutual funds can provide a steady monthly income while preserving your capital.
With an SWP, you can withdraw a fixed amount every month, which can supplement your income post-retirement.
It allows the remaining investment to continue growing, giving you both income and potential growth.
Gold as a Backup
Gold is a valuable asset in your portfolio, especially in uncertain economic times.
It can be used as a last-resort backup if you face financial strain, or you may consider pledging it for a low-interest loan in emergencies.
Retaining gold as part of your net worth also adds security, as it’s generally stable and can hedge against inflation.
Tax Implications
As your income and investments grow, being aware of tax liabilities will be beneficial.
Earnings from mutual funds are taxable. Gains above Rs 1.25 lakh on equity funds are taxed at 12.5% as LTCG, while STCG is taxed at 20%. Debt funds are taxed as per your income slab.
A CFP can assist in devising a tax-efficient investment plan to maximize your take-home returns.
Insurance and Health Cover
Since you’re in healthcare, consider a personal health policy that offers ample coverage for you and your children.
Health issues or medical emergencies can have significant financial implications, so an adequate health policy will provide security.
Make sure the coverage amount is sufficient, especially as medical costs are continually rising.
Finally
Balancing current needs with future security is essential.
This guidance provides a rounded approach to managing your finances, aiming for security, growth, and stability.
Regular reviews of your financial plan, ideally with a Certified Financial Planner, will help you stay on track and make adjustments as necessary.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
You have a home, which provides security and stability, and savings of Rs 15 lakh, two LIC policies, and some gold.
Your income is Rs 40,000 per month from contract work in healthcare.
Given your position, here’s a comprehensive financial guide to support your goals and build security for you and your children’s future.
Build an Emergency Fund
Setting up an emergency fund is a priority to cover any unforeseen expenses.
This should equal 6–12 months of essential expenses, ensuring you have a cushion if you face job uncertainties.
Consider liquid funds for this purpose, as they offer easy access and moderate returns.
Review Existing LIC Policies
You currently hold LIC policies of Rs 10 lakh and Rs 8 lakh.
Insurance policies are traditionally low in returns, especially if they are investment-oriented.
To maximize returns, consider surrendering these and reinvesting in mutual funds, if they don’t have significant penalties or surrender charges.
Reinvesting these into well-chosen, actively managed mutual funds could yield better growth, helping meet your financial needs more effectively.
Optimise Savings for Growth
To make the most of your Rs 15 lakh savings, consider dividing the amount into various investment avenues.
Fixed Deposits (FDs) are safe but have limited growth potential. A mix of debt and equity mutual funds can offer better returns.
Debt funds are ideal for stable growth, while balanced equity funds offer a moderate risk-return balance.
Mutual Fund Investments
Since you’re looking for long-term growth, actively managed mutual funds could be a suitable choice.
Actively managed funds allow for expert supervision, adjusting investments to optimize returns based on market trends.
It’s beneficial to consult with a Certified Financial Planner (CFP) for guidance on selecting these funds, which will help in growing wealth over time.
Avoid Direct Mutual Funds
Direct funds may seem economical due to lower expense ratios, but managing them independently requires expertise.
A regular plan, managed through a CFP, includes advisory services that can help you make informed decisions and adjust to market changes.
This assistance can be invaluable, especially for someone managing various responsibilities alone.
Disadvantages of Index Funds
Index funds may sound attractive due to lower costs and simplicity, but they have limitations.
These funds mirror the index and can’t respond to market fluctuations effectively. This could lead to lower returns compared to actively managed funds.
Actively managed funds, by contrast, adjust their portfolios to aim for better returns, which can benefit you in the long term.
Allocate for Children’s Education
Both of your children are in graduation, so education expenses will continue for a few more years.
It’s wise to set aside funds specifically for this purpose, perhaps in a debt mutual fund for safer returns.
Debt funds offer stable growth and can be easily liquidated as education expenses arise.
Retirement Planning
With no retirement fund mentioned, it’s crucial to establish one now.
Since you may not have a regular pension or provident fund as a contract worker, you’ll need to rely on personal investments for post-retirement income.
Setting up a systematic investment in a balanced equity fund is a wise way to build a corpus over the next few years.
Generate Passive Income through SWP
A Systematic Withdrawal Plan (SWP) in mutual funds can provide a steady monthly income while preserving your capital.
With an SWP, you can withdraw a fixed amount every month, which can supplement your income post-retirement.
It allows the remaining investment to continue growing, giving you both income and potential growth.
Gold as a Backup
Gold is a valuable asset in your portfolio, especially in uncertain economic times.
It can be used as a last-resort backup if you face financial strain, or you may consider pledging it for a low-interest loan in emergencies.
Retaining gold as part of your net worth also adds security, as it’s generally stable and can hedge against inflation.
Tax Implications
As your income and investments grow, being aware of tax liabilities will be beneficial.
Earnings from mutual funds are taxable. Gains above Rs 1.25 lakh on equity funds are taxed at 12.5% as LTCG, while STCG is taxed at 20%. Debt funds are taxed as per your income slab.
A CFP can assist in devising a tax-efficient investment plan to maximize your take-home returns.
Insurance and Health Cover
Since you’re in healthcare, consider a personal health policy that offers ample coverage for you and your children.
Health issues or medical emergencies can have significant financial implications, so an adequate health policy will provide security.
Make sure the coverage amount is sufficient, especially as medical costs are continually rising.
Finally
Balancing current needs with future security is essential.
This guidance provides a rounded approach to managing your finances, aiming for security, growth, and stability.
Regular reviews of your financial plan, ideally with a Certified Financial Planner, will help you stay on track and make adjustments as necessary.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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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