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Ramalingam Kalirajan |8077 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 08, 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

Question by Rohan on Apr 27, 2024Hindi

Hi Sir/Ma'am, I am 25 yrs old and my take home monthly is approx 1.2 lacs working in IT. Currently I am investing in PPF since 2020. Used to invest around Rs. 1000/- pm but slowly increased my investment to 12,500 from last month onwards and looking to continue the same. Since beginning of this year, I have started to invest in mutual funds with a monthly SIP of 15,000. I invest in a mix of small, mid and large cap funds. Does it makes sense to consider investing in ELSS tax saver funds? Do they generally give good returns as compared to SML cap funds? I am looking to step up my SIP by 10% every year. My goal is to attain financial freedom in the next ten years with more 1cr. as a corpus. I also have a LIC jeevan anand policy and I invest around 1,250/- every month which will mature in next 10 years. In order to achieve my financial goal fast, should I increase my monthly SIP to maybe 30k by decreasing the amount invested in other schemes? I know that SIPs generally comes with a better return but with a high risk. Is there any other scheme that I should opt for which gives higher return? Please suggest how to go about it based on my current income and living expenses. I also have some liabilities after investments such as: Personal loan: 45k Consumer loans: around 10k House expenses: 20k My current investment portfolio so far: SIP: 40K (Recently started as mentioned) PPF: 2.2 lacs EPF: 1.8 lacs LIC: 1 lac Thank you!

Ans: Firstly, I commend you for taking proactive steps towards building your financial future at such a young age. Your commitment to increasing your investments over time is commendable and will serve you well in achieving your financial goals.

Regarding your query about ELSS tax saver funds, they can indeed be a valuable addition to your investment portfolio. ELSS funds not only offer tax benefits under Section 80C of the Income Tax Act but also have the potential to generate higher returns over the long term compared to traditional investment avenues like PPF.

As for comparing ELSS funds with small-cap funds, it's essential to understand that they belong to different categories with varying risk profiles. Small-cap funds typically carry higher risk but also have the potential for higher returns, while ELSS funds invest primarily in equity markets and have the added advantage of tax benefits. Both can play a role in diversifying your investment portfolio and achieving your financial goals.

Considering your goal of attaining financial freedom in the next ten years with a corpus of over 1 crore, it's essential to review your investment strategy periodically and make adjustments as needed. Increasing your monthly SIP to 30k and potentially reallocating some funds from other schemes could be a prudent move, given your high income and relatively low living expenses.

Regarding your existing LIC Jeevan Anand policy, surrendering it and reinvesting the proceeds in mutual funds could potentially yield higher returns, especially considering your long investment horizon and risk tolerance. However, it's essential to evaluate the surrender value, any applicable penalties, and the potential tax implications before making a decision.

In summary, continue with your disciplined approach to investing, consider adding ELSS funds to your portfolio, and review your investments periodically to ensure they align with your financial goals and risk tolerance.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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