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Ramalingam

Ramalingam Kalirajan  |6568 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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Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

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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.

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Ramalingam Kalirajan  |6568 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
Milind

Milind Vadjikar  |386 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 13, 2024

Asked by Anonymous - Oct 12, 2024Hindi
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Hi, age 40 years, monthly net salary Rs 85k, married , 1 kid. Recently have constructed new house. Ground floor commercial shops, and 1st floor residential 2bhk flat were we stay. Home loan 1.05 cr with monthly EMI of 85k for next 30 years & All current savings exhausted due to new construction. Commercial shops have potential for monthly rental income of 60k to 70k.please guide on below for strategy: 1) how to close home loan in next 10 years 2) considering 60 as retirement age, need corpus of 8 cr to fund kid education, marriage and for rest of livelihood.
Ans: Hello;

1. Immediately let out the commercial shops on long lease with yearly rent hikes. This is crucial to fund your loan EMI.

Assuming this to yield rental income of 70 K per month.

You will still need to shell out 15 K for the EMI amount from your income.

2. So after deducting EMI cut from your monthly pay we are left with
70 K.
Earmarking 30 K for your regular expenses, I suggest you start a monthly SIP of 40 K in a pure equity mutual fund with yearly top-up of 11% minimum.

This may grow into a corpus of 1.47 Cr after 10 years part of which you may utilise to settle off the overdue loan amount.

3. The balance corpus left after settling the loan is expected to be around 54 L. At this stage you will need enhance monthly sip to 1.5 L with 13 % yearly top-up for the next 10 years.

4. The corpus from SIP after the next 10 years may be 6.3 Cr. The balance corpus of 54 L may grow into a sum of 1.83 Cr. Both added will give you a comprehensive corpus of 8.13 Cr, as desired. ( A modest return of 13% from pure equity mutual funds is considered).

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

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Career Counsellor - Answered on Oct 13, 2024

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Sir the median package at ssnce for cse core is less than rvce ise .So does it make more viable option considering placement in mind .I have a dream of becoming software engineer from my childhood. But my seniors are advising for rvce ise.what to do should I follow my dream or placement.I am a Bangalore resident and Tamil is my mother tongue.
Ans: Ashwin, my son, graduated from RVCE in 2023 and secured employment through campus placement with a reputable software company. Despite being among the highest achievers in COMEDK, he opted for ECE instead of the more accessible CSE. We did not compel him to join CSE. Following his second year, he progressively shown an interest in software and obtained several certifications through NPTEL, Internshala, and similar platforms. Regarding his experience, while ISE is commendable, CSE is the superior option. Simply enter 'RV placement statistics 2024'. Select the initial result to get the Placement Statistics of RV directly. The top placements are for Computer Science Engineering, followed by Electronics and Communication Engineering, and then Information Science Engineering. The recommendations of your seniors, your personal interests, and the branch with the highest placement statistics are distinct considerations. Kindly review the Course Curriculum for both CSE and ISE and make a decision. Kindly review one of my detailed responses below, in which I have explicitly outlined the stages, recommendations, and methods that a first-year engineering student should adhere to till their fourth year for campus placement. All the BEST for Your Prosperous Future.

To know more on ‘ Careers | Education | Jobs’, ask / follow Us here in RediffGURUS.

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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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