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Ramalingam

Ramalingam Kalirajan  |8089 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 03, 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
Vikesh Question by Vikesh on Jun 03, 2024Hindi
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I m 42 years old and will retire at age of 58. I want 3 crore at my retirement. How much amount invest lumsum in mutual fund.

Ans: Planning for Retirement: Achieving a Rs 3 Crore Corpus
You are 42 years old and plan to retire at 58. To ensure you have Rs 3 crore at retirement, you need a well-structured investment strategy. Let’s explore how to achieve this goal by investing in mutual funds.

Understanding Your Investment Horizon
You have 16 years until retirement. This is a significant period, allowing your investments to benefit from compounding. Compounding is the process where the returns earned on your investments generate their own returns. Over time, this can lead to exponential growth.

Assessing Your Risk Tolerance
Before diving into the investment calculations, it's crucial to understand your risk tolerance. Given your age and retirement goal, a balanced approach combining growth and stability is recommended. Equities can offer higher returns, but they come with higher volatility. Debt instruments provide stability but with lower returns.

Benefits of Actively Managed Funds
Actively managed funds can be a good option for your investment. These funds are managed by professional fund managers who aim to outperform the market. Here are some benefits:

Professional Management: Expert fund managers make strategic decisions to maximize returns.
Flexibility: These funds can adjust their portfolio based on market conditions.
Potential for Higher Returns: They aim to outperform index funds, providing better returns over the long term.
Disadvantages of Direct Funds
Investing in direct funds means bypassing intermediaries, but it has drawbacks:

Lack of Professional Guidance: Direct funds require you to make investment decisions without expert advice.
Higher Responsibility: You need to monitor and adjust your investments regularly.
Potential for Mistakes: Without a Certified Financial Planner (CFP), you might miss opportunities or take unnecessary risks.
Investing through a Mutual Fund Distributor (MFD) with CFP credentials provides professional guidance, ensuring your investments are well-managed and aligned with your goals.

Calculating the Required Investment
To determine how much you need to invest in a lump sum, we must consider the expected rate of return. Historically, equity mutual funds in India have provided an average return of around 12-15% per annum. For this calculation, we will use a conservative estimate of 12%.

We need approximately Rs 50 Lacs to 60 Lacs as a lumpsum investment.

Importance of Diversification
Diversification is crucial for managing risk. While equity funds can provide higher returns, adding debt funds to your portfolio can offer stability. A balanced approach ensures you are not overly exposed to market volatility.

Regular Monitoring and Rebalancing
Investments need regular monitoring. Market conditions change, and your portfolio should adapt accordingly. Rebalancing involves adjusting your investment mix to maintain the desired level of risk and return. This ensures your portfolio remains aligned with your retirement goal.

Considering Tax Implications
Investing in mutual funds has tax implications. Long-term capital gains (LTCG) tax applies to equity funds after one year, while short-term capital gains (STCG) tax applies within a year. Understanding these tax rules helps in planning your withdrawals and maximizing your returns.

Emergency Fund and Insurance
Before making a lump sum investment, ensure you have an adequate emergency fund. This fund should cover at least six months of living expenses. Additionally, having sufficient life and health insurance is crucial to protect against unforeseen events.

Reviewing Investment Options
Evaluate different mutual fund schemes based on their past performance, fund manager expertise, and investment strategy. Look for funds with consistent returns and a track record of outperforming their benchmarks.

Seeking Professional Guidance
A Certified Financial Planner can provide personalized advice tailored to your financial goals and risk tolerance. They can help you choose the right mix of funds and ensure your investment strategy is robust and effective.

Benefits of Starting Now
Starting your investment now gives you a significant advantage. The power of compounding works best with time. The earlier you start, the more you benefit from exponential growth in your investments.

Conclusion
Achieving a Rs 3 crore corpus at retirement is a realistic goal with a disciplined investment approach. By investing a calculated lump sum in mutual funds, diversifying your portfolio, and seeking professional guidance, you can ensure a comfortable and financially secure retirement.

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

Ramalingam Kalirajan  |8089 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2024

Asked by Anonymous - May 13, 2024Hindi
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Hello, I am 40 years old and I would like retire at 60. I have mutual funds amounting to Rs 5 lakh, EPF of Rs 9 lakh and FD and RD of Rs 16 lakh. I earn Rs 18 lakh per annum. Where and how much should I invest to get Rs 2 lakh per month. Thank you
Ans: Assessing Your Financial Situation
You're in a commendable position with a good foundation for retirement planning. Let's delve into your assets and objectives.

Current Assets Evaluation
Kudos on your prudent savings strategy, which includes Mutual Funds, EPF, and FD/RD.
Your Mutual Funds and EPF indicate a balanced approach towards retirement planning.
Understanding Your Goals
Retiring at 60 is a realistic goal considering your current financial standing and income.
Your aim of Rs 2 lakh per month post-retirement reflects a comfortable lifestyle choice.
Crafting a Retirement Plan
Given your current assets and income, achieving Rs 2 lakh per month post-retirement requires strategic planning.

Investment Strategy Recommendations
Diversification is key. Allocate your investments across various asset classes.
Consider Equity Mutual Funds for long-term growth potential.
Debt Funds can provide stability and regular income, aligning with your retirement goal.
Systematic Investment Plans (SIPs) in Mutual Funds can help you capitalize on rupee-cost averaging.
Income Generation Plan
With Rs 5 lakh in Mutual Funds, you can aim for growth-oriented funds for capital appreciation.
EPF of Rs 9 lakh provides a secure foundation. Ensure it's aligned with your risk appetite.
Utilize Rs 16 lakh from FD/RD for Debt Funds to generate stable income.
Regular Monitoring and Review
Periodically review your portfolio's performance and adjust strategies accordingly.
Stay informed about market trends and economic indicators to make informed decisions.
Conclusion
Your disciplined savings approach and clear retirement goals lay a solid foundation for your future financial security. By adopting a diversified investment strategy and regularly monitoring your portfolio, you're well on your way to achieving your retirement aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 27, 2024

Asked by Anonymous - Sep 27, 2024Hindi
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Sir i am 48 and work in a private firm. I want to know how much should i invest in mutual funds monthly and which mutual funds can i invest to save two crores at 60.
Ans: Hello;

You have two options:

Either make a flat monthly sip of 60 K for 12 years.
Or
Make a monthly sip of 50K with 5% top-up each year upto 12 years

Both options will yield you a corpus of 2 Cr as desired(modest return of 13% assumed).

Recommended mutual fund types with one example is given below:

1. Retirement mutual fund(Solution based funds)

These funds have a 5 year lock-in. I recommend HDFC Retirement Savings Fund Equity Plan(Growth).

2. Equity Linked Savings Scheme(ELSS) funds

If you invest in ELSS schemes, then you can avail tax exemption of the invested amount up to a limit of Rs. 150,000.

Theses funds have a 3 year lock-in.

They serve dual purpose of tax saving and capital appreciation. I recommend Mirae Asset ELSS tax saver fund(growth).

In case your 80C deduction limit is covered by other tax saving investments like EPF/PPF, insurance premia etc then you may consider the following type of fund.

3. Flexicap fund
Flexicap funds are equity funds that have the flexibility to invest in any market cap equities, i.e. large-cap, mid-cap, or small-cap shares, without any restriction. This means that the fund manager can change the allocation of the fund based on the market conditions, opportunities, and valuations.

I recommend you to invest in PPFAS flexicap fund (growth).

You may allocate 50:50 in any two of these fund types.

Recommended funds are based on their return performance in their category.

You may follow us on X at @mars_invest for updates.

Happy Investing!!

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8089 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 10, 2025

Asked by Anonymous - Mar 07, 2025Hindi
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Is 4.5 CR at age of 58 is enough for retirement. Liabilities are(a) marriage of daughter (b) Education and marriage of son.
Ans: A retirement corpus of Rs 4.5 crore at age 58 may seem like a good amount. However, its sufficiency depends on expenses, goals, inflation, and investment returns. You also have major financial commitments, including your daughter’s marriage and your son’s education and marriage.

 

Step 1: Understanding Your Retirement Expenses
Retirement expenses can be divided into two categories: essential and discretionary.

 

1. Essential Expenses
Day-to-day expenses like food, utilities, and transportation.

Healthcare costs, including insurance premiums and medical treatments.

Inflation-adjusted expenses, which may double every 15 years.

 

2. Discretionary Expenses
Leisure activities like travel, hobbies, and entertainment.

Home maintenance and renovation costs.

Additional expenses such as gifts, social commitments, and festivals.

 

Step 2: Major Financial Liabilities Before and After Retirement
You have major expenses related to your daughter and son.

 

1. Daughter’s Marriage
Marriage expenses can vary widely based on personal choices.

Consider factors like venue, jewelry, gifts, and ceremonies.

Plan to invest separately for this goal to avoid reducing retirement savings.

 

2. Son’s Education and Marriage
Higher education costs are rising significantly every year.

If he plans to study abroad, costs can be even higher.

Marriage expenses will depend on cultural and personal preferences.

Investing in a dedicated portfolio for this goal will help manage costs.

 

Step 3: Evaluating Your Corpus Against Inflation
Inflation will erode the purchasing power of your Rs 4.5 crore.

A comfortable retirement today may not be sufficient 20 years later.

Healthcare inflation is higher than regular inflation.

Your investment strategy should ensure consistent cash flow post-retirement.

 

Step 4: Investing to Preserve and Grow Retirement Corpus
Investing correctly can ensure your corpus lasts through retirement.

 

1. Keep a Balanced Investment Portfolio
Maintain 60-70% in equity mutual funds for long-term growth.

Keep 30-40% in fixed-income instruments for stability.

A Certified Financial Planner (CFP) can help in portfolio allocation.

 

2. Avoid Index Funds and ETFs
Index funds do not actively manage risks.

Actively managed funds adjust portfolios based on market conditions.

Professional fund management helps in better returns and risk control.

 

3. Stay Away from Direct Funds
Direct funds require continuous tracking and market knowledge.

Investing through a Certified Financial Planner with MFD credentials ensures better planning.

Regular funds provide expert management and timely rebalancing.

 

Step 5: Managing Healthcare Costs in Retirement
Medical expenses will be one of the biggest costs in retirement.

 

Maintain a strong health insurance policy.

Keep an emergency healthcare fund for medical costs.

Consider investing in a separate fund for future medical needs.

 

Step 6: Generating a Steady Income Post-Retirement
Your corpus must generate regular income while also growing over time.

 

Withdraw only a small percentage each year to ensure longevity.

Keep a mix of growth and stability-oriented investments.

A proper withdrawal strategy prevents early depletion of funds.

 

Finally
A Rs 4.5 crore corpus may or may not be enough, depending on expenses and inflation. Your daughter’s marriage, son’s education, and rising medical costs require a structured financial plan. Investing wisely in actively managed funds, avoiding index and direct funds, and maintaining a proper withdrawal strategy can help you sustain a comfortable retirement.

 

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8089 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 10, 2025

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How can I make 1cr if I start my career at 30 in next 10-15 years time span
Ans: Making Rs 1 crore in 10-15 years is possible with the right investment plan. A structured approach with regular investments, asset diversification, and discipline can help you reach this goal.

 

Step 1: Define Your Investment Approach
Start investing as early as possible to harness compounding.

Choose investments that balance growth, risk, and stability.

Increase investments as your income grows over the years.

Stick to a long-term strategy and avoid panic selling.

 

Step 2: Select the Right Asset Classes
Your portfolio should have a mix of growth-oriented and stable investments.

 

1. Actively Managed Mutual Funds for High Growth
Equity mutual funds can provide inflation-beating returns over 10-15 years.

Choose a mix of large-cap, mid-cap, and flexi-cap funds for balanced growth.

Actively managed funds outperform index funds in volatile markets.

Avoid index funds as they lack flexibility and depend entirely on market trends.

 

2. Fixed-Income Investments for Stability
Fixed-income options provide stability and predictable returns.

They are useful for balancing risk in your portfolio.

Invest a small percentage in such options for liquidity and safety.

 

3. Public Provident Fund (PPF) for Long-Term Security
PPF is a tax-free long-term investment.

It ensures guaranteed compounding over 15 years.

Ideal for creating a safe retirement buffer.

 

Step 3: Increase SIP Investments Over Time
Start with a fixed monthly SIP amount.

Increase your SIP by 10-15% every year as your salary grows.

Use SIPs in actively managed funds to benefit from market cycles.

SIPs allow cost averaging and reduce market timing risk.

 

Step 4: Avoid Common Investment Mistakes
Many investors lose money due to avoidable mistakes. Stay cautious.

 

1. Avoid Index Funds and ETFs
Index funds do not adapt to market conditions.

Actively managed funds provide better risk-adjusted returns.

Fund managers adjust portfolios in actively managed funds, unlike passive funds.

 

2. Stay Away from Direct Funds
Direct mutual funds require market expertise and continuous tracking.

Regular funds through a Certified Financial Planner (CFP) with MFD credentials provide professional guidance.

A CFP helps with goal-based planning and portfolio rebalancing.

 

3. Do Not Invest in Endowment or ULIP Policies
These policies mix insurance with investment and offer low returns.

If you already hold such policies, surrender them and reinvest in mutual funds.

Always keep insurance and investment separate for better financial planning.

 

Step 5: Balance Risk and Return with Portfolio Diversification
A diversified portfolio protects against market fluctuations.

Keep around 60-70% in equity mutual funds for growth.

Maintain 20-30% in fixed-income options for safety.

Allocate a small portion to PPF or debt funds for stability.

 

Step 6: Increase Savings Rate for Faster Wealth Creation
Set aside at least 30-40% of your income for investments.

Avoid unnecessary expenses and increase savings rate gradually.

As income grows, increase investments rather than lifestyle expenses.

 

Step 7: Rebalance Portfolio Every Year
Review your investments annually to stay on track.

Reallocate funds based on performance and risk tolerance.

A Certified Financial Planner (CFP) can help in portfolio adjustments.

 

Finally
Building Rs 1 crore in 10-15 years is achievable with consistent investments and the right asset mix. Avoid common mistakes like index funds, direct funds, and investment-linked insurance. A well-structured plan with actively managed funds and disciplined savings will help you reach your goal faster.

 

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8089 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 10, 2025

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Sir, My sons salary is 1.5 lakhs per month but the employer is deducting EPF subscription only on 15000 and similarly the Employers contribution is also made on 15000. Is it permissible uner the Act ? Is it not mandatory to increase the EPF subsription and Employers contribution on his basic pay which is higher than 15000?
Ans: Your son earns Rs 1.5 lakh per month, but EPF deductions are only on Rs 15,000. This is a common concern among salaried individuals. Let’s assess whether this is permissible and what options are available.

 

EPF Contribution Rules Under the Law
The Employees’ Provident Fund (EPF) is governed by the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.

As per the EPF rules, it is mandatory for employees earning up to Rs 15,000 per month to contribute 12% of their basic salary plus dearness allowance (DA) towards EPF.

Employers must match this contribution with their own 12%, but part of it (8.33%) goes to the Employees’ Pension Scheme (EPS).

For employees earning more than Rs 15,000 per month, EPF contributions above Rs 15,000 are not mandatory. Employers are allowed to restrict contributions to Rs 15,000 unless both employer and employee voluntarily agree to contribute more.

 

Is the Employer’s Practice Legal?
Since your son earns Rs 1.5 lakh per month, his employer is legally allowed to cap the EPF contribution at Rs 15,000.

The law does not mandate contributions on the full basic pay if it exceeds Rs 15,000.

If your son wants a higher EPF contribution, he can opt for Voluntary Provident Fund (VPF), but the employer is not obliged to match it.

 

Should Your Son Increase His EPF Contribution?
EPF is a safe and tax-efficient retirement savings option. However, it has limitations when it comes to wealth creation. Let’s assess the pros and cons of increasing EPF contributions.

 

Advantages of Increasing EPF Contribution
Safe and Guaranteed Returns – EPF provides fixed returns declared by the government.

Tax-Free Interest – Interest earned on EPF is tax-free up to Rs 2.5 lakh annual contribution.

Forced Savings for Retirement – Higher contributions ensure disciplined long-term savings.

 

Disadvantages of Increasing EPF Contribution
Limited Growth Potential – The return on EPF is lower than actively managed equity mutual funds.

Liquidity Constraints – Funds in EPF are locked until retirement, with limited withdrawal options.

Employer’s Contribution Won’t Increase – Even if your son contributes more via VPF, the employer’s share remains capped at 12% of Rs 15,000.

 

Alternative Investment Options for Better Wealth Creation
If your son wants higher returns, he should consider other investment options instead of increasing his EPF contribution.

 

1. Actively Managed Mutual Funds
Actively managed mutual funds have higher return potential than EPF over the long term.

They are professionally managed and provide exposure to high-growth sectors.

A mix of large-cap, mid-cap, and flexi-cap funds can create a balanced portfolio.

 

2. Voluntary Provident Fund (VPF) – A Safe Option
If he prefers safe investments, he can opt for VPF, which offers EPF-like returns but without an employer match.

It is suitable if he wants fixed returns with tax benefits.

 

3. Public Provident Fund (PPF) for Long-Term Safety
PPF is a great option for long-term tax-free compounding.

The investment is locked for 15 years, ensuring retirement security.

 

4. Diversified Portfolio for Growth
Instead of putting all savings in EPF, he should allocate funds across different asset classes.

A combination of EPF, mutual funds, and fixed-income products will provide both safety and growth.

 

What Should Your Son Do Next?
Your son should evaluate his long-term financial goals before deciding on EPF contributions.

 

If He Prefers Safety:
Keep EPF contributions as they are.

Increase investment in VPF or PPF.

 

If He Wants Higher Returns:
Keep EPF limited to Rs 15,000 cap.

Invest in actively managed mutual funds for better wealth creation.

Consider a mix of equity and debt investments based on risk appetite.

 

Final Insights
Your son’s employer is following the law correctly by restricting EPF contributions to Rs 15,000. While increasing EPF contributions can provide stability, it limits growth potential and liquidity. Instead, a diversified approach with actively managed mutual funds and fixed-income options can offer better long-term wealth creation.

Encourage your son to review his financial goals and create an investment strategy that balances safety and returns.

 

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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