Hello I am a 35 year old women and I have a net salary of 120000 per month. I have investment of 10k in mutual funds, 6k in ulip. I want to start investing more so that I have a 5cr corpus when i retire. I want to have a diversified portfolio.Can you please advise
Ans: Building a Rs. 5 Crore Retirement Corpus
Dear Investor,
You’re already on a commendable path with your investments. Let's enhance your strategy to achieve a Rs. 5 crore corpus by retirement.
Current Financial Situation
At 35, you have a monthly net salary of Rs. 1,20,000. You are investing Rs. 10,000 in mutual funds and Rs. 6,000 in a ULIP. You aim to grow your portfolio to Rs. 5 crore by retirement.
Setting Clear Financial Goals
1. Determine Retirement Age:
Knowing when you plan to retire helps in calculating the investment horizon. Assuming you retire at 60, you have 25 years to build your corpus.
2. Understand Financial Requirements:
Besides the Rs. 5 crore goal, consider other financial needs like children’s education, emergencies, and lifestyle changes.
Increasing Monthly Investments
1. Enhance Mutual Fund SIPs:
Currently, you invest Rs. 10,000 in mutual funds. To reach your goal, you should increase your SIPs. Consider increasing it to at least Rs. 30,000 per month.
2. Review ULIPs:
Evaluate the performance of your ULIP. Often, mutual funds offer better returns with lower charges. Consult your Certified Financial Planner (CFP) for the best course of action.
Diversified Portfolio Strategy
1. Equity Mutual Funds:
Investing in equity mutual funds is crucial for long-term growth. They offer higher returns, though with higher risk. Allocate a significant portion of your SIPs to:
Large-Cap Funds: For stability and steady returns.
Mid-Cap Funds: For a balance of growth and risk.
Small-Cap Funds: For aggressive growth potential.
2. Debt Mutual Funds:
Debt funds provide stability to your portfolio. They are less volatile and offer steady returns. Consider allocating around 20-30% to debt funds.
3. Hybrid Mutual Funds:
Hybrid funds balance equity and debt, offering moderate risk and returns. They are suitable for medium-term goals and add diversity to your portfolio.
Regular Monitoring and Rebalancing
1. Periodic Review:
Regularly review your portfolio with your CFP. Adjust your investments based on performance and changing financial goals.
2. Rebalancing:
Rebalance your portfolio periodically to maintain the desired asset allocation. This involves shifting investments from overperforming to underperforming assets and vice versa.
Emergency Fund and Insurance
1. Emergency Fund:
Maintain an emergency fund covering 6-12 months of expenses. This ensures liquidity for unforeseen events without disturbing your investments.
2. Adequate Insurance:
Ensure you have adequate health and life insurance. This protects your investments from being depleted by unexpected medical or life events.
Tax Efficiency
1. Tax-Saving Investments:
Invest in tax-saving mutual funds (ELSS) to avail of Section 80C benefits. This helps in reducing your taxable income while growing your corpus.
2. Long-Term Capital Gains:
Equity mutual funds held for over a year enjoy tax benefits, with long-term capital gains taxed at 10% beyond Rs. 1 lakh per year.
Avoiding Common Investment Pitfalls
1. Chasing High Returns:
Avoid investing solely based on past high returns. Diversify to manage risk and ensure steady growth.
2. Ignoring Inflation:
Ensure your investments outpace inflation. Equity funds, despite short-term volatility, typically offer inflation-beating returns over the long term.
3. Lack of Clear Plan:
Stick to a structured investment plan. Regular reviews and adjustments help stay aligned with your goals.
Conclusion
By enhancing your monthly SIPs and maintaining a diversified portfolio, you can achieve your Rs. 5 crore goal. Regular monitoring, rebalancing, and consulting with a Certified Financial Planner will ensure your investments stay on track.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in