Hi, i m a breadwinner to my family of 4 (Myself 44yrs, wife 42, one daughter 7yrs n son 4 yrs). I am salaried engineering professional in private firm with 13L/annum. To have financial gain, i invested in shares, gained a little but now in loss of...

Hi, i m a breadwinner to my family of 4 (Myself 44yrs, wife 42, one daughter 7yrs n son 4 yrs). I am salaried engineering professional in private firm with 13L/annum. To have financial gain, i invested in shares, gained a little but now in loss of Rs 3L with total investment of 8L. Its been 2yrs but it seems it will be waste of time further as it is unpredictable when those shares will recover? n if not any profit when can i get the principal amount? Somebody suggested me to withdraw all from shares n with those Rs 5L, invest in MF not only to recover 3L but also gain profit in Long term. My investment goals are obviously as below; 01) Lumpsum amount for child education after 10 n 15 yrs from now. 02) For their marriage. After 20yrs from now. 03) Have sufficient funds as lumpsum or monthly post retirement. 15yrs from now. As an asset, I have got only flat amounting 80L now in Noida. A principal home loan outstanding 14L on that property, 24K as EMI. I m staying in rented accommodation in Panvel - Mumbai where i am doing Job. My monthly saving of now is almost NIL after all expenses, but can somehow manage to invest around 5~6k. Plz suggest, with given conditions what should be my next step to achieve above 3 goals?

Ans: Given your current situation, it's essential to reassess your investment strategy and prioritize long-term financial goals. Here's a suggested plan:

Immediate Action on Shares: Consider selling the shares to minimize further losses and reinvest the remaining amount in more stable investment avenues like mutual funds.

Mutual Fund Investment: With the proceeds from the shares (5L), consider investing in mutual funds. Given your long-term goals, opt for diversified equity funds or balanced funds that offer growth potential with comparatively lower risk.

Emergency Fund: Since your monthly savings are limited, focus on building an emergency fund equivalent to at least 6-12 months of your expenses. Keep this fund in a liquid or low-risk investment option like a savings account or short-term debt fund.

Child Education and Marriage: For your children's education and marriage goals, consider starting SIPs (Systematic Investment Plans) in equity mutual funds. Allocate funds based on the respective time horizons and risk appetite.

Retirement Planning: Since you have a flat as an asset, ensure that you continue to pay off the home loan EMIs regularly. Additionally, allocate a portion of your monthly savings towards retirement planning through SIPs in retirement-focused mutual funds or NPS (National Pension Scheme).

Regular Review: Regularly review your investment portfolio's performance and make necessary adjustments based on changing market conditions, financial goals, and risk tolerance.

Seek Professional Advice: Consider consulting a financial advisor who can provide personalized guidance tailored to your specific financial situation and goals.

By following these steps and staying disciplined in your investment approach, you can work towards achieving your financial goals and securing your family's future.

Ans: You have provided valuable details about your financial situation. Let’s analyse your current standing and future goals.

Age: 46 years old
Running Investments:
Pension Plan with a current fund value of Rs 42 lakhs (maturing in 2037).
Equity Mutual Fund with a current fund value of Rs 12 lakhs.
Income & Expenditure:
Monthly rental income of Rs 8,000.
Monthly expenditure of Rs 25,000.
Yearly EMI of Rs 1.2 lakh for ongoing investments.
Savings: Bank balance of Rs 26 lakhs.
Investment Goals:
You want to invest Rs 10-15 lakh to build a corpus of Rs 1 crore in 18 years for your child.
You also need a monthly income of Rs 50,000 in the next 2-3 years.
Given these goals, let’s discuss how you can achieve them.

Income Generation for Monthly Needs (Rs 50,000)
To achieve a monthly income of Rs 50,000 in the next 2-3 years, we need to explore investment options that can generate consistent returns.

Rental Income: You already have Rs 8,000 coming in monthly. This helps reduce your income requirement.

Systematic Withdrawal Plan (SWP):

A Systematic Withdrawal Plan from your mutual funds could be useful.
You can park part of your Rs 26 lakh bank balance into a debt-oriented hybrid mutual fund.
These funds provide stability with moderate returns.
You can withdraw monthly amounts through SWP to meet your requirement.
Based on the fund's performance, you can plan to withdraw around Rs 42,000 per month to reach your target of Rs 50,000 (including Rs 8,000 from rent).
This option allows you to use your capital effectively while keeping it invested for moderate growth.

Fixed Income Options:

You may also consider some amount in fixed deposits or high-interest-bearing savings instruments.
However, they are taxed as per your income tax slab, so this may reduce post-tax returns.
Combining these with SWP ensures liquidity and some level of fixed returns.
This way, your immediate income needs can be met, keeping your capital intact.

Investment Plan for Building Rs 1 Crore for Child's Future
You aim to build Rs 1 crore in 18 years for your child. The best way to achieve this is through equity-based investments, as they tend to offer the highest long-term growth.

Equity Mutual Funds:

For long-term goals like 18 years, equity mutual funds are the most suitable.
Your existing equity mutual funds of Rs 12 lakh can continue to grow.
You can also invest Rs 10-15 lakh from your bank balance into diversified equity funds.
Actively managed equity mutual funds generally perform better over a long period compared to passive index funds, which often lack flexibility in changing market conditions.
It’s crucial to focus on mid-cap and small-cap funds as they have higher growth potential over an 18-year period.
Regular vs Direct Funds:

You might have heard about direct mutual funds, which have lower fees.
However, direct plans require deep market understanding and regular monitoring.
Investing through a Certified Financial Planner (CFP) who works with an MFD can help you manage your portfolio professionally, ensuring that your investments are regularly rebalanced to match market changes.
Regular plans, managed by CFPs, provide professional guidance, making them a better choice for individuals who do not want the stress of tracking every detail.
SIP for Consistent Growth:

You can start a SIP (Systematic Investment Plan) of Rs 50,000 monthly.
This amount will steadily build wealth over 18 years.
By investing Rs 50,000 a month in a mix of large-cap, mid-cap, and small-cap funds, you stand a good chance of achieving your target of Rs 1 crore.
A professional MFD working with a CFP can help you select funds based on your risk profile and growth expectations.
Review of Existing Pension Plan
Your pension plan with a current fund value of Rs 42 lakhs is a significant part of your retirement portfolio.

Performance Review:
It is crucial to review the performance of this pension plan periodically.
Ensure that it continues to give reasonable returns, as you have 13 more years until it matures.
Often, these plans have high charges and lower returns compared to equity mutual funds. You should evaluate if it makes sense to continue with this investment or switch to something more productive.
If the returns are lower than expected, you may want to consider redirecting future premiums into better-performing mutual funds.
Tax Implications on Your Investments
Understanding tax liabilities is essential for maximising your returns.

Capital Gains Tax on Mutual Funds:

For equity mutual funds, LTCG (Long-Term Capital Gains) above Rs 1.25 lakh is taxed at 12.5%.
Short-Term Capital Gains (STCG) on equity mutual funds are taxed at 20%.
For debt mutual funds, LTCG and STCG are taxed according to your income tax slab.
You should consult with your CFP to ensure that your withdrawals and investments are done in the most tax-efficient manner.
Tax on Rental Income:

The Rs 8,000 monthly rental income is also taxable.
Ensure you factor this into your annual tax planning.
By optimising tax strategies, you can maximise your returns while keeping your liabilities low.

Contingency and Emergency Fund
While investing for long-term goals, don’t overlook short-term financial safety.

Emergency Fund:
Out of your Rs 26 lakh bank balance, set aside at least Rs 4-5 lakh as an emergency fund.
This will help you manage any unforeseen expenses without disturbing your investments.
Keep this amount in a liquid or short-term debt fund for easy access.
Health Insurance:
Since your wife is the sole earning member now, ensure that you have adequate health insurance coverage.
This will help safeguard your family’s finances in case of medical emergencies.
Revisit Your Financial Plan Regularly
It is essential to track your financial journey.

Review Performance:

Regularly review the performance of your mutual funds and pension plans.
Make adjustments based on market conditions and your changing life circumstances.
Stay on Track with Goals:

Ensure that you are consistently investing towards your Rs 1 crore goal.
Keep in touch with your CFP to monitor if you’re on track, and take corrective actions if required.
By actively managing your investments and reviewing your goals, you can ensure financial security for your family.

Finally
Your situation is unique, and your goals are achievable with a disciplined approach.

By combining equity mutual funds, SWPs, and systematic SIPs, you can grow your wealth and generate regular income. Balancing risk and return is essential to meet your child’s future needs and your immediate income requirements.

Keep your financial plan flexible, review it often, and stay committed to your goals.

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