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Ramalingam Kalirajan  |8092 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 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
Asked by Anonymous - May 12, 2024Hindi
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I have a monthly income of 1.4 lacs. Have 62 Lacs in FD, 5 Lacs in PF and about 5 lacs in equity. I spend about 40 k per month. How can I plan my retirement. Please suggest. Thanks.

Ans: Given your current financial situation, planning for retirement requires a strategic approach to ensure financial security in your golden years. Let's outline a retirement plan tailored to your needs:

Assess Retirement Needs: Start by estimating your expected expenses during retirement. Consider factors such as healthcare costs, living expenses, travel, and leisure activities. Be realistic in your estimations to ensure you have adequate funds to maintain your desired lifestyle.

Evaluate Current Assets: Take stock of your existing assets, including FDs, PF, and equity investments. Calculate their expected growth over time and factor in inflation to determine their future value. This assessment will provide a baseline for your retirement corpus.

Investment Strategy: Given your conservative investment approach with significant holdings in FDs and PF, consider diversifying your portfolio to optimize returns while managing risk. Allocate a portion of your portfolio to equity investments for long-term growth potential, balanced with fixed-income securities for stability.

Retirement Corpus Calculation: Determine the desired corpus needed to sustain your lifestyle during retirement. Factor in inflation, life expectancy, and potential healthcare expenses. Use online retirement calculators or consult with a Certified Financial Planner to arrive at a realistic target amount.

Savings and Investments: Maximize your savings by setting aside a portion of your monthly income specifically for retirement. Channel these savings into a mix of retirement-focused investments such as Equity Linked Savings Schemes (ELSS), National Pension System (NPS), and Mutual Funds tailored for retirement planning.

Regular Review and Adjustment: Regularly review your retirement plan to track progress towards your goals and make adjustments as needed. As you approach retirement age, gradually shift your portfolio towards more conservative investments to preserve capital and minimize risk.

Emergency Fund: Maintain an emergency fund equivalent to 6-12 months' worth of living expenses to cover unforeseen expenses or income disruptions during retirement.

Consult a Financial Planner: Consider seeking guidance from a Certified Financial Planner who can provide personalized advice based on your financial goals, risk tolerance, and retirement timeline. They can help optimize your retirement plan and address any concerns or uncertainties you may have.

By following these steps and staying disciplined in your savings and investment approach, you can work towards building a substantial retirement corpus that will provide financial security and peace of mind in your retirement years.

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  |8092 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2024

Asked by Anonymous - May 09, 2024Hindi
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I have a monthly income of 1.4 lacs. Have 62 Lacs in FD, 5 Lacs in PF and about 5 lacs in equity. I spend about 40 k per month. How can I plan my retirement. Please suggest. Thanks.
Ans: Considering your current financial situation, planning for retirement is a wise decision to ensure financial security in your later years. With a monthly income of 1.4 lacs and expenses of 40k per month, you have a healthy surplus that can be channelled towards retirement planning.

Firstly, let's assess your existing assets. Your FDs, PF, and equity investments provide a good foundation. However, to optimize your retirement planning, consider diversifying your investments to maximize returns while managing risk.

Given the conservative nature of FDs, it's advisable to explore other investment avenues that offer potential for higher returns. Consider gradually reallocating a portion of your FDs into equity-oriented investments like mutual funds or stocks. This can help you benefit from the potential growth of equity markets over the long term.

Additionally, your PF balance is a valuable asset for retirement planning. Ensure you're maximizing contributions to your PF account to build a substantial corpus for retirement. Explore options like Voluntary Provident Fund (VPF) to increase your PF contributions beyond the mandatory limit.

Regarding your equity investments, review your portfolio regularly to ensure it aligns with your risk tolerance and investment goals. Consider consulting with a Certified Financial Planner to optimize your asset allocation and select suitable investment avenues based on your risk profile and retirement timeline.

Lastly, continue to monitor your expenses and budget effectively to maintain a healthy savings rate. Consider creating an emergency fund to cover unexpected expenses and mitigate financial risks.

Remember, retirement planning is a journey that requires careful consideration and proactive decision-making. By taking steps to optimize your investments and manage your finances wisely, you can build a secure financial future for your retirement years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8092 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2024

Asked by Anonymous - Jul 03, 2024Hindi
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Hi i am 39 year old my in hand salary after tax is 51 lpm I have fixed deposit worth 80 lac ppf of 34 lac, I have own flat fully paid, mutual fund around 13 lac,10 lac emergency fund, my wife housewife and son is 3 year old, what can I do to plan my retirement my current yearly expense is around 9 lacs and I don't have any loan
Ans: Planning for retirement is crucial, and it's wonderful that you're thinking ahead. Let's create a comprehensive plan to ensure a comfortable and secure retirement for you and your family. I'll guide you through the steps and strategies needed, addressing various aspects of your financial situation.

Understanding Your Current Financial Situation
You have a strong financial foundation, which is great. Your current financial assets include:

Fixed Deposit: Rs. 80 lakh
PPF: Rs. 34 lakh
Mutual Funds: Rs. 13 lakh
Emergency Fund: Rs. 10 lakh
Fully Paid Flat
Your annual expenses are Rs. 9 lakh, and you have no loans. With these details in mind, we can create a solid retirement plan.

Setting Retirement Goals
First, let's set clear retirement goals. This includes determining the age you wish to retire, estimating your post-retirement expenses, and accounting for inflation.

Retirement Age: Let's assume you plan to retire at 60.
Post-Retirement Expenses: Estimating your expenses to increase with inflation, let's assume Rs. 12 lakh annually.
Your current expenses of Rs. 9 lakh will likely increase over time due to inflation. Planning for increased expenses ensures you won't fall short of funds during retirement.

Building a Retirement Corpus
To ensure a comfortable retirement, you need to build a substantial retirement corpus. Given your current financial assets and future goals, let's discuss how to achieve this.

Mutual Funds: A Key Investment
Mutual funds are a crucial part of your investment strategy. They offer diversification, professional management, and the potential for higher returns. Let's explore the categories of mutual funds and their benefits:

1. Equity Mutual Funds
Equity mutual funds invest in stocks. They have the potential for high returns but come with higher risk.

2. Debt Mutual Funds
Debt mutual funds invest in bonds and fixed income securities. They are safer but offer lower returns compared to equity funds.

3. Balanced or Hybrid Funds
These funds invest in both equity and debt, providing a balance of risk and return.

Advantages of Mutual Funds
Diversification: Mutual funds spread investments across various assets, reducing risk.
Professional Management: Experts manage your investments, aiming for the best returns.
Liquidity: You can easily buy or sell mutual fund units.
Compounding: Reinvesting returns can lead to significant growth over time.
Risk and Power of Compounding
Mutual funds come with market risks. However, long-term investments usually balance out short-term market fluctuations. The power of compounding significantly boosts your corpus over time. By reinvesting your returns, your money grows faster.

Disadvantages of Index Funds and Direct Funds
While index funds track market indices and come with lower fees, they lack the active management that can potentially outperform the market. Direct funds may save on commissions, but investing through a certified financial planner (CFP) provides valuable guidance and better fund selection.

Investing in Actively Managed Funds
Actively managed funds, chosen by an experienced CFP, often outperform index funds. A CFP’s expertise helps in selecting funds tailored to your financial goals and risk tolerance.

Structuring Your Investments
Now, let's structure your investments to build a robust retirement corpus.

Emergency Fund
You already have a Rs. 10 lakh emergency fund. Keep this in a liquid or ultra-short-term debt fund to ensure quick access.

Fixed Deposits and PPF
Your fixed deposit and PPF are safe investments. However, their returns may not outpace inflation in the long term. Consider moving a portion into higher-yielding investments like mutual funds.

Diversifying Your Mutual Fund Portfolio
Diversification is key. Spread your investments across various mutual funds:

Equity Funds: Allocate a significant portion to equity funds for higher returns.
Debt Funds: Invest in debt funds for stability and income.
Balanced Funds: Include balanced funds to mitigate risk while aiming for growth.
Systematic Investment Plan (SIP)
Investing through SIPs ensures disciplined investing and rupee cost averaging. This strategy reduces the impact of market volatility.

Reviewing and Rebalancing Your Portfolio
Regularly review and rebalance your portfolio. This ensures your investments stay aligned with your goals and risk tolerance. A CFP can provide ongoing guidance and adjustments.

Tax Planning
Effective tax planning maximizes your returns. Utilize tax-saving instruments and plan withdrawals to minimize tax liabilities.

Insurance Coverage
Ensure you have adequate insurance coverage:

Life Insurance: Protect your family’s future with sufficient life insurance.
Health Insurance: Adequate health insurance covers medical emergencies without draining your savings.
Retirement Income Streams
Plan for multiple income streams during retirement:

Systematic Withdrawal Plan (SWP): Use SWPs from mutual funds for regular income.
Dividends: Invest in dividend-paying funds or stocks.
Part-Time Work: Consider part-time work or consultancy for additional income.
Estate Planning
Estate planning ensures your assets are distributed as per your wishes. Prepare a will and consider trusts for efficient transfer of wealth.

Final Insights
Planning for retirement involves a multi-faceted approach. By diversifying your investments, utilizing mutual funds, and planning for tax efficiency, you can build a substantial retirement corpus. Regular reviews and adjustments with a CFP ensure you stay on track to achieve your retirement goals.

Conclusion
Planning your retirement requires careful consideration of various factors. By following the outlined strategies, you can ensure a comfortable and secure retirement for you and your family. Regularly consulting with a CFP will help you stay on track and make informed decisions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8092 Answers  |Ask -

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

Asked by Anonymous - Mar 08, 2025Hindi
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I will be retiring from my present pvt company job in April' 25. I have corpus about 40 L. Please advise, where to invest securely to get better monthly income from May' 2025 alongwith growth of capital amount to combat the market inflation in every year. My monthly requirement of fund is about 30 K.
Ans: You will retire in April 2025 with a corpus of Rs 40 lakh. Your goal is to get a steady monthly income of Rs 30,000 while ensuring your capital grows.

A secure investment strategy is essential. It should balance income, safety, and growth.

 

Key Challenges in Your Retirement Plan
Generating a stable monthly income without depleting capital.

Beating inflation so that income remains sufficient.

Minimising risk while getting reasonable returns.

Ensuring liquidity for unexpected expenses.

 

Dividing Your Corpus for Stability and Growth
Your corpus should be divided into different categories. Each category serves a purpose.

 

1. Emergency Fund – Rs 5 Lakh
Keep Rs 3 lakh in a high-interest savings account.

Keep Rs 2 lakh in a liquid fund for better returns.

This fund helps handle unexpected expenses without touching investments.

 

2. Monthly Income Fund – Rs 25 Lakh
Invest in a mix of debt mutual funds and conservative hybrid funds.

These funds offer better returns than bank FDs.

Withdraw Rs 30,000 per month using a Systematic Withdrawal Plan (SWP).

This ensures stable income while keeping the capital growing.

 

3. Growth-Oriented Fund – Rs 10 Lakh
Invest in a balanced mix of equity mutual funds.

This helps to beat inflation and grow wealth over time.

Do not withdraw from this fund for at least 7-10 years.

This will help in long-term capital appreciation.

 

Why Not Rely Entirely on Fixed Deposits?
Bank FDs give lower returns than inflation.

Tax on FD interest reduces post-tax returns.

Debt mutual funds offer better tax efficiency and higher returns.

 

Why Avoid Index Funds?
Index funds only follow the market and cannot adjust to downturns.

Actively managed funds are handled by professional fund managers.

These funds can reduce losses in a falling market.

They offer better long-term returns than index funds.

 

Why Not Invest in Direct Mutual Funds?
Direct funds require constant tracking and decision-making.

Investing through an MFD with CFP credentials ensures better fund selection.

A Certified Financial Planner (CFP) helps in portfolio rebalancing.

This reduces investment mistakes and improves long-term returns.

 

How to Manage Inflation Every Year?
Increase your withdrawal amount by 5-6% per year.

Keep a portion in equity funds for growth.

Do not withdraw from growth-oriented funds in the first 7-10 years.

This ensures your capital lasts longer and grows.

 

Rebalancing Your Portfolio Regularly
Check investments every year.

Move money from growth funds to income funds when needed.

Adjust withdrawal amounts based on expenses and market conditions.

 

Finally
Your plan should ensure financial security and peace of mind. A well-diversified portfolio will help you get a stable income while growing your wealth. A Certified Financial Planner (CFP) can help you optimise this strategy.

 

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8092 Answers  |Ask -

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

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I am new to this mutual fund since last 6 month.i have been doing a sip of 18k per month.. parag parikh flexicap 5k uti nifty 50 5k motilal oswal midcap 2.2k nippon small cap 1.5k quant small cap 1.5k jm flexicap 1k icici prudential fund 2k is these good.i have a plan of 15 yr investment with 10 percent step up each year..kindly opine
Ans: You have started SIP investing six months ago. Your monthly SIP is Rs 18,000 across different mutual funds. You also plan to increase investments by 10% each year. A long-term plan of 15 years is a good approach.

 

Strengths of Your Portfolio
You have chosen a mix of flexi-cap, mid-cap, and small-cap funds.

A 15-year investment horizon allows compounding benefits.

The 10% annual step-up increases the final corpus.

You are investing consistently, which is important for long-term success.

 

Areas That Need Attention
1. Too Many Funds in the Portfolio
You have seven different funds.

Some categories are overlapping, reducing diversification benefits.

A leaner portfolio can be easier to manage.

 

2. High Exposure to Small-Cap and Mid-Cap Funds
You have three funds in small-cap and mid-cap segments.

Small caps are high-risk, high-return investments.

Too much exposure can increase volatility.

 

3. Index Fund is Not the Best Choice
Index funds do not beat the market in all conditions.

Actively managed funds adjust to changing markets.

A professional fund manager can reduce downside risks.

 

Suggested Portfolio Improvements
1. Reduce the Number of Funds
Keep 3 to 4 well-managed funds instead of seven.

Choose one flexi-cap fund, one large-cap or multi-cap fund, and one mid/small-cap fund.

 

2. Balance Between Risk and Stability
Reduce exposure to too many small-cap funds.

Add a large-cap or multi-cap fund for stability.

 

3. Invest Through a Certified Financial Planner (CFP)
Direct funds require constant tracking.

A Certified Financial Planner (CFP) can guide investment decisions.

Investing through an MFD with CFP credentials ensures professional fund selection.

 

Reviewing Your Plan Regularly
Check your portfolio every year.

Rebalance if some funds underperform.

Maintain discipline and avoid emotional decisions.

 

Finally
Your investment strategy is good, but reducing the number of funds can improve returns. Focus on diversification, balancing risk, and expert guidance. A 15-year SIP with step-up can create wealth, but regular reviews are essential.

 

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8092 Answers  |Ask -

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

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Hello...I am planning to construct a home in next 5 years. My monthly salary is only 35000. I dont have any idea how to make my dream into a success. Please give me an idea how I can save my money to make a home with a budget of 30 lakhs.
Ans: Building a home is a big financial goal. You want to construct a house worth Rs 30 lakh in 5 years. Your monthly salary is Rs 35,000. With the right savings and investment plan, you can make this dream a reality.

 

Step 1: Understanding the Total Budget Requirement
The house construction cost is Rs 30 lakh.

You will need to save or arrange this amount in 5 years.

Costs may increase due to inflation.

Having a buffer amount is important for unexpected expenses.

 

Step 2: Evaluating Your Savings Capacity
Your monthly income is Rs 35,000. The goal is to save a portion consistently.

 

First, identify your essential monthly expenses.

Reduce unnecessary spending to increase savings.

The more you save, the less you need to borrow.

 

Step 3: Creating a Dedicated Home Fund
Open a separate investment account for home savings.

Invest in growth-oriented mutual funds.

Avoid keeping all money in fixed deposits due to lower returns.

 

Step 4: Choosing the Right Investment Strategy
A 5-year investment plan should have a balance of growth and safety.

 

1. Avoid Index Funds and ETFs
Index funds cannot adjust to market risks.

Actively managed funds perform better in volatile markets.

 

2. Avoid Direct Mutual Funds
Direct funds need market tracking and knowledge.

Investing through a Certified Financial Planner (CFP) ensures proper management.

 

3. Maintain Liquidity for Construction Costs
Keep some funds in liquid investments for easy access.

Avoid locking money in long-term illiquid assets.

 

Step 5: Considering a Home Loan as an Option
If saving Rs 30 lakh is difficult, a home loan can help.

 

Banks may provide up to 80% of the home cost.

Your EMI should not exceed 40% of your income.

Higher down payment reduces loan burden.

A shorter loan tenure saves interest costs.

 

Step 6: Cutting Expenses to Boost Savings
Reduce unnecessary spending like eating out and entertainment.

Avoid impulse purchases.

Use discounts and cashback options to save more.

A simple lifestyle today helps in building your dream home sooner.

 

Step 7: Reviewing Your Plan Every Year
Track savings and investments regularly.

Adjust plans if income increases or expenses change.

Consult a Certified Financial Planner (CFP) for guidance.

 

Finally
A Rs 30 lakh home in 5 years is possible with proper planning. Focus on consistent savings, smart investments, and controlled spending. If needed, a home loan can bridge the gap. With discipline and patience, your dream home can become a reality.

 

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8092 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  |8092 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  |8092 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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