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Ramalingam

Ramalingam Kalirajan  |8315 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 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
vikram Question by vikram on Sep 19, 2024Hindi
Money

HI,Iam 51 year old MALE, want to invest in some financial instruments, for next 10 years...to build up a good corpus...may salary is about a lakh...can invest upto 40 k..pls suggest

Ans: At 51, you're in an ideal position to plan for the next decade of your financial journey. With a steady salary of Rs 1 lakh and the ability to invest Rs 40,000 per month, your focus is likely on building a secure retirement corpus while balancing some level of growth.

Let’s explore options that suit your investment horizon, risk tolerance, and desire for a good corpus in 10 years.

Balanced Approach Between Safety and Growth
Since you're looking to invest for the next 10 years, it's important to create a diversified portfolio. You should aim for both growth and stability. With a mix of equity, debt, and other instruments, you can grow your wealth steadily while reducing risks.

Systematic Investment Plan (SIP) in Mutual Funds
SIPs are a great way to grow your wealth systematically. By investing a fixed amount monthly, you benefit from rupee cost averaging, which helps you ride market volatility.

Growth potential: SIPs offer you exposure to equity, which generally gives better returns than fixed income instruments over the long term.

Moderate risk: Since you have 10 years, you can consider a blend of equity and debt mutual funds. Actively managed funds can outperform index funds, especially when guided by a Certified Financial Planner.

Monthly investment: Out of the Rs 40,000 you can invest monthly, allocating around Rs 25,000-30,000 in equity mutual funds can provide growth.

Debt Mutual Funds for Stability
Alongside equity, it’s important to have stability in your portfolio. Debt mutual funds offer lower risk but still provide better returns than traditional bank deposits. They are ideal for your lower risk tolerance and shorter investment horizon.

Safety focus: Debt funds invest in government bonds and high-quality corporate debt, providing capital protection.

Tax efficiency: Debt mutual funds are more tax-efficient than fixed deposits if held for more than 3 years due to indexation benefits.

Monthly allocation: You could consider investing Rs 10,000-15,000 into debt mutual funds for a more balanced portfolio.

Public Provident Fund (PPF)
PPF remains a safe, tax-free, long-term investment option. Given your 10-year time horizon, it aligns well with your financial goals.

Risk-free returns: PPF offers a guaranteed return, and the interest earned is exempt from tax.

Fixed lock-in: Since PPF has a 15-year lock-in period, it is not very liquid, but it's perfect for creating long-term financial discipline.

Allocation: Consider contributing a portion, say Rs 5,000 monthly, to PPF to diversify your portfolio into risk-free instruments.

Gold Investments
You already hold Rs 1 crore in gold, but it’s important to remember that gold is more of a wealth-preserving asset than a growth generator.

Portfolio diversification: Avoid over-investing in gold, as it typically provides low returns over time compared to equity or debt.

Better alternatives: Instead of physical gold, you could invest in Sovereign Gold Bonds (SGBs) for better returns and tax-free redemption after 8 years.

Insurance and Protection
At 51, it's important to ensure your family is financially protected in case of any unforeseen events. Check your life insurance policies and make sure you have enough coverage.

Term insurance: If you don’t already have term insurance, consider getting a policy to secure your family.

Health insurance: Adequate health insurance is critical at this stage. Ensure you have a good family floater plan that covers all medical emergencies.

Avoid Over-reliance on Traditional Investments
It's important to avoid over-investing in traditional instruments like fixed deposits or endowment plans, which provide low returns.

Inflation impact: These instruments often fail to outpace inflation, reducing the value of your wealth over time.

Alternative options: Instead, focus on higher-return options like mutual funds, PPF, and SGBs, which offer a better balance of growth and security.

Tax Planning
Tax-efficient investing is essential to help you maximise returns. Here are a few strategies:

ELSS Mutual Funds: Equity Linked Savings Schemes (ELSS) not only offer good returns but also help in tax-saving under Section 80C.

Long-term capital gains: By holding equity investments for more than a year, you can benefit from lower long-term capital gains tax rates.

Debt funds for tax-saving: Debt mutual funds, if held for more than 3 years, are taxed at a lower rate due to indexation benefits, making them more attractive than fixed deposits.

Emergency Fund
Even though you are focusing on building a corpus for the next 10 years, it's important to maintain an emergency fund. This fund should cover 6-12 months of your monthly expenses, ensuring you are prepared for unexpected events.

Liquidity: Keep this fund in highly liquid instruments like bank savings accounts, short-term debt funds, or liquid funds.

Amount allocation: Set aside around Rs 3-4 lakhs for this purpose to stay financially secure.

Avoid Index Funds
You might come across recommendations for index funds. While these are passively managed and track market indices, they may not be ideal for you.

Underperformance: Actively managed funds often outperform index funds, especially in the Indian market.

Expert guidance: A Certified Financial Planner (CFP) can help you choose better-performing actively managed funds, ensuring your investments are in good hands.

Final Insights
You are at a great stage in your financial journey. By investing Rs 40,000 monthly in a mix of equity, debt, and safe instruments, you can build a strong corpus over the next 10 years. Ensure you are well-protected with adequate insurance and focus on tax-efficient investments to maximise returns.

Keep an eye on your long-term goals and revisit your portfolio regularly with the help of a Certified Financial Planner to ensure you stay on track.

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 Kalirajan  |8315 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Asked by Anonymous - May 20, 2024Hindi
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Hi Sir, I am 31 years old and I want to invest for next 20 years and I am looking a corpus of 10crwhich mf should I invest in
Ans: Embarking on a 20-year investment journey with the goal of accumulating a corpus of ?10 crore demonstrates your commitment to long-term financial planning and wealth creation. Let's explore a strategic approach to mutual fund investing tailored to your objectives.

Understanding Your Investment Horizon and Goals
At 31, you have a significant investment horizon ahead, providing ample time to pursue growth-oriented investments. Your target corpus of ?10 crore over 20 years is ambitious yet achievable with the right investment strategy and discipline.

Leveraging the Expertise of a Certified Financial Planner
Working with a Certified Financial Planner (CFP) can provide valuable insights and guidance in navigating the complex world of mutual fund investing. A CFP can assist you in selecting suitable funds and crafting a personalized investment plan aligned with your financial goals and risk profile.

Choosing Active Funds in Regular Mode Through MFD
Active mutual funds managed by experienced fund managers offer the potential to outperform the market and generate superior returns over the long term. Investing through a Mutual Fund Distributor (MFD) in regular mode ensures access to professional advice and ongoing support in managing your investments.

Emphasizing Diversification and Risk Management
Diversifying your mutual fund portfolio across multiple asset classes, sectors, and fund categories is crucial for managing risk and optimizing returns. Consider allocating your investments across equity, debt, and hybrid funds to achieve a well-balanced portfolio.

Monitoring and Reviewing Your Portfolio Regularly
Regularly monitor the performance of your mutual fund portfolio and review your investment strategy periodically to ensure alignment with your long-term goals. Stay informed about market trends, fund performance, and economic developments to make informed decisions.

Leveraging the Power of Compounding
Harnessing the power of compounding is key to achieving your target corpus of ?10 crore over 20 years. By reinvesting dividends and staying invested for the long term, you can benefit from the compounding effect and exponentially grow your wealth over time.

Conclusion
In conclusion, investing in active mutual funds through a Certified Financial Planner and Mutual Fund Distributor in regular mode is a prudent approach to achieving your long-term financial goals. By emphasizing diversification, risk management, and disciplined investing, you can work towards accumulating a corpus of ?10 crore over the next 20 years and secure your financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8315 Answers  |Ask -

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

Asked by Anonymous - May 20, 2024Hindi
Money
I am 38 years old, having monthly salary of 1.8lakhs, invested in stocks (3lakhs), SGB 6lakhs, MF portfolio current value 14lakhs, ppf 25lakhs, nos 5lakhs, term insurance of 2cr, having 2 property of abt 2cr current value. Emergency fund of 10lakhs. Home loan of 16lakhs with 25k monthly emi. Monthly investment in nps = 40k, MF = 21k Monthly expenses= 50k Having 2 kids, 9yrs and 3yrs old. Parents are not dependent on me. I left with 50k monthly which I can invest. Pl suggest appropriate instrument to invest into, which is safe and give higher than 10%. Also how can I build a corpus of 10cr in next 12years
Ans: congratulations on your impressive financial journey so far. With a robust monthly salary of Rs. 1.8 lakhs and diverse investments, you are well-positioned to achieve your financial goals. Let’s delve into a strategic plan to help you build a corpus of Rs. 10 crores in the next 12 years while ensuring safety and higher returns.

Current Financial Situation
Income and Expenses
Monthly Salary: Rs. 1.8 lakhs
Monthly Expenses: Rs. 50,000
Monthly Investments:
NPS: Rs. 40,000
Mutual Funds: Rs. 21,000
Remaining Monthly Amount for Investment: Rs. 50,000
Existing Investments
Stocks: Rs. 3 lakhs
Sovereign Gold Bonds (SGB): Rs. 6 lakhs
Mutual Funds: Rs. 14 lakhs
Public Provident Fund (PPF): Rs. 25 lakhs
National Pension System (NPS): Rs. 5 lakhs
Emergency Fund: Rs. 10 lakhs
Term Insurance: Rs. 2 crores
Property: Current value approx. Rs. 2 crores
Home Loan: Rs. 16 lakhs (EMI: Rs. 25,000 per month)
Investment Goals and Strategy
Your primary goal is to build a corpus of Rs. 10 crores in the next 12 years. To achieve this, you need to focus on a balanced and diversified investment strategy that emphasizes growth, safety, and tax efficiency.

Recommended Investment Instruments
Equity Mutual Funds
Why Equity Mutual Funds?

Higher Returns: Historically, equity mutual funds have provided returns averaging 12-15% over the long term.
Diversification: Investing in a mix of large-cap, mid-cap, and small-cap funds offers balanced risk and return.
Strategy:

SIP (Systematic Investment Plan): Continue your SIPs and consider increasing the amount annually.
Additional Allocation: Allocate a portion of your Rs. 50,000 surplus into equity mutual funds.
Balanced Advantage Funds
Why Balanced Advantage Funds?

Dynamic Allocation: These funds adjust the allocation between equity and debt based on market conditions.
Stability: They offer a good balance of risk and return, providing some downside protection.
Strategy:

Monthly Investment: Consider allocating Rs. 10,000-15,000 per month to balanced advantage funds.
Direct Stocks
Why Direct Stocks?

Potential for High Returns: Individual stocks can provide significant returns if well-researched and selected.
Diversification: Investing in different sectors can mitigate risks.
Strategy:

Research and Investment: Invest Rs. 10,000 per month in blue-chip and high-growth potential stocks.
Debt Funds
Why Debt Funds?

Lower Risk: They are less volatile compared to equity funds.
Steady Returns: Ideal for stability and regular income.
Strategy:

Monthly Investment: Allocate Rs. 10,000-15,000 per month to debt funds, focusing on high-quality corporate bonds and government securities.
Public Provident Fund (PPF)
Why PPF?

Tax Benefits: Offers tax exemption under Section 80C.
Safe Returns: Government-backed, ensuring safety of principal.
Strategy:

Annual Contribution: Continue contributing to your PPF account to maximize the benefits.
Building a Corpus of Rs. 10 Crores
Systematic Investment and Compounding
Importance of Compounding:

Regular Investments: Continuously invest the Rs. 50,000 surplus every month.
Reinvestment: Reinvest returns to benefit from compounding over the next 12 years.
Expected Returns:

Equity Mutual Funds and Stocks: Assuming an average annual return of 12-15%.
Balanced Funds: Expecting around 10-12% returns annually.
Debt Funds and PPF: Providing 7-8% returns annually.
Monthly Investment Allocation
Suggested Allocation:
Equity Mutual Funds: Rs. 25,000
Balanced Advantage Funds: Rs. 10,000
Direct Stocks: Rs. 10,000
Debt Funds: Rs. 5,000
This diversified approach balances high returns with safety and stability.

Tax Implications and Planning
Equity Investments
Long-Term Capital Gains (LTCG): Taxed at 10% beyond Rs. 1 lakh of gains.
Short-Term Capital Gains (STCG): Taxed at 15%.
Debt Investments
LTCG: Taxed at 20% with indexation benefits.
STCG: Taxed as per your income slab.
Managing Your Home Loan
Early Repayment
Consider making occasional lump sum payments towards your home loan principal to reduce the interest burden and pay off the loan sooner.

Financial Planning for Your Children
Education and Future Needs
Child Education Plans: Consider investing in child-specific mutual funds or balanced advantage funds.
SIP for Children: Start SIPs dedicated to your children’s education and future needs.
Regular Review and Adjustment
Periodic Review
Review Investments: Conduct semi-annual or annual reviews of your portfolio with a Certified Financial Planner (CFP).
Rebalance Portfolio: Adjust your investments based on performance and changing financial goals.
Final Thoughts
You have a solid financial foundation and a clear goal. By following a disciplined investment strategy, leveraging the power of compounding, and regularly reviewing your investments, you can achieve your target corpus of Rs. 10 crores in the next 12 years. Remember, the key to successful investing is consistency, diversification, and periodic assessment.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8315 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2025

Money
Hi Sir, My name is Abhishek, and i am 40 years old, I have 12 lakhs in FD, 6 lakhs in MF and stocks(5+1), and 10 lakhs cash, also, i have a flat in Delhi with 15 lakhs home loan, A car loan of 8 lakhs. and i am a software engr. In an MNC, having salary of 1.5 lakhs in a month. ABOVE IS ALL my asset. But i want to be financially free. Is it possible? Please suggest any best practical idea for me. Currently, WFH in ranchi.
Ans: At 40, with your current income and asset base, the goal of financial freedom is definitely achievable. Let’s work towards a 360-degree financial strategy to help you build a solid and practical roadmap.

Below is a complete evaluation and guidance to align your financial life with your freedom goal.

Current Financial Position – Snapshot and Assessment
You have Rs. 12 lakhs in Fixed Deposit.

You hold Rs. 6 lakhs in mutual funds and stocks.

You are keeping Rs. 10 lakhs in cash.

You have a flat in Delhi. You have Rs. 15 lakhs home loan on it.

You also have a car loan of Rs. 8 lakhs.

Your monthly salary is Rs. 1.5 lakhs from an MNC job. You are working from Ranchi now.

You are 40 years old and working in a stable job.

This is a very decent starting point. You are earning well, and you have good savings. But to reach financial freedom, we need better alignment.

Let’s move step-by-step.

Step 1 – Clarify What Financial Freedom Means to You
Financial freedom is not only about quitting your job.

It means you have enough income from investments to cover your monthly needs.

You should be able to choose to work or not, without worrying about money.

So first, we need to estimate your monthly future expenses post-retirement.

Let’s assume Rs. 60,000 to Rs. 80,000 per month today, adjusted for inflation later.

That means you need to create income sources to support at least Rs. 1 crore to Rs. 2 crore in future corpus.

This is not impossible. You have time and income to build this.

Step 2 – Improve the Quality of Your Assets
Let us now improve your asset quality to suit your freedom goal.

Rs. 12 lakhs in Fixed Deposit is very conservative.

FD earns low returns, and interest is fully taxable.

Keep only 4 to 5 lakhs in FD for emergency use.

Move the rest (7 to 8 lakhs) to good quality mutual funds through SIP.

Your Rs. 10 lakhs in cash is too much to keep idle.

Keep Rs. 1.5 to 2 lakhs in savings for short-term needs.

Move the balance Rs. 8+ lakhs to a liquid mutual fund for better returns.

Over the next 3 to 6 months, you can start shifting this towards equity-oriented funds.

Rs. 6 lakhs in MF and stocks is a good beginning.

But if these include index funds or direct funds, you must evaluate them carefully.

Index funds only copy the market, and don’t actively manage risks.

They underperform in falling or flat markets.

A good actively managed mutual fund is better in Indian conditions.

Direct mutual funds look low-cost, but no expert advice is included.

When you invest through a Mutual Fund Distributor (MFD) who is also a Certified Financial Planner, you get proper hand-holding.

Regular funds through a CFP-linked MFD provide portfolio monitoring, review, and behavioural coaching.

This helps avoid panic selling or greed-driven buying.

Step 3 – Work on Your Loans
You have Rs. 15 lakhs home loan.

This is acceptable if interest is below 8.5% per annum.

Home loan offers tax benefits also. So don’t rush to close it.

Continue paying EMIs without stress. Try to pre-pay 1 EMI every 6 months if possible.

This will reduce your loan term.

But do not use emergency cash or investments to close it.

Car loan of Rs. 8 lakhs is a liability without return.

Try to clear this in the next 1.5 years.

Use your bonus or incentives for that.

Avoid buying new cars or gadgets on EMI again.

Step 4 – Build a Systematic Investment Plan
You should be investing 30% to 40% of your monthly income.

That means Rs. 45,000 to Rs. 60,000 per month.

Start SIPs in diversified actively managed mutual funds.

Allocate more in equity-oriented funds for long-term growth.

Keep a small portion in hybrid or conservative hybrid funds for balance.

If you are supporting family, consider a term insurance plan (not ULIP or endowment).

Term insurance is cheaper and offers better coverage.

Also take health insurance for self and family, even if company gives cover.

Step 5 – Emergency Planning and Risk Management
You must keep an emergency fund equal to 6 months expenses.

You already have FD and cash, so earmark Rs. 3 to 4 lakhs for this.

Put this in a separate savings or liquid mutual fund account.

Don’t touch this unless there is an actual emergency.

Review your health and life insurance policies yearly.

Step 6 – Review and Improve Your Monthly Budgeting
Track your monthly expenses. Use simple mobile apps or Excel.

Avoid impulse expenses like gadgets, travel, or lifestyle items.

Stick to a monthly budget. Save before you spend.

Increase your SIPs every year by 10%.

This will match inflation and improve wealth creation.

Step 7 – Don’t Depend on Real Estate for Financial Freedom
Real estate has low liquidity and high maintenance.

Rental yield is only 2 to 3%.

Also, resale takes time and effort.

Don’t invest more in real estate. Focus on financial instruments instead.

Step 8 – Plan Your Retirement and Passive Income Sources
At age 40, you have 15–17 years to retire.

That’s enough time to build a retirement corpus.

If you invest Rs. 50,000 monthly for 15 years in mutual funds, wealth can be significant.

Once you retire, you can shift to monthly income plans from mutual funds.

These generate regular withdrawals with tax efficiency.

You must also reallocate to more conservative funds as you near retirement.

Avoid annuity products. They give low returns and poor liquidity.

Step 9 – Tax Planning and Filing
Use tax deductions wisely under Sec 80C, 80D and home loan benefits.

Keep your investments tax-efficient.

For example, equity fund gains up to Rs. 1.25 lakhs are tax-free annually.

Above this, LTCG is taxed at 12.5%.

Short-term capital gains from equity funds are taxed at 20%.

Debt fund gains are taxed as per your income slab.

You should do tax planning with a CFP who can review your total asset base.

Step 10 – Set Clear Milestones and Review Yearly
Set short, mid, and long-term goals.

For example: close car loan in 1 year, build Rs. 50 lakhs corpus in 5 years, etc.

Track these goals once every 6 months.

If you miss one goal, don’t panic. Adjust and continue.

Stay disciplined with SIPs and avoid timing the market.

Don’t follow tips or market trends blindly.

Final Insights
You are doing well for your age and income level.

But to reach financial freedom, you need more structured planning.

Convert your cash and FDs to wealth-generating assets.

Stop investing in real estate and focus on financial investments.

Eliminate loans step-by-step.

Increase your SIPs regularly and keep your portfolio reviewed by a Certified Financial Planner.

Review your goals, risks, and insurance every year.

Stay consistent and patient. Freedom will come earlier than expected.

You are on the right track. Just need direction, discipline, and dedication.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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

...Read more

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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