And if not which shares in my lot shall I sell and at what price considering a three-year horizon? Planning to raise capital to purchase a house worth Rs 50 Lakh on cash by 2023; Plus I want to add L&T by the year's end worth Rs 1 Lakh.Please...

And if not which shares in my lot shall I sell and at what price considering a three-year horizon? Planning to raise capital to purchase a house worth Rs 50 Lakh on cash by 2023; Plus I want to add L&T by the year's end worth Rs 1 Lakh.

Please advise.

Ans: We would recommend you to invest in stocks such as HDFC Bank, L&T, HUL, Britannia (on dips), Dabur, Colgate, Asian Paints, Maruti, Infosys, Tech Mahindra, Reliance Industries (on dips), Cipla, Biocon, Havells, Voltas and Bharti Airtel. We advise you to buy these stocks in staggered manner as these stocks have decent fundamentals and good long term growth prospects which can deliver healthy returns

Ans: I appreciate your trust in seeking financial advice. Let’s dive into your financial situation and plan a robust strategy for your future.

Your Current Financial Landscape
You have a well-diversified portfolio with investments in mutual funds, fixed deposits, gold, and insurance. Here’s an overview:

Home: You own a home in Nagpur worth Rs. 75 lakhs.

Mutual Funds: You have invested Rs. 4 lakhs in mutual funds as a lump sum in December 2023. Additionally, you have been doing SIPs of Rs. 30,000 per month for the last year.

Fixed Deposits: You have Rs. 10 lakhs in fixed deposits with HDFC Bank at a 7% interest rate.

Gold: You have invested Rs. 14 lakhs in gold bars.

Insurance: You have a TATA AIA ULIP plan with an annual premium of Rs. 1.5 lakhs, currently in its second year of a five-year term. Additionally, you have a monthly LIC policy with an annual premium of Rs. 80,000.

Future Plans: You plan to increase your SIP to Rs. 30,000 per month from July 2024. You are also considering a term plan with an annual premium of Rs. 1.75 lakhs for the next 10 years, offering a cover of Rs. 2 crores until the age of 85.

Evaluating Your Investments
Mutual Funds
Mutual funds are a fantastic way to grow your wealth over the long term. They offer the benefits of professional management, diversification, and the power of compounding.

Advantages of Mutual Funds:
Diversification: Mutual funds invest in a variety of securities, reducing risk.

Professional Management: Experienced fund managers make investment decisions on your behalf.

Liquidity: You can easily redeem your investments when needed.

Flexibility: With options like SIPs, you can start with a small amount and increase it over time.

Power of Compounding
Compounding is the process where the returns on your investments generate their returns. The longer you stay invested, the more your money grows. This is why starting early and staying consistent with your SIPs is crucial.

Actively Managed Funds vs. Index Funds
Actively Managed Funds:

Fund managers actively select stocks to beat the market.
Potential for higher returns than index funds.
Regular reviews and adjustments based on market conditions.
Index Funds:

Passively track a specific index like Nifty or Sensex.
Lower expense ratios, but often lower returns compared to actively managed funds.
Lack of flexibility to adjust to market changes.
In your case, actively managed funds might offer better growth potential.

Regular Funds vs. Direct Funds
Regular Funds:

Invest through a Certified Financial Planner (CFP).
CFP provides personalized advice and ongoing support.
Slightly higher expense ratio due to advisory fees.
Direct Funds:

Invest directly with the fund house, bypassing a CFP.
Lower expense ratio but lack of professional guidance.
Suitable for experienced investors with time to manage their portfolios.
Given your busy career, regular funds through a CFP could provide valuable support and expertise.

Fixed Deposits
Fixed deposits are safe and offer guaranteed returns. However, their growth potential is limited compared to mutual funds. Given the current inflation rates, FD returns might not keep pace with the rising cost of living.

Gold Investment
Gold is a good hedge against inflation and market volatility. However, it doesn’t generate regular income. It’s essential to balance your portfolio with growth-oriented investments like mutual funds.

Insurance Plans
ULIP Plan
ULIPs combine investment and insurance. They have higher costs due to insurance charges and fund management fees. You have already completed two years out of five. It might be beneficial to surrender the plan after the lock-in period and reinvest in mutual funds for better returns.

Term Plan
A term plan is essential for risk cover. Ensure the cover amount aligns with your family’s financial needs. A Rs. 2 crore cover until age 85 is a prudent decision, providing long-term security.

LIC Policy
LIC policies offer traditional savings with insurance. However, the returns are generally lower than mutual funds. It might be worth reviewing this policy and considering surrendering it to reinvest in more lucrative options.

Strategic Recommendations
Enhance Your SIPs
You are planning to increase your SIP to Rs. 30,000 per month. This is a smart move. SIPs instill financial discipline and benefit from rupee cost averaging. Here’s how to optimize your SIPs:

Diversify: Invest in a mix of large-cap, mid-cap, small-cap, and sectoral funds.
Review: Regularly review your portfolio with your CFP.
Increase: Gradually increase your SIP amount as your income grows.
Rebalance Your Portfolio
Mutual Funds: Increase your allocation to equity mutual funds for higher growth.
Fixed Deposits: Consider reducing your FD holdings and reallocating to mutual funds.
Gold: Maintain your gold investments but avoid further additions.
Insurance: Focus on pure term insurance for risk cover.
Long-Term Wealth Creation
Retirement Planning
Start planning for retirement early. Aim to build a corpus that supports your lifestyle and healthcare needs. Here’s how:

EPF and PPF: Maximize contributions to these tax-free retirement schemes.
NPS: Consider the National Pension System for additional retirement savings.
Equity Funds: Allocate a significant portion to equity funds for long-term growth.
Children's Education
If you have children, plan for their higher education expenses. SIPs in mutual funds can help build a substantial corpus over time.

Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses. This provides financial stability during unforeseen events. Your fixed deposits can serve this purpose.

Tax Planning
Optimize your investments for tax efficiency. Utilize tax-saving instruments like ELSS, PPF, and NPS. Seek guidance from a tax advisor to minimize tax liability.

Risk Management
Adequate Insurance
Ensure you have adequate health insurance for your family. Consider critical illness and accident covers. Your term insurance plan should provide sufficient risk cover.

Asset Allocation
Maintain a balanced asset allocation based on your risk tolerance and financial goals. Regularly review and rebalance your portfolio to align with changing market conditions.

Regular Review
Regularly review your financial plan with your CFP. Adjust your investments based on your life goals, market conditions, and financial situation.

Avoiding Common Pitfalls
Emotional Decisions: Avoid making investment decisions based on market emotions.
Over-diversification: Don’t invest in too many funds; it dilutes returns.
Ignoring Inflation: Ensure your investments grow faster than inflation.
Final Insights
You have a solid foundation with your current investments. Enhancing your SIPs, optimizing your portfolio, and strategic planning will ensure robust growth and financial security. Keep an eye on market trends, stay disciplined, and regularly review your plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: ? Strong Financial Foundation and Thoughtful Intentions

– You are showing great care for your grandchildren.
– The SIPs for their future are a strong step.
– Your assets provide a very stable base.
– Rental income of Rs. 2.5 lakh is excellent post-retirement support.
– Holding equity and PMS ensures potential long-term growth.
– Overall, your setup is solid and responsible.

? Review of Monthly SIPs Towards Grandchildren’s Goals

– Rs. 75K for the elder and Rs. 85K for the younger child is generous.
– With 5% annual increase, compounding will boost growth.
– Already two years of SIP is completed.
– That gives you 13 years more of investment time.
– This is a good horizon for equity-focused SIPs.
– With this strategy, Rs. 5 crore per child is achievable.
– But this depends on consistent equity returns over time.
– Market volatility is a factor, but time helps smoothen it.
– SIPs over 15 years usually reward with wealth creation.
– The rising SIP contribution every year also boosts target achievement.

? Portfolio Safety and Risk Allocation Assessment

– Equity shares of Rs. 1.1 crore are good for long-term growth.
– PMS of Rs. 88 lakh adds to the equity exposure.
– However, PMS requires monitoring.
– PMS also comes with higher fees and lower transparency.
– Direct equity too demands active watch and regular reviews.
– In retirement, active management adds stress and risk.
– Shifting some equity to mutual funds via MFD with CFP support is better.
– Actively managed mutual funds bring professional oversight.
– They offer smoother diversification and lower effort for retirees.

? Overexposure to Real Estate: A Review

– Real estate is illiquid and cannot be used quickly in emergencies.
– You own properties worth Rs. 10.1 crore.
– This is a huge chunk of total wealth.
– Commercial property, two houses, and a vacant plot is too much.
– Real estate requires maintenance, taxes, and time to sell.
– Rental income is fine, but too much dependency limits flexibility.
– Consider slowly reducing real estate exposure.
– Use the sale proceeds for safer, more liquid options.
– Use mutual funds aligned with specific goals.
– With the help of a Certified Financial Planner, this can be smooth.

? Emergency Planning and Liquidity Concerns

– You mentioned Rs. 1 lakh/month for expenses.
– But no liquid emergency fund is visible.
– At least 18 months of expenses should be parked separately.
– Keep Rs. 18 to Rs. 24 lakh in safe, low-risk instruments.
– Choose options that are not linked to market volatility.
– This ensures you don’t have to sell assets during downturns.
– Use short-term mutual funds through MFDs with CFP advice.

? Insurance Review for Risk Coverage

– You said annual payments include medical insurance.
– But coverage amount was not mentioned.
– At your age, at least Rs. 15 to 20 lakh health insurance is essential.
– Consider a super top-up plan if needed.
– Don’t let health expenses eat into investment goals.
– Also, review if the policy covers pre-existing conditions and has lifetime renewability.

? Rebalancing Need in Current Portfolio

– You are heavily skewed towards equity and real estate.
– Safe, non-market-linked investments are not visible.
– Rebalancing is needed to reduce risk.
– Allocation to low-risk options brings peace and stability.
– Retired life needs more predictable cash flow.
– Equity is good for growth, but you need balance too.
– Asset mix must suit your age and withdrawal needs.
– Allocate some equity to hybrid mutual funds.
– Balanced approach keeps safety and growth together.

? Reviewing the PMS Approach

– PMS charges are usually 2-2.5% annually.
– They may also take a performance-linked fee.
– These eat into your returns.
– PMS is suitable for very high-risk appetite individuals.
– Also, it lacks daily visibility and flexibility.
– Mutual funds through an MFD with CFP help are more transparent.
– These also allow easier goal tracking.
– Consider shifting some of the PMS corpus to mutual funds.
– This will make the portfolio more aligned to your gifting goals.

? Gifting Strategy and Tax Implications

– Gifts to grandchildren are not taxable in their hands.
– But growth from these investments will be taxed.
– Equity mutual funds: LTCG above Rs. 1.25 lakh taxed at 12.5%.
– STCG taxed at 20%.
– This applies even to investments for grandchildren.
– Plan the gift transfers through proper documentation.
– Joint holding or third-party SIPs in their name is possible.
– Consult a tax advisor to handle the mechanics smoothly.

? Ensuring Estate Planning and Legal Clarity

– You have multiple assets and long-term goals.
– Estate planning is very important now.
– Prepare a registered Will covering all assets.
– Mention clear allocations and ownerships.
– Include mutual funds, PMS, shares, and properties.
– This will avoid future disputes or confusion.
– Also consider creating a Trust if needed.
– Especially for minor grandchildren, Trusts offer smooth control.
– A Certified Financial Planner and lawyer can help draft this properly.

? Inflation-Proofing Your Grandchildren’s Corpus

– You aim for Rs. 5 crore per grandchild in 15 years.
– Inflation will reduce purchasing power.
– That means future education and living costs will be higher.
– Long-term equity SIPs help fight inflation.
– Continue with 5% annual step-up as planned.
– This keeps investments ahead of inflation.
– Reinvest dividends if any, to ensure compounding is not interrupted.

? Reviewing the Real Estate Strategy from Legacy Lens

– You have three large real estate assets.
– This is not easy to divide among two grandchildren.
– Property disputes happen often in such cases.
– Liquidity is a problem during asset division.
– Instead, slowly shift to financial assets.
– Mutual funds or bonds are easier to transfer.
– They are clean, transparent, and hassle-free.
– Legacy planning becomes smoother when assets are financial.
– Discuss a phased exit plan from real estate with a Certified Financial Planner.

? Child-Specific Investment Strategy

– Since the children are minors, use guardian accounts.
– SIPs can be in their name with you as guardian.
– Choose child-oriented mutual funds for better structure.
– These come with lock-ins and purpose alignment.
– You can also use diversified equity mutual funds.
– Avoid investing in their name directly under direct plans.
– Regular plans through MFD + CFP offer better advice and clarity.
– MFDs with CFP certification provide goal-linked fund tracking.
– Direct funds do not offer regular reviews and behavioural coaching.

? Monitoring and Rebalancing Your Investment

– Once a year, review SIP progress.
– Check if fund performance is consistent.
– Replace underperformers if needed.
– Review risk levels with your Certified Financial Planner.
– Make small shifts based on market cycle.
– Don’t stop SIPs during market falls.
– In fact, falling markets add more units.
– That helps the SIP strategy work better.
– Use periodic rebalancing to keep portfolio in shape.

? Finally

– Your goal of Rs. 5 crore per grandchild is very possible.
– The SIP structure and 5% step-up are well planned.
– Continue this discipline for another 13 years.
– Review PMS, direct equities, and real estate exposure.
– Shift to more mutual funds with CFP advice.
– Create a robust Will and Trust structure.
– Protect health and emergency fund needs.
– You’ve done very well so far.
– With a few tweaks, your strategy will be even stronger.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

And if not which shares in my lot shall I sell and at what price considering a three-year horizon? Planning to raise capital to purchase a house worth Rs 50 Lakh on cash by 2023; Plus I want to add L&T by the year's end worth Rs 1 Lakh.Please advise.

And if not which shares in my lot shall I sell and at what price considering a three-year horizon? Planning to raise capital to purchase a house worth Rs 50 Lakh on cash by 2023; Plus I want to add L&T by the year's end worth Rs 1 Lakh.
Please advise.