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Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 21, 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
phani Question by phani on May 18, 2024Hindi
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Hi Sir, My name is Krishna & I am 38 years old and I have a savings of around 40Lakhs in bank in FD's and I started investing 20000 every month from Jan-2024 in these mutual funds [1. DSP Nifty 50 Equal Weight Index Fund Direct-Growth, 2. HDFC Index Fund Nifty 50 Plan - Direct Plan, 3. Nippon India Large Cap Fund - Direct Plan, 4. Edelweiss Large Cap Fund - Direct Plan, 5. ICICI Prudential Bluechip Fund - Direct Plan-Growth, 6. Kotak Emerging Equity Fund - Direct Plan, 7. Motilal Oswal Midcap Fund - Direct Plan, 8. Axis Small Cap Fund - Direct Plan, 9. Kotak Multi Asset Allocator FoF - Dynamic - Direct Plan, 10. Edelweiss Aggressive Hybrid Fund - Direct Plan]. I checked through money control and value research before investing in these mutual funds. I would like to keep investing till 50 years (currently 38yrs) for longterm holdings may be 7+ years to 12+ years. Kindly check my portfolio and please let me know if my investments are good.

Ans: Assessment of Mutual Fund Portfolio for Long-Term Investment

Krishna, it's commendable that you've taken the initiative to invest in mutual funds for your long-term financial well-being. Let's evaluate your portfolio to ensure it aligns with your investment objectives and risk tolerance.

Portfolio Composition Analysis

Your portfolio comprises a mix of large-cap, mid-cap, small-cap, hybrid, and index funds, reflecting diversification across different market segments. This diversification is essential for managing risk and capturing growth opportunities across various sectors of the economy.

Benefits of Diversification

Diversification is the cornerstone of sound investment strategy, helping spread risk across different asset classes and market segments. By investing in a mix of large-cap, mid-cap, and small-cap funds, you're positioned to benefit from the growth potential of companies of varying sizes.

Active vs. Passive Management

While index funds provide low-cost exposure to broad market indices, actively managed funds offer the potential for outperformance through skilled fund management. Your portfolio includes both actively managed funds and index funds, striking a balance between cost efficiency and potential returns.

Potential Areas of Improvement

Reviewing Fund Selection Criteria: While your research through Moneycontrol and Value Research is commendable, consider consulting with a Certified Financial Planner to validate your investment choices and ensure they align with your financial goals and risk tolerance.

Regular Portfolio Review: Given your investment horizon of 12+ years, it's crucial to conduct periodic portfolio reviews to assess fund performance, monitor changes in fund objectives or management, and rebalance your portfolio if necessary.

Asset Allocation Strategy: Evaluate your asset allocation strategy to ensure it's optimized for long-term growth and risk management. Consider factors such as age, risk tolerance, and investment goals when determining the ideal mix of equity and debt funds in your portfolio.

Final Recommendations

Seek Professional Advice: Consider consulting with a Certified Financial Planner to conduct a comprehensive review of your investment portfolio and provide personalized recommendations based on your financial goals and risk profile.

Stay Informed: Stay abreast of market developments, economic trends, and regulatory changes that may impact your investment portfolio. Continuous learning and informed decision-making are essential for long-term investment success.

Maintain Discipline: Maintain discipline in your investment approach by adhering to your long-term investment plan, avoiding impulsive decisions based on short-term market fluctuations, and staying committed to your financial goals.

In conclusion, while your current mutual fund portfolio demonstrates a proactive approach to long-term wealth accumulation, there's always room for refinement and optimization. By seeking professional guidance and staying disciplined in your investment journey, you can enhance the effectiveness of your portfolio and work towards achieving your financial aspirations.

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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Sanjeev

Sanjeev Govila  |458 Answers  |Ask -

Financial Planner - Answered on Jun 15, 2023

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Hello Sir, I am 38 years working professional. Below are my Mutual Funds list. 1. Axis Bluechip fund Direct Plan growth - 2000 / month 2. PGM mid cap opportunity Direct Plan growth - 2000 / month 3. SBI small cap fund Regular growth - 1000 / month 4. Axis nifty 50 Direct Plan growth - 2000 / month 5. ICICI next nifty 50 Direct Plan growth - 2000 / month 6. ICICI nasdaq index direct plan growth - 2000 / month 7. ICICI technology fund Regular plan growth - 1000 / month Kindly give your input on this. Shall I continue with this for long term or not?
Ans: According to the data you have given, it appears that you have a Rs. 12,000/- monthly systematic investment plan (SIP) distributed across seven different mutual funds. Generally speaking, if your entire investing amount is Rs. 10 lakhs, you should invest in 6-7 mutual funds. Over-diversification can result from having too many mutual funds in your portfolio.

Regarding the recommendation on the mutual funds in your portfolio, all of them are considered to be fundamentally strong with a good track record. Investments in pure equity funds are recommended for the long term, ideally for a period of 5-7 years.

On the other hand, certain categories such as Small Cap, Mid Cap, and Sectoral funds are recommended only if you have an investment horizon of more than 7 years.

It's worth noting that two of the funds in your portfolio, namely Axis Nifty 50 Direct Plan Growth and ICICI Nasdaq Index Direct Plan Growth, are recently launched funds. As a result, they do not have sufficient track record to accurately assess their risk and reward potential.
We hope that you have made your investments based on your short-term and long-term goals, taking into consideration your risk profile.

Disclaimer:
• I have just no idea about your age, future financial goals, your risk profile, other investments and whether you would have the nerves to not get unduly perturbed if stock markets go temporarily down.
• Hence, please note that I am answering your question in absolute isolation to other parameters which should definitely be considered when answering a question of this type.
• I recommend you to also consult a good financial advisor who would look at your complete profile in totality before you act on this advice given by me.

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Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

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

Money
Hi Sir, My name is Krishna & I am 38 years old and I have a savings of around 40Lakhs in bank in FD's and I started investing 20000 every month from Jan-2024 in these mutual funds [DSP Nifty 50 Equal Weight Index Fund Direct-Growth, HDFC Index Fund Nifty 50 Plan - Direct Plan, Nippon India Large Cap Fund - Direct Plan, Edelweiss Large Cap Fund - Direct Plan, ICICI Prudential Bluechip Fund - Direct Plan-Growth, Kotak Emerging Equity Fund - Direct Plan, Motilal Oswal Midcap Fund - Direct Plan,Axis Small Cap Fund - Direct Plan, Kotak Multi Asset Allocator FoF - Dynamic - Direct Plan, Edelweiss Aggressive Hybrid Fund - Direct Plan]. I checked through money control and value research before investing in these mutual funds. Please let me know if my investments are good?
Ans: Hello Krishna,

Your commitment to financial planning and investment is commendable. Let's analyze your mutual fund portfolio to ensure it aligns with your goals and risk tolerance.

Portfolio Composition
Your portfolio comprises a diverse range of mutual funds, spanning various categories including large-cap, mid-cap, small-cap, index funds, and hybrid funds. This diversified approach spreads risk across different market segments and investment styles.

Fund Selection
Index Funds: Investments in index funds like DSP Nifty 50 Equal Weight Index Fund and HDFC Index Fund Nifty 50 Plan provide exposure to the broader market, capturing the performance of the Nifty 50 index constituents.

Active vs. Passive Management:
While you've included both actively managed mutual funds and index funds (ETFs) in your portfolio, it's important to understand the differences between the two. Actively managed funds aim to outperform the market through active stock selection and portfolio management, while index funds passively track a specific index's performance.
Benefits of Actively Managed Funds:
Actively managed funds offer the potential for higher returns compared to index funds, especially during market inefficiencies or when skilled fund managers can identify lucrative investment opportunities. Additionally, active management allows for flexibility in portfolio construction and adjustments based on market conditions.
Potential Disadvantages of Index Funds:
While index funds offer low expense ratios and broad market exposure, they may lack the potential for outperformance compared to actively managed funds. Additionally, they're subject to tracking error, which occurs when the fund's performance deviates from the index it's designed to replicate.

Large Cap Funds: Nippon India Large Cap Fund, Edelweiss Large Cap Fund, and ICICI Prudential Bluechip Fund offer stability and growth potential by investing in established companies with strong fundamentals.

Mid Cap and Small Cap Funds: Motilal Oswal Midcap Fund and Axis Small Cap Fund aim to capitalize on the growth potential of mid-sized and small-sized companies, albeit with higher volatility.

Hybrid and Multi-Asset Funds: Kotak Multi Asset Allocator FoF - Dynamic and Edelweiss Aggressive Hybrid Fund provide a blend of equity and debt exposure, suitable for investors seeking balanced returns with lower risk.

There are some advantages to consider direct funds, and the cost savings can be significant in the long run. However, there are some potential benefits to using a regular MFD:
Advantages of Investing Through a Mutual Fund Distributor (MFD):
• Personalized Advice: MFDs can be helpful for beginners or those who lack investment knowledge. They can assess your risk tolerance, financial goals, and investment horizon to recommend suitable mutual funds. This personalized guidance can be valuable, especially if you're new to investing.
• Convenience: MFDs handle all the paperwork and transactions on your behalf, saving you time and effort. They can help with account setup, SIP registrations, and managing your portfolio across different funds.
• Investor Support: MFDs can be a point of contact for any questions or concerns you may have about your investments. They can provide ongoing support and guidance throughout your investment journey.

Fund Research
Cross-referencing your fund selections with reputable sources like Moneycontrol and Value Research is a prudent approach. These platforms offer valuable insights into fund performance, risk metrics, and portfolio composition, aiding informed investment decisions.

However, relying solely on mutual fund ratings overlooks individual financial goals and risk tolerance. Ratings may not account for changing market conditions or long-term performance. Blindly following ratings can lead to a mismatched portfolio, potentially resulting in suboptimal returns and increased investment risk over time.

Continuous Monitoring
Regularly reviewing your portfolio's performance, fund ratings, and market dynamics ensures alignment with your financial goals and risk appetite. Periodic rebalancing and adjustments may be necessary to optimize returns and manage risk effectively.

Conclusion
Your mutual fund portfolio exhibits diversity and a thoughtful selection process, indicating a sound investment strategy. By staying informed, maintaining a disciplined approach, and periodically reassessing your investments, you're well-positioned to achieve your financial objectives.

Best Regards,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 22, 2024

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Sir, I am 30 years now. I have started my Mutual fund in July 2024 portfolio by investing in several mutual funds. I am investing for long term gain and to accumulate a corpus or min. 2 Cr in other 30 years. Please advice if i can continue my investing. Here are my investments - 1. Index Fund - UTI Nifty 50 Index Fund Growth - 3000 2. Large Cap Fund - ICICI Prudential Bluechip Fund Direct Growth - 2000 3. Midcap Fund - HDFC Mid-Cap Opportunities Fund - 1500 4. Small Cap Fund - Nippon India Small Cap Fund - 1500 5. Flexi Cap Fund - Parag Parikh Flexi Cap Fund Direct Growth - 2000 Please advise sir
Ans: At 30 years of age, your decision to start investing in mutual funds is commendable. Your goal of accumulating a corpus of Rs 2 crore over the next 30 years is achievable with disciplined investing.

However, it is important to regularly review and align your portfolio with your financial objectives. This ensures that your investments remain on track towards achieving your desired goals.

Evaluating Your Current Portfolio
Your portfolio consists of a mix of index funds, large-cap, mid-cap, small-cap, and flexi-cap funds. Let’s assess the pros and cons of each and see how they contribute to your long-term goal:

1. Index Fund (UTI Nifty 50 Index Fund Growth)

Disadvantages of Index Funds: While index funds offer low-cost exposure to the market, they may not outperform actively managed funds over the long term. Index funds simply mimic the market index and do not have the flexibility to adapt to changing market conditions. In times of market downturns, index funds can also suffer significant declines without the ability to cushion losses.

Benefits of Actively Managed Funds: Actively managed funds, on the other hand, offer the potential for higher returns as they are managed by experienced fund managers who can make strategic decisions based on market trends. These managers aim to outperform the benchmark index, giving you the potential for better returns in the long run.

2. Large Cap Fund (ICICI Prudential Bluechip Fund Direct Growth)

Large Cap Exposure: Large-cap funds are known for their stability and lower risk compared to mid and small-cap funds. They invest in well-established companies with a strong track record. However, the "Direct" plan of this fund means you are investing without the guidance of a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD).

Disadvantages of Direct Plans: Direct plans require investors to be more hands-on, with regular monitoring and decision-making. Many investors might miss out on timely advice, leading to missed opportunities or increased risks. Regular plans, through a CFP or MFD, ensure that you receive professional guidance, helping you make informed decisions aligned with your goals.

3. Midcap Fund (HDFC Mid-Cap Opportunities Fund)

Growth Potential: Midcap funds offer a balance between risk and reward. They invest in companies with the potential for high growth. However, they can be volatile, especially during market downturns. It's essential to have a longer investment horizon for mid-cap funds, as you do, to ride out the volatility and capture long-term growth.
4. Small Cap Fund (Nippon India Small Cap Fund)

High Risk, High Reward: Small-cap funds invest in emerging companies with high growth potential. However, they are also the most volatile and carry higher risk. These funds can experience significant fluctuations in short periods. While they can generate substantial returns, it's important to balance them with more stable investments.
5. Flexi Cap Fund (Parag Parikh Flexi Cap Fund Direct Growth)

Diversification and Flexibility: Flexi-cap funds invest across market capitalizations (large, mid, and small-cap stocks). This provides a diversified approach, reducing the risk associated with investing in a single market segment. However, as with the large-cap fund, the "Direct" nature of this investment means you are managing it without expert guidance.
Recommended Adjustments to Your Portfolio
Given your long-term horizon and financial goals, consider the following adjustments:

1. Switch from Index Funds to Actively Managed Funds

Replace the index fund with an actively managed large-cap or multi-cap fund. This could offer better returns over the long term, as fund managers can make informed decisions based on market conditions.
2. Move from Direct to Regular Plans

Consider switching your direct plans to regular plans. A CFP or MFD will provide professional advice and regular portfolio reviews. This will help you make the most of your investments and adjust your portfolio as needed.
3. Rebalance Your Portfolio

Ensure your portfolio is well-diversified across asset classes. You may consider adding a mix of debt funds to reduce risk. This will provide stability, especially during market downturns.

Periodically rebalance your portfolio to maintain the desired asset allocation and ensure you are on track to achieve your financial goals.

Importance of Regular Portfolio Review
Regularly reviewing your portfolio is crucial. The financial market is dynamic, and periodic reviews will help you make necessary adjustments. This ensures your portfolio remains aligned with your risk tolerance, investment horizon, and financial goals.

Tax Efficiency and Investment Tenure
Tax Implications: Keep in mind the tax implications of your investments. Long-term capital gains (LTCG) on equity funds are taxed at 10% on gains exceeding Rs 1 lakh per financial year.

Investment Tenure: Given your 30-year horizon, equity funds are suitable due to their potential for high returns over the long term. However, consider the tax benefits and implications when choosing funds and investment durations.

Role of a Certified Financial Planner (CFP)
Expert Guidance: A CFP can help you navigate the complexities of investing, offering personalized advice and ensuring your portfolio aligns with your goals. They will help you stay disciplined and avoid common pitfalls that can derail your financial journey.
Final Insights
Your current portfolio has a solid foundation, but with some adjustments, it can be optimized for better long-term performance. Replacing index funds with actively managed funds, switching to regular plans, and ensuring a balanced portfolio will help you achieve your goal of accumulating Rs 2 crore in 30 years.

Investing in a well-diversified portfolio, guided by a Certified Financial Planner, will ensure that you are on the right path to financial success. Remember to stay disciplined, review your portfolio regularly, and make adjustments as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Hello Sir, I want to become a businesswoman and have ideas for a startup. I know that for a business, having skills is more important than a degree. However, my parents want me to go to university. I have shortlisted two courses and have been selected for them at MIT WPU- BBA LLB and BSc Economics. LLB because I also have an inclination towards civil services. I had discussed with a teacher who said that Bsc Economics will give me a business understanding better than BBA, however, the career opportunities in that are lesser than that of BBA LLB and my initial preference was BBA LLB itself. What will be suitable for me, I am not able to make up my mind? Thank you.
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Hello Sir, Currently I am carrying 13+ years of experience in software industry and leading a team of 10 software developers. I would like to transition into leadership/project management roles in software industry. Could you please share your recommendations on the list of courses/certifications to upskill myself that would help me transition to the leadership roles? Thanks in advance!
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Nitin

Nitin Narkhede  |3 Answers  |Ask -

MF, PF Guru - Answered on Sep 09, 2024

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Can Investment in Gold and Mutual Funds Give High Returns??
Ans: Dear Sumukh,
Thank you for your question about investing in gold and mutual funds. Both of these investment options have their merits, but they work differently and suit different financial goals. Let's explore how they can potentially deliver returns.
1. Gold as an Investment
• Potential Returns: Historically, gold has been seen as a hedge against inflation and currency fluctuations. Over the long term, gold prices tend to rise, but the growth is usually moderate compared to equity-based investments. In the last decade, gold has provided returns averaging 6-8% per year. However, in times of economic uncertainty (like during the pandemic), gold prices surged due to its status as a safe-haven asset.
• Volatility: While gold is a relatively stable investment during periods of economic distress, its prices can be volatile in the short term. It's best suited for long-term portfolios or when you want to diversify and protect your investments from inflation.
• Forms of Gold Investment:
o Physical Gold (Jewelry, Coins, Bars): This involves storage and making charges.
o Gold ETFs or Sovereign Gold Bonds (SGBs): These are better options for investment, offering ease of trading, tax benefits, and interest on SGBs.
2. Mutual Funds as an Investment
• Potential Returns: Mutual funds, especially equity mutual funds, can offer much higher returns than gold over the long term. Over the last 10-15 years, equity mutual funds have provided average returns of 10-15% per annum, depending on the market conditions and the type of mutual fund.
o Equity Mutual Funds have higher growth potential but come with greater risk. These funds invest in stocks of companies, and their performance is directly linked to the stock market.
o Debt Mutual Funds are safer and provide more stable returns (typically 6-8%) but with less growth potential compared to equity funds.
• SIP (Systematic Investment Plan): One of the most popular ways to invest in mutual funds is through SIPs. This method helps mitigate risk through rupee-cost averaging and can lead to substantial returns if done consistently over the long term.
Which One Offers Higher Returns?
• Short-Term Perspective: Gold might offer stability in the short term, but mutual funds, especially equity funds, generally outperform gold when it comes to growth over the long term.
• Long-Term Perspective: Mutual funds, particularly equity mutual funds, are more likely to deliver higher returns over time. Gold can be a good hedge and part of a diversified portfolio, but it's less likely to deliver substantial returns by itself.
Ideal Strategy:
• Diversification: It’s a good idea to diversify your investments between mutual funds and gold. You could allocate a portion of your portfolio (e.g., 10-15%) to gold for safety, while the majority can be invested in mutual funds to maximize growth.
• Risk Profile: If you’re comfortable with market fluctuations, equity mutual funds could be a better choice for high returns. If you prefer safety, a combination of debt mutual funds and gold might be a better strategy.
Conclusion:
• Mutual Funds have the potential to give higher returns than gold, particularly over the long term, thanks to the growth of equity markets. In Mutual funds with High Risk you can earn up to 40% returns, where as at low risk you can get 6 to 9 % returns at debt funds. At Moderate risk you can achive up to 15 to 25% returns.
• Gold, on the other hand, is a safer, long-term investment that can protect against inflation but typically offers moderate returns. Golds can give you on and average of 10 to 15 % return over long horzons.
It’s essential to align your investments with your financial goals, risk tolerance, and investment horizon. You might consider consulting a financial advisor to help create a balanced investment plan.
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Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 09, 2024Hindi
Money
Hi sir, I have net salary of 2.7L per month and am 46 year old with 2 children aged 12 and 6. I have a EPF+PPF corpus of 65 lakhs , NPS 5 lakhs, 1CR in MF portfolio, invest 50k monthly (Which is on Hold currently) in MF SIPs. I own a house 65L(loan free) & another house 2CR have outstanding loans of 1CR. I have family floater medical insurance with 20L coverage and life cover for 1Cr. I wish to retire by age of 55 - pls advise how much corpus do I need at hand to retire. Consider my monthly expense as 1L
Ans: You are 46 years old with a net salary of Rs. 2.7 lakh per month. You have two children, aged 12 and 6, and a current corpus of Rs. 65 lakh in EPF and PPF, Rs. 5 lakh in NPS, and Rs. 1 crore in your mutual fund portfolio. Additionally, you own two properties, one valued at Rs. 65 lakh (loan-free) and another valued at Rs. 2 crore, with an outstanding loan of Rs. 1 crore. Your current monthly expenses are Rs. 1 lakh, and you have paused your monthly SIP of Rs. 50,000. You also hold a life insurance cover worth Rs. 1 crore and a family floater medical insurance with Rs. 20 lakh coverage.

You plan to retire by the age of 55, which gives you approximately nine years to build a sufficient corpus. Let's explore how much you need to comfortably retire while sustaining your current lifestyle.

Estimating Your Retirement Corpus
To determine your retirement corpus, we need to consider several factors:

Current monthly expenses: Rs. 1 lakh
Retirement age: 55
Post-retirement years: Assuming life expectancy of 85 years, you need to plan for 30 years post-retirement.
Inflation rate: An assumed inflation rate of 6% per year is a reasonable estimate for the future.
Growth rate of investments: Typically, diversified equity mutual funds have delivered around 10-12% returns over the long term.
Based on these factors, your current monthly expenses will increase due to inflation, and you need a corpus that generates enough to cover these rising costs. Since your expenses are Rs. 1 lakh today, they could double or triple over time. Your corpus should be able to sustain this without depleting prematurely.

Breakup of Current Assets
EPF & PPF (Rs. 65 lakh): These are stable, low-risk assets that will help you post-retirement but won't generate high returns.

NPS (Rs. 5 lakh): Provides tax benefits and is specifically designed for retirement savings. It will grow over time but is not highly flexible for withdrawals until retirement age.

Mutual Funds (Rs. 1 crore): This is an excellent foundation for your retirement plan. Equity mutual funds, in particular, have the potential to grow at a faster rate and combat inflation.

Real Estate (Rs. 65 lakh + Rs. 2 crore): While real estate holds value, its liquidity is limited. The house you live in does not contribute to your retirement corpus unless you plan to downsize. The second house has a loan of Rs. 1 crore, and the EMIs for this property must be factored into your pre-retirement cash flows.

Life Insurance (Rs. 1 crore): While it’s important for your family’s protection, this doesn’t contribute to your retirement corpus.

Estimating Your Future Monthly Expenses
Your current monthly expense is Rs. 1 lakh, but due to inflation, this figure will increase. Let’s assume the inflation rate remains at 6%. By the time you retire at 55, your monthly expenses will likely double or triple, reaching anywhere between Rs. 1.7 lakh to Rs. 2 lakh per month. Your retirement corpus should be large enough to generate this amount without running out of funds.

In addition, you’ll have to account for:

Healthcare costs: As you age, medical expenses tend to rise. Even though you have Rs. 20 lakh family floater insurance, post-retirement medical costs not covered by insurance should be factored in.

Educational expenses: Your children’s education could be a significant expense over the next 10 to 15 years.

Corpus Required for Comfortable Retirement
To maintain your current lifestyle, you would need a corpus that generates at least Rs. 2 lakh per month during retirement. Based on a withdrawal rate of 4%, which is commonly used to ensure the corpus lasts for the entirety of your retirement, you’ll need a retirement corpus of approximately Rs. 6 to 7 crore.

This corpus will ensure that you can comfortably cover your rising living expenses, healthcare, and other unforeseen costs without depleting your savings.

Recommendations to Achieve the Corpus
Here’s a detailed plan to help you achieve your target of Rs. 6 to 7 crore before retirement:

1. Resume Your SIP Investments
Restart your monthly SIP of Rs. 50,000 immediately. This is crucial, as equity mutual funds can provide the high returns needed to meet your retirement goal.

Consider increasing your SIP contribution each year in line with salary increments. This will accelerate your corpus growth and help you fight inflation more effectively.

2. Focus on Equity Mutual Funds
Given your long-term horizon (9 years until retirement), equity mutual funds remain the best investment option to grow your wealth. These funds have historically provided higher returns (10-12% CAGR), which will be essential for building your retirement corpus.

Ensure your portfolio is diversified across large-cap, mid-cap, and multi-cap mutual funds for balanced growth and risk.

3. Debt Repayment Strategy
You currently have an outstanding home loan of Rs. 1 crore. It’s advisable to clear this debt as early as possible. Carrying such a large debt into retirement can strain your finances.

Use a portion of your liquid assets, such as your mutual fund corpus or any bonuses, to reduce the loan burden gradually. This will free up cash flow and allow you to focus more on building your retirement fund.

4. Maximize Your EPF & PPF Contributions
Continue contributing to your EPF and PPF accounts. While the returns from these are modest, they are low-risk and provide tax-free returns, making them ideal for post-retirement stability.

As PPF matures, consider reinvesting the proceeds into equity mutual funds to capitalize on higher returns.

5. Increase Contributions to NPS
Your NPS balance is currently Rs. 5 lakh. Increase your contributions to this as it provides excellent tax benefits and is tailored for retirement.

NPS is also one of the few products where withdrawals are partially tax-free. Increasing contributions now will give you a more substantial corpus in the future.

6. Prioritize Children’s Education
Plan separately for your children’s education expenses. You might want to use specific child education funds or a combination of mutual funds for this.

Avoid dipping into your retirement savings for education purposes. Set clear boundaries between these two financial goals.

Final Insights
At 46, you are well-positioned financially, but pausing your SIP investments and holding onto a large loan could hinder your retirement plans. Restart your investments and focus on paying off your loan as soon as possible. By maintaining discipline and increasing your contributions to SIPs, NPS, and PPF, you should comfortably achieve your retirement corpus of Rs. 6 to 7 crore. Prioritize growth-oriented investments like equity mutual funds, and continue evaluating your portfolio annually to ensure it aligns with your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

Asked by Anonymous - Sep 03, 2024Hindi
Money
Hello Mr. Ramalingam Good morning. I'm 47 years old, my wife is at 40 and one daughter studying in 8th std. I have an investement in MF worth of 1.8 cr, ULIP of 20 lakhs, Direct equity of 5 lakhs, 1 cr term insurance, 5 lakhs LIC, 30 lakhs FD. Monthly SIP of 65 k in different MF's, accumulated EPF of 40 lakhs, 10 lakhs super annuatation fund. Invested in plot worth of 1 cr and farm land worth of 1.5 cr. No house and no loan. Would like retire by 55 years with monthly income of 2 lakhs / month from investment. Kindly suggest how I can make my finanical plan. Thanks
Ans: Based on your current financial situation and your goal of retiring at 55 with a monthly income of Rs. 2 lakhs, we need to assess your existing investments, future requirements, and how to bridge any gaps in your retirement plan.

Assets You Already Have
You have built a solid foundation of investments, which is impressive. Let’s break down your current assets:

Mutual Fund portfolio: Rs. 1.8 crore
ULIP: Rs. 20 lakhs
Direct equity: Rs. 5 lakhs
Term Insurance: Rs. 1 crore (sufficient for family protection)
LIC: Rs. 5 lakhs (Could be better allocated elsewhere)
Fixed Deposit: Rs. 30 lakhs
EPF: Rs. 40 lakhs
Superannuation Fund: Rs. 10 lakhs
Real Estate Investments: Plot (Rs. 1 crore) and farmland (Rs. 1.5 crore)
Your current SIP of Rs. 65,000 monthly in mutual funds is a good strategy for wealth accumulation.

Assessing Your Retirement Goal
You wish to have Rs. 2 lakhs per month as retirement income starting at 55. Considering inflation, your future expenses will likely be higher than Rs. 2 lakhs, which we must account for in your financial plan. Assuming you retire at 55 and live till 85, your investments need to generate returns for 30 years.

Evaluating Existing Investments
1. Mutual Funds:
Your current MF portfolio of Rs. 1.8 crore is a major asset. Continue with your SIPs to grow this corpus.
You might consider reviewing your fund allocations to ensure diversification across large-cap, mid-cap, and debt funds for stability and growth. Ensure these are actively managed funds, as they typically perform better than index funds over time.
2. ULIP:
ULIPs often have high charges and offer lower returns compared to mutual funds. It would be wise to surrender this policy and reinvest the Rs. 20 lakhs into mutual funds. This will offer better long-term growth for retirement.
3. Direct Equity:
Direct equity investments, while rewarding, are risky, especially as you approach retirement. It’s advisable to either reduce exposure to individual stocks or move to safer large-cap funds or balanced funds to ensure stability.
4. Fixed Deposit:
Rs. 30 lakhs in FD is a safe bet, but it yields lower returns. Consider using a portion of this for debt mutual funds, which offer slightly better returns and are tax-efficient.
5. LIC:
The Rs. 5 lakhs in LIC should be reconsidered, as insurance-based investment products are typically low-yielding. It’s better to surrender and reinvest this in mutual funds or safer investment options that offer higher returns.
6. Real Estate:
Your plot and farmland, though valuable, are illiquid assets. Real estate cannot generate a regular retirement income unless sold or rented out. Ideally, you should not rely on these for monthly income during retirement. Focus on liquid investments that can generate steady cash flow.
Plan for Retirement Income
Here’s how you can plan to generate Rs. 2 lakhs per month during retirement:

1. Continue Your SIPs:
Your monthly SIP of Rs. 65,000 is a good practice. If you can increase this slightly over the next few years, it will help you build a larger corpus for retirement. Aim to have at least Rs. 5-6 crore in liquid assets by the time you retire.
2. Shift to More Conservative Funds Closer to Retirement:
As you approach retirement, gradually move some of your equity-heavy investments into safer debt funds or balanced funds to preserve capital and reduce market risk.
3. Utilize the EPF and Superannuation Fund:
Your Rs. 40 lakhs in EPF and Rs. 10 lakhs in superannuation fund will continue to grow. Do not withdraw this early; allow it to accumulate till your retirement for a sizeable corpus that can act as a fixed-income generator.
4. Create an Income Stream with SWP:
Systematic Withdrawal Plan (SWP) from mutual funds will help you generate a monthly income after retirement. This is tax-efficient and can provide you with the Rs. 2 lakhs you desire. You can gradually withdraw from your mutual fund corpus post-retirement, ensuring your capital lasts for 30 years.
5. Review and Increase Insurance:
Your current term insurance of Rs. 1 crore is adequate for now. Ensure you have it in place till your retirement to protect your family in case of any unforeseen events. No need for further investment in insurance-based products like ULIPs or LIC.
Things to Keep in Mind
Inflation Protection: Rs. 2 lakhs per month today will not hold the same value in the future due to inflation. Plan to increase your SIP amounts and grow your corpus to account for this.

Healthcare Costs: As you age, healthcare expenses might rise. Ensure that your health insurance coverage is sufficient, or consider top-up plans to enhance your coverage.

Reassess Regularly: Financial planning is not a one-time activity. Review your portfolio annually to ensure you are on track and make adjustments based on changing market conditions or personal goals.

Final Insights
You are in a strong financial position and well on your way to a comfortable retirement. However, small changes like surrendering low-return policies and enhancing your mutual fund portfolio can make a significant difference. Focus on building a larger liquid corpus by continuing your SIPs and shifting towards income-generating assets as you near retirement.

Stay disciplined with your investments, and you will likely achieve your retirement goal of Rs. 2 lakhs monthly without financial stress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6253 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 2024

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Money
Sir, I have both Mirae asset Large and Mid cap fund with sip + Mirae asset Large cap fund (sip stopped) Can I make STP or complete SWITCH from Mirae asset large cap fund to Mirae asset large and Mid cap fund. ? is it advisable
Ans: Switching or making a Systematic Transfer Plan (STP) from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be considered based on your financial goals, risk tolerance, and investment strategy.

Factors to Consider:
1. Portfolio Diversification:
Large Cap Fund: Primarily invests in the top 100 companies, which are considered stable and less volatile. It is ideal for those seeking steady returns with relatively lower risk.
Large and Mid Cap Fund: Combines both large-cap (safer, stable) and mid-cap (higher growth potential but riskier) stocks. This offers a balanced approach, with more room for growth but with a bit more risk.
If your goal is to increase exposure to mid-cap stocks for potentially higher growth, an STP or switch to the Large and Mid Cap Fund makes sense. This fund offers a more diversified approach while still having a safety net of large-cap investments.

2. Investment Time Horizon:
Large and mid-cap funds tend to perform better in the long term (5+ years), as mid-caps may take time to realize their full growth potential. If your investment horizon is shorter, sticking with a large-cap fund may be preferable.
3. Risk Appetite:
Mid-cap stocks have higher growth potential but come with increased volatility. If you are comfortable with short-term fluctuations for long-term gains, an STP into the large and mid-cap fund could align with your goals.
4. Performance Track Record:
Both funds from Mirae Asset have strong reputations, but large-cap funds offer more consistent returns with lower downside risks during market corrections. You may want to assess the historical performance and volatility of both funds to see which fits your strategy better.
Why Use STP Instead of a Lump Sum Switch?
Tax Efficiency: An STP allows you to move funds gradually, spreading out tax implications and avoiding a large one-time exit load or capital gains tax.
Risk Mitigation: Instead of moving all your funds at once, an STP reduces the risk of entering at a high point in the market.
Consistent Investment: You continue investing in a disciplined manner, benefiting from rupee cost averaging.
Final Insight:
If your risk profile supports it, and your goal is long-term wealth creation, a STP from Mirae Asset Large Cap Fund to Mirae Asset Large and Mid Cap Fund can be a good option. This allows you to diversify your portfolio while retaining some stability through large-cap exposure.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

...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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