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Milind

Milind Vadjikar  |315 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 02, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Oct 02, 2024Hindi
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Hi, I manage to buy five house from where I get Study rental income of 1.2 lakh(net worth of the house is about 4cr). I deposited FD of 80 lakh on my wife's name thru which she gets steady income to pay rent of 30k, and school fee of the kids and house hold expenses. I don't have any loans but bought two more flats for which I may need to take loan for 1CR soon. I have about 50 lakhs in PF, 50 Lakhs in mutual funds, 10 lakhs in shares, 16 lakhs in gold investments. Since I don't have any monthly expenses as of now, all my salary 2L+ I am inviting in different assets in the market. I am 48 year old. Somehow still I am not getting conference to retire yet. I need your help to make me feel comfortable where I stand if I leave my job today. My house hold expenses are 50k. Kids already set for higher studies not more than 30 lakh. From two flats I am bought, I can cancel one flat and get only 50 lakh loan. Please help.

Ans: Hello;

I can see 2 factors that may force you to delay your retirement:

1. Kids higher education+ wedding expenses are underestimated.

2. So long as you have a loan, you need to have salary income to fund the EMIs.

Rental income may help to enhance your corpus or prepay the loan but shouldn't be substituted as source for loan repayment in my view.

If you don't take loan then I can say with some degree of comfort that you are retirement ready but more allocation for kids future expenses is a must(1 Cr+) and also the term insurance cover(1.5-2 Cr) for self and healthcare insurance for the family(Min 50L) are highly desirable.

Feel free to revert in case you have any queries.

Happy Investing!!
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  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 11, 2024

Asked by Anonymous - Jun 07, 2024Hindi
Money
Hi I am 37 year old and wife is 33 yr old with a total earning of 4 lakh/month. We have a housing loan of 1.8cr, MF worth 10 lakh , PPF - 12 lakh , Life insurance - 20 lakh. Every yr we invest 1 lakh on MF , LIC & Insurance. We have 5 yr old daughter. Planning to retire at 55 with net worth of 10Cr & 1.5Cr for child education.
Ans: Comprehensive Financial Plan for Retirement and Child's Education
Understanding Your Current Financial Situation
You are 37 years old, and your wife is 33. Together, you have a monthly income of Rs 4 lakh. You have a housing loan of Rs 1.8 crore, mutual funds worth Rs 10 lakh, a PPF of Rs 12 lakh, and life insurance cover of Rs 20 lakh. Annually, you invest Rs 1 lakh in mutual funds, LIC, and insurance. You have a five-year-old daughter and plan to retire at 55 with a net worth of Rs 10 crore and Rs 1.5 crore for your daughter's education.

Setting Clear Financial Goals
Retirement Goal
You aim to retire at 55 with a net worth of Rs 10 crore. Considering an inflation rate of 6%, this corpus should be sufficient to support a comfortable lifestyle post-retirement.

Child's Education Goal
You need Rs 1.5 crore for your daughter's higher education. With education costs rising, starting early ensures you achieve this goal without financial strain.

Evaluating Current Investments
Mutual Funds
Your mutual fund portfolio is Rs 10 lakh, with an annual investment of Rs 1 lakh. Mutual funds are crucial for long-term growth due to their compounding benefits.

Public Provident Fund (PPF)
Your PPF balance is Rs 12 lakh. PPF offers safe, tax-free returns and should continue to be part of your portfolio.

Life Insurance
Your life insurance cover is Rs 20 lakh. Ensure this is adequate to cover any unforeseen events. Term insurance may provide higher coverage at lower premiums.

Analyzing Your Housing Loan
You have a substantial housing loan of Rs 1.8 crore. This loan represents a significant financial commitment. Ensure you manage this loan efficiently to avoid financial strain.

Current loan: Rs 1.8 crore
EMI: Calculate based on the interest rate and tenure to manage monthly cash flow effectively.
Enhancing Your Investment Strategy
Increasing Mutual Fund Investments
Mutual funds should form a significant part of your investment strategy due to their potential for high returns. Increase your annual SIP investments to Rs 5 lakh to build a substantial corpus.

Diversified Portfolio
Equity Mutual Funds: High growth potential; allocate 60% of your mutual fund investments here.
Debt Mutual Funds: Lower risk; allocate 20% for stability.
Hybrid Funds: Combine equity and debt; allocate 20% for balanced growth.
Systematic Investment Plans (SIPs)
Increase your SIPs to ensure a disciplined investment approach. A monthly SIP of Rs 40,000 can grow substantially over time.

Calculating Future Value of SIPs
Assuming a 12% annual return, a monthly SIP of Rs 40,000 over 18 years can accumulate a significant amount. Use an SIP calculator for precise future value calculations.

Disadvantages of Index Funds and Direct Funds
Index funds replicate market performance and may lack the potential for higher returns offered by actively managed funds. Direct funds require significant knowledge and time, which may not be suitable for everyone. Investing through a mutual fund distributor ensures professional management.

Utilizing Tax Benefits
Tax-saving Investments
Maximize contributions to tax-saving instruments like PPF, ELSS funds, and NPS. These provide tax deductions under Section 80C and additional benefits under Section 80CCD for NPS.

Efficient Tax Management
Review your investments for tax efficiency. Long-term capital gains on equities are taxed at 10% beyond Rs 1 lakh. Mutual funds provide tax-efficient growth compared to traditional savings.

Insurance Coverage
Adequate Life Insurance
Ensure you have adequate life insurance coverage. A term insurance plan provides high coverage at a low premium, securing your family's financial future.

Comprehensive Health Insurance
With a family of three, having comprehensive health insurance is crucial. Ensure your policy covers all family members and has a high sum insured to protect your savings from medical emergencies.

Planning for Child's Education
Child Education Fund
Start a dedicated education fund for your daughter. Invest in child-specific mutual funds or education plans that offer long-term growth. Starting early ensures a substantial corpus for her higher education.

Emergency Fund
Building a Safety Net
Maintain an emergency fund covering at least six months of expenses. This fund protects against unexpected financial challenges. Consider keeping this amount in a high-yield savings account or liquid mutual funds for easy access.

Managing Your Housing Loan
Efficient Loan Repayment
Consider prepaying your housing loan when possible to reduce the interest burden. Evaluate if refinancing options offer lower interest rates, helping manage EMIs effectively.

Retirement Planning
Creating a Retirement Account
Consider opening a retirement-specific account like the National Pension System (NPS). NPS offers tax benefits and helps build a retirement corpus with professional management. Invest regularly in this account for long-term growth.

Pension Plans
Explore pension plans that provide regular income post-retirement. These plans ensure a steady flow of income and financial security during retirement.

Building a Sustainable Retirement Corpus
Calculating Future Value
Using the earlier example, let’s calculate the future value of your current investments.

PPF: Rs 12 lakh + annual investments for 18 years at 7% = significant growth
Mutual Funds: Rs 10 lakh + Rs 40,000 monthly SIP for 18 years at 12% = substantial corpus
Equity Shares: Assuming 10% annual growth
Total estimated corpus needs to be regularly reviewed and adjusted based on market conditions and personal circumstances.

Regular Review and Rebalancing
Regularly review your investment portfolio. Market conditions and personal circumstances change over time. Rebalancing ensures your portfolio stays aligned with your goals.

Professional Guidance
Consult a Certified Financial Planner (CFP) for personalized advice. A CFP can help create a comprehensive financial plan tailored to your goals. They offer professional insights and strategies to achieve your retirement and education objectives.

Final Insights
Achieving your retirement goal of Rs 10 crore and Rs 1.5 crore for your daughter's education requires disciplined saving and investing. Regularly review and adjust your financial plan. Focus on long-term growth and tax efficiency. With careful planning, you can retire at 55 with financial security and peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 30, 2024

Money
Good evening sir Ashok here I am 48 with two kids one 15 yrs and other 1.5 yrs. Doing business but I would like to retire. I have fd of 4.3 cr which quaternary pay out and I invested in form of fd in my account and 4 sisters of around 4 cr in which I'm the joint account holder and all the account are handled by be mutual fund around 50 lk Shares around 1cr in different account Real estate investment around 5cr which is fetching 80 k rent per month loan of around 50k.good running business but still I am some were not satisfied in life please suggest I
Ans: Hello Ashok,

I understand you’re feeling some dissatisfaction despite your successful business and sound investments. Let's assess your financial situation and develop a strategy to secure a fulfilling and comfortable retirement. I'll guide you step-by-step, considering all aspects of your financial portfolio.

Current Financial Landscape
You have various investments and assets that provide a strong financial foundation. Here's a summary:

Fixed Deposits: Rs 4.3 crore in your name, with quarterly payouts.
Joint Fixed Deposits: Rs 4 crore with your sisters.
Mutual Funds: Rs 50 lakh.
Shares: Rs 1 crore.
Real Estate: Rs 5 crore, generating Rs 80,000 in monthly rent.
Loan: Rs 50,000.
Assessing Financial Goals
First, let’s identify your key financial goals and priorities:

Retirement Security: Ensure a steady income stream.
Children’s Future: Secure funds for education and other needs.
Health and Lifestyle: Maintain a good quality of life.
Financial Freedom: Free from business stress and active management.

You’ve done an excellent job building a diversified portfolio. Your investments in real estate, shares, mutual funds, and fixed deposits are commendable. Managing such a broad spectrum of assets shows your financial acumen and dedication.


I understand your desire to retire and the dissatisfaction you might be feeling. It’s normal to seek more peace and fulfillment, especially after years of hard work. Let’s work towards creating a plan that not only secures your financial future but also brings you peace of mind and satisfaction.

Income Streams and Retirement Planning
Your current income streams include:

Fixed Deposits: Regular interest payouts.
Real Estate: Rental income.
Business: Profits from your business.
To ensure a steady and reliable income during retirement, consider these steps:

1. Optimize Fixed Deposits
Reevaluate the interest rates on your fixed deposits. Ensure you’re getting the best possible rates. Since interest rates can vary, consider reinvesting in higher-yield fixed deposits when possible.

2. Mutual Fund Investments
With Rs 50 lakh in mutual funds, it’s crucial to review your portfolio. Actively managed funds often outperform index funds due to professional management. A Certified Financial Planner (CFP) can help you optimize your mutual fund investments.

Advantages of Actively Managed Funds:

Professional management and expertise.
Potential for higher returns.
Better risk management.
3. Shares and Equity Investments
Your Rs 1 crore in shares should be regularly reviewed and rebalanced. Consider consulting a CFP for insights into which stocks to hold, sell, or buy. Diversifying across different sectors can mitigate risks and enhance returns.

4. Rental Income from Real Estate
Your real estate investments provide a steady rental income of Rs 80,000 per month. Ensure you have a robust property management plan in place to maintain this income stream. Regularly review rental agreements and property maintenance to avoid any disruptions in income.

Debt Management
You have a loan of Rs 50,000, which is relatively small. Ensure timely repayments to maintain a good credit score. Avoid taking on additional debt as you approach retirement to keep financial stress at bay.

Children's Future Planning
With two children, aged 15 and 1.5 years, securing their future is paramount. Here’s how you can plan for their education and other needs:

1. Education Fund
Start by estimating the future costs of education for both children. Consider inflation and rising education costs. Investing in dedicated education savings plans or mutual funds can help you accumulate the necessary corpus over time.

2. Insurance and Protection
Ensure you have adequate life and health insurance coverage. This will safeguard your family’s financial future in case of unforeseen circumstances. Review your existing policies and make necessary adjustments.

Health and Lifestyle Considerations
A good quality of life during retirement is essential. Consider the following aspects:

1. Health Insurance
Ensure you have comprehensive health insurance coverage. Medical expenses can be a significant burden during retirement. A good health insurance policy will cover major medical expenses, reducing financial stress.

2. Lifestyle Planning
Think about how you want to spend your retirement years. Whether it's traveling, hobbies, or spending time with family, plan your finances to support these activities. Having a clear vision of your desired lifestyle will help you allocate funds appropriately.

Financial Freedom and Peace of Mind
Transitioning from an active business life to retirement requires careful planning. Here are some steps to achieve financial freedom and peace of mind:

1. Succession Planning
If your business is doing well, consider succession planning. This involves identifying and preparing a successor to take over the business. You can gradually reduce your involvement while ensuring the business continues to thrive.

2. Passive Income Streams
Focus on building passive income streams that require minimal active management. Your rental income and fixed deposit interest are good examples. Explore other avenues like dividends from shares or interest from bonds.

Final Insights
Retirement planning is a multi-faceted process that requires careful consideration of various aspects of your financial life. Here’s a summary of key points to ensure a fulfilling and secure retirement:

Review and Optimize Investments: Regularly review your portfolio with a CFP to ensure it aligns with your goals.
Ensure Steady Income: Focus on building and maintaining passive income streams.
Plan for Children’s Future: Secure their education and other needs through dedicated investments.
Manage Health and Lifestyle: Ensure adequate insurance coverage and plan for a desired lifestyle.
Achieve Financial Freedom: Gradually transition out of active business life through succession planning and building passive income.
By following these steps, you can create a comprehensive retirement plan that not only secures your financial future but also brings you peace of mind and satisfaction. Remember, retirement is not just about financial security but also about enjoying the fruits of your hard work.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 28, 2024

Asked by Anonymous - Aug 27, 2024Hindi
Money
Hi Sir, my age is 29. I am a IT employee doing job since 2020 June.. present my monthly salary 70000, I started inverting in Mutual fund from 2020 November with amount of 1000 bluechip fund, and increase 10% sip amount every year. Now I am having 7.5Lacks fund in bluechip fund and after change new organization i started one more 10,000/- SIP in quant ELSS fund for tax saving fund from April 2024. Along with that I invested 1.7lacks in FD for emergency fund.. and for family security purpose I took a 1cr term insurance, I have a dream that is build a own house so I am planning to take a home loan for 50-60lacks. So I can full fill my dream with little changes in my investment plans..
Ans: You are in a good place financially. With a monthly salary of Rs 70,000, you have been steadily building your wealth since you began working in 2020. The fact that you started investing in mutual funds from November 2020 is a positive step towards securing your financial future. Your decision to increase the SIP amount by 10% each year reflects a disciplined and forward-thinking approach to wealth accumulation.

The Rs 7.5 lakhs you’ve accumulated in the bluechip fund shows the power of consistency and long-term investing. Additionally, your Rs 1.7 lakhs in a Fixed Deposit for emergencies is a sensible move, ensuring you have a safety net. Your Rs 1 crore term insurance policy is also a wise decision, offering financial security to your family in case of unforeseen events.

Your recent investment of Rs 10,000 per month in an ELSS fund is a strategic choice, combining tax savings with equity growth potential. This is an intelligent move considering the tax benefits under Section 80C, along with the long-term growth prospects of equity investments.

However, your dream of owning a home and the associated plans to take a home loan of Rs 50-60 lakhs requires careful consideration, especially in the context of your current and future financial goals.

Home Loan and Its Impact
Owning a home is a significant milestone. However, taking a home loan for Rs 50-60 lakhs is a substantial financial commitment. A loan of this size could lead to an EMI of around Rs 40,000 to Rs 50,000 per month, depending on the interest rate and tenure. This will significantly impact your cash flow.

Things to Consider Before Taking the Home Loan:

EMI Burden: The EMI will consume a significant portion of your monthly income. This could limit your ability to invest in other areas. With your current salary, this EMI might take up over half of your monthly income, potentially straining your budget.

Interest Cost: Over the tenure of the loan, the interest component could be considerable. Even though the real estate appreciates, the interest you pay over time might outweigh the gains unless the property’s value appreciates substantially.

Opportunity Cost: The funds directed towards home loan EMIs could otherwise be invested in high-growth avenues, potentially offering higher returns over the long term.

Adjusting Your Investment Strategy
Given your current situation and future plans, a few adjustments in your investment strategy might help balance your dream of owning a home with your long-term financial goals.

Increasing SIPs Gradually:

Continue with your existing SIPs in mutual funds, including the ELSS fund for tax saving. Given the power of compounding, even small, regular investments can grow significantly over time. Since you have already implemented a strategy of increasing your SIP by 10% each year, ensure you continue this practice. This will help counter the effect of inflation on your investments and ensure your wealth grows in real terms.
Diversification of Investment Portfolio:

While bluechip funds are a good choice for stability and growth, consider adding mid-cap and small-cap funds to your portfolio. These funds carry higher risk but offer the potential for higher returns. A diversified portfolio can help you achieve a balance between risk and return, thereby optimizing your overall portfolio performance.
Avoid Overreliance on FD for Emergency Fund:

Your Rs 1.7 lakh FD serves as an emergency fund, which is essential. However, Fixed Deposits may not be the best option in terms of returns. Consider moving a portion of this fund to a liquid fund or a short-term debt fund. These funds offer better returns than FDs and are equally liquid, ensuring you can access the money when needed without sacrificing returns.
Reassessing the Home Loan Plan
Given the potential financial strain of a large home loan, it might be worth reconsidering the size of the loan or even the timing of your home purchase. Here are a few strategies to help you align your dream of homeownership with your financial security:

Delay the Purchase:

Consider delaying the home purchase by a few years, allowing your investments to grow further. This could reduce the loan amount you need to take, thereby reducing the EMI burden. A delay of even 3-5 years could make a significant difference in your financial comfort.
Save for a Larger Down Payment:

Increase your savings to make a larger down payment on the house. This will reduce the loan amount, subsequently lowering the EMIs and interest paid over time. Given your disciplined approach to SIPs, you could allocate some of your savings towards this goal.
Consider a Shorter Loan Tenure:

If you are set on buying the home now, consider opting for a shorter loan tenure. Though this would mean higher EMIs, you will pay significantly less interest over the loan’s life. It will also help you become debt-free sooner, allowing you to focus on other financial goals.
Maintain a Healthy Debt-to-Income Ratio:

Aim to keep your debt-to-income ratio below 40%. This means your total EMI payments (including the home loan) should not exceed 40% of your monthly income. This will ensure you have enough left over to invest in other areas and meet your living expenses comfortably.
Ensuring Long-Term Financial Security
Owning a home is a part of your financial journey, but ensuring long-term security requires a broader approach. Here’s how you can align your home purchase with other financial goals:

Retirement Planning:

Continue building your retirement corpus alongside your home loan repayments. With the power of compounding, the earlier you start, the more significant your retirement fund will be. Even a small monthly SIP dedicated to your retirement can grow substantially over time.
Review Your Insurance Needs:

Your Rs 1 crore term insurance is a good start, but with a home loan, your liabilities increase. Consider reviewing your insurance coverage to ensure it adequately covers your outstanding loan amount along with other potential financial responsibilities.
Education Fund for Future Children:

If you plan to have children in the future, consider starting an education fund early. SIPs in equity mutual funds or child-specific investment plans can help you accumulate a substantial corpus by the time your child needs it.
Tax Planning Strategies
Given that you are already investing in an ELSS fund for tax saving, continue doing so. However, with the addition of a home loan, you will have more tax-saving avenues available:

Section 80C Deductions:

The principal repayment of the home loan qualifies for a deduction under Section 80C, along with your ELSS contributions. This could help you maximize your Section 80C deductions up to the limit of Rs 1.5 lakhs.
Section 24(b) Interest Deductions:

Under Section 24(b), the interest paid on your home loan is deductible up to Rs 2 lakhs per annum. This deduction will significantly reduce your taxable income, thereby lowering your tax liability.
Maximizing HRA and Home Loan Benefits:

If you continue living in a rented house even after purchasing the new home, you can claim both HRA (House Rent Allowance) and home loan deductions, depending on the location and circumstances.
Final Insights
Your financial journey is off to a great start, and your disciplined approach to saving and investing will serve you well in the long run. However, balancing your dream of owning a home with other financial goals requires careful planning and consideration.

While taking a home loan is a viable option, ensure it does not strain your finances to the point where it compromises other aspects of your financial well-being. By gradually increasing your SIPs, diversifying your investments, and possibly delaying your home purchase or saving for a larger down payment, you can achieve your dream without compromising your financial security.

Remember, your financial plan should be flexible, allowing you to adjust as circumstances change. Regularly reviewing and adjusting your strategy with the help of a Certified Financial Planner will ensure you stay on track to achieve all your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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