Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 04, 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
Sunil Question by Sunil on Feb 29, 2024Hindi
Listen
Money

Hi sir my ongoing sip in Nippon small cap DG from past 5 years my goal is 1 cr. Sip 25 k pm. When will reach to my goal. Assuming 21% xirr

Ans: It's commendable that you've been diligently investing in SIPs for your financial goals. Given your commitment, here are some tips:

Stay Consistent: Maintain discipline in your SIP investments, as regular contributions over time can yield significant results.
Diversify Wisely: Consider diversifying your portfolio across different asset classes and investment vehicles to spread risk.
Regular Review: Periodically review your investments to ensure they align with your goals and adjust if necessary.
Stay Informed: Stay updated on market trends and economic developments to make informed investment decisions.
Long-Term Outlook: Maintain a long-term perspective with your investments, as short-term fluctuations are part of the journey.
Seek Professional Advice: Consider consulting with a Certified Financial Planner to fine-tune your investment strategy and address any concerns.
Stay Patient: Remember that wealth accumulation takes time, so stay patient and trust in your investment plan.
By following these guidelines and staying committed to your financial objectives, you're on the right path towards achieving your goals. Keep up the good work!
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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 23, 2024

Asked by Anonymous - May 22, 2024Hindi
Listen
Money
Hello sir, I am 28 years old. I have started an SIP of 10,500/month in Nippon India Flexi Cap Fund, and intend to stay invested to next 20-25 years. I also plan to step up the SIP amount every year. What is the rate of return should I be expecting if I stay invested for 25 years and could the corpus amount be close to 20 crores?
Ans: Firstly, congratulations on starting your SIP journey at a young age. Investing Rs. 10,500 per month in the Nippon India Flexi Cap Fund with a long-term horizon of 20-25 years is a commendable decision. Your plan to increase the SIP amount each year shows a disciplined approach towards wealth creation.

Understanding SIP and Expected Returns
What is SIP?
Systematic Investment Plan (SIP) allows you to invest a fixed amount regularly in a mutual fund scheme. This method inculcates financial discipline and helps in averaging the cost of investment over time.

Expected Rate of Return
Mutual funds, especially equity-oriented ones like Flexi Cap Funds, typically have the potential to offer an annual return between 12% to 15% over the long term. However, these returns are not guaranteed and are subject to market risks.

Projecting Future Corpus
Compound Interest and Power of Compounding
Compounding plays a significant role in wealth creation over long periods. The longer you stay invested, the more your money works for you through the power of compounding.

Corpus Estimation
If we assume an average annual return of 12% to 15%, your corpus over 25 years can be significant. Regularly increasing your SIP amount (step-up SIP) further enhances this growth potential.

Benefits of Step-Up SIP
Increasing Your Investment
Step-up SIP involves increasing your SIP amount annually. This approach takes advantage of increasing income over time and ensures that your investment grows at a faster rate.

Inflation Hedge
Increasing your SIP helps combat inflation. It ensures that your real returns are not eroded by the rising cost of living.

Achieving a Rs. 20 Crore Corpus
Realistic Expectations
Achieving a Rs. 20 crore corpus is ambitious but achievable with a disciplined approach. Increasing your SIP amount annually and staying invested for the long term are key strategies.

Scenario Analysis
If you start with Rs. 10,500 per month and increase it by 10% annually, assuming an average return of 12% to 15%, your corpus could potentially reach close to or exceed Rs. 20 crores over 25 years.

Regular Monitoring and Review
Importance of Periodic Review
Regularly reviewing your investments is crucial. It helps ensure that your portfolio remains aligned with your financial goals and risk tolerance.

Rebalancing Your Portfolio
Market conditions change over time. Rebalancing your portfolio ensures that it maintains the desired asset allocation, balancing risk and returns.

Role of a Certified Financial Planner
Professional Guidance
Working with a Certified Financial Planner (CFP) can provide you with tailored advice. They help you stay on track with your financial goals and adjust your strategy as needed.

Avoiding Common Pitfalls
A CFP can help you avoid common investment mistakes, such as reacting impulsively to market volatility or failing to diversify adequately.

Conclusion
Your proactive approach to investing through SIPs in the Nippon India Flexi Cap Fund is commendable. By staying invested for the long term and regularly increasing your SIP amount, you have a strong potential to achieve your financial goals. Regular reviews and professional guidance from a Certified Financial Planner will ensure you remain on track towards building a significant corpus, potentially close to Rs. 20 crores.

Keep focusing on maintaining a disciplined investment strategy and regularly review your portfolio. This approach will help you achieve financial security and wealth creation over time.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 23, 2024

Asked by Anonymous - Jun 23, 2024Hindi
Money
I am 30years old investing monthly in SIPs as follows: 5000 in aditya birla sun life PSU equity direct fund, 3000 in nippon india small cap fund direct growth, 5000 in icici prudential infrastructure direct growth 4000 in quant small cap fund direct growth paln, 5000 in nippon large cap fund, 5000 in canara robeco equity hybrid fund regular. Apart from the above I have invested bulk 24k in invesco india psu india equity fund direct And 50k n 60k in canara manufacturing NFOs. My goal is to have 1cr, for how many years do i need to continue investing for me to reach my goal
Ans: It’s great to see that you are actively investing and planning for your financial future. Reaching a goal of Rs 1 crore is ambitious and achievable with disciplined saving and smart investment strategies. Let’s break down your investment journey and evaluate how to reach your goal.

Understanding Your Current Investments
Your current SIPs and lump sum investments are quite diverse. Here’s a snapshot of your monthly investments:

Rs 5,000 in a PSU equity fund.
Rs 3,000 in a small-cap fund.
Rs 5,000 in an infrastructure fund.
Rs 4,000 in another small-cap fund.
Rs 5,000 in a large-cap fund.
Rs 5,000 in a hybrid equity fund.
You have also invested:

Rs 24,000 in a PSU equity fund.
Rs 50,000 and Rs 60,000 in manufacturing NFOs.
This diversification is beneficial but needs a strategic review.

Evaluating Your Portfolio
Your portfolio leans towards sector-specific funds (PSU, infrastructure) and small-cap funds. While these can generate high returns, they also carry higher risks. Let's evaluate the pros and cons of your investment choices.

Pros:

High Growth Potential: Small-cap and sector-specific funds can offer significant returns during market uptrends.
Diversification: Investing in different sectors spreads risk.
Hybrid Fund: Provides a mix of equity and debt, balancing growth and stability.
Cons:

High Volatility: Small-cap and sector-specific funds are more volatile and risky.
Sector Concentration Risk: Heavy investment in specific sectors can be risky if those sectors underperform.
Lack of Stability: Lack of significant investments in more stable, large-cap funds.
Actively Managed Funds vs. Index Funds
While actively managed funds can potentially offer higher returns, they come with higher management fees. However, their benefits often outweigh the disadvantages of index funds.

Disadvantages of Index Funds:

Passive Management: Index funds simply replicate the index without any strategic adjustments.
Market Dependency: They perform in line with the market, offering no downside protection.
Limited Flexibility: No room for fund managers to capitalize on market inefficiencies.
Advantages of Actively Managed Funds:

Professional Management: Fund managers make strategic decisions to outperform the market.
Flexibility: Ability to adapt to market changes and economic conditions.
Potential for Higher Returns: Active management can potentially yield better returns.
Disadvantages of Direct Funds
Direct funds might have lower expense ratios, but regular funds come with the benefit of professional guidance.

Disadvantages of Direct Funds:

No Professional Guidance: You miss out on the expertise of a Certified Financial Planner.
DIY Approach: Requires more personal research and time investment.
Risk of Poor Decisions: Without professional advice, there's a higher risk of poor investment choices.
Benefits of Regular Funds:

Expert Advice: CFPs provide tailored advice based on your financial goals.
Portfolio Management: Ongoing monitoring and rebalancing of your portfolio.
Stress-free Investing: Less effort required from your side in managing investments.
Projecting Your Goal Achievement
To reach Rs 1 crore, you need a strategic plan. Assuming an average annual return of 12%, which is a reasonable expectation for a diversified equity portfolio, let’s estimate the timeframe.

Your current SIP investment totals Rs 27,000 per month. The lump sum investments add another dimension. Here’s a breakdown:

Monthly SIP: Rs 27,000
Lump Sum: Rs 1,34,000
Long-term Investment Horizon
Given your current investments, let's assess how long it might take to reach Rs 1 crore.

Investment Growth Factors:

Consistent SIPs: Continuing your Rs 27,000 monthly SIP.
Market Performance: Assuming an average annual return of 12%.
Regular Review: Adjusting your portfolio as needed with professional advice.
Detailed Investment Strategy
Reevaluate Sector-specific Funds:
Sector funds can be volatile. Consider balancing them with more stable, diversified funds.

Increase Large-cap Exposure:
Large-cap funds offer stability. They should form a core part of your portfolio.

Hybrid Funds for Stability:
Continue with hybrid funds for a balanced approach.

Regular Monitoring:
Have a CFP regularly review and rebalance your portfolio.

Tax Efficiency and Savings
Consider the tax implications of your investments. Equity funds held for over a year are subject to long-term capital gains tax, which is lower than short-term. Utilize tax-saving funds like ELSS to benefit from Section 80C deductions.

Benefits of a Certified Financial Planner (CFP)
A CFP can provide invaluable assistance:

Tailored Advice: Aligning investments with your financial goals.
Risk Management: Balancing risk and return effectively.
Portfolio Rebalancing: Adjusting investments based on market conditions.
Adjusting Your Investment Strategy
To optimize your journey towards Rs 1 crore:

Diversify Wisely: Balance high-risk, high-reward investments with stable ones.
Focus on Long-term Growth: Prioritize long-term potential over short-term gains.
Leverage Professional Guidance: Utilize a CFP for informed decision-making.
Final Insights
To summarize:

Maintain and Review: Keep your current SIPs but consider diversifying further.
Adjust Sector Exposure: Reduce concentration in sector-specific funds.
Increase Stability: Add more large-cap and hybrid funds.
Utilize Professional Help: Regularly consult a CFP for portfolio adjustments.
Stay Committed: Continue disciplined investing and regular reviews.
Achieving Rs 1 crore is possible with consistent investing, strategic diversification, and professional guidance. Stay committed to your financial goals and regularly reassess your strategy to ensure you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 16, 2024

Asked by Anonymous - Oct 16, 2024Hindi
Listen
Money
Sir my age 40 years how much amount invest in sip after 20 years got 5 cr.
Ans: At the age of 40, you are in a great position to start planning for your financial future. Achieving Rs 5 crore in 20 years is definitely possible with disciplined investments. To achieve this goal, investing through SIPs (Systematic Investment Plans) in equity mutual funds can be your best option. Let’s dive into how much you need to invest and how to plan it right.

How Much Should You Invest?
To accumulate Rs 5 crore in 20 years, you need to invest regularly in equity mutual funds. Over long periods, these funds tend to offer higher returns, typically around 10-12% annually.

If we assume a return of 12% per year, you might need to invest around Rs 50,000 per month in SIPs to reach your goal of Rs 5 crore in 20 years.

Now, Rs 50,000 may seem high, but remember, you can start smaller and gradually increase your SIPs. Let’s look at how this can be done.

Start Small, Increase Over Time
If you cannot invest Rs 50,000 right away, don’t worry. You can start with a smaller amount, like Rs 20,000 or Rs 30,000 per month. Then, increase your SIPs every year by a certain percentage, like 10%. This approach is called SIP Top-up, and it allows you to invest more as your income grows. By doing this, you’ll eventually reach the required monthly investment over time.

Why Choose Actively Managed Mutual Funds?
You might wonder, “Why should I choose actively managed funds over index funds or direct mutual funds?”

Actively managed mutual funds are managed by professional fund managers who constantly monitor and adjust the fund’s portfolio. This allows them to perform better in volatile markets. Index funds, while cheaper, do not have this flexibility, which could limit your returns in the long run.

Investing through a Certified Financial Planner who can guide you with regular funds is also a safer option than going for direct mutual funds. The expertise of a CFP ensures your portfolio is well-diversified, managed effectively, and aligned with your financial goals.

Avoiding Direct Funds
Direct mutual funds may seem appealing due to lower costs, but they lack professional guidance. Without a CFP or professional manager, you might miss crucial market signals or fail to rebalance your portfolio at the right time. Investing in regular funds with the help of a Certified Financial Planner ensures that your investments are optimally managed.

Diversify Your Investments
While equity mutual funds should form the majority of your portfolio for growth, it’s essential to diversify your investments across different categories. This could include:

Equity Mutual Funds for long-term growth.

Debt Funds for stability and to reduce risk as you approach your target.

This diversification will protect your investments from market volatility and give you a more balanced portfolio.

Tax Implications of Mutual Funds
Understanding the tax rules is crucial to managing your investments efficiently.

Equity Mutual Funds: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Funds: Both LTCG and STCG are taxed as per your income tax slab.

Knowing these tax rates can help you plan your withdrawals and avoid unnecessary tax burdens.

Key Points to Stay Focused On
Discipline: Make sure to invest every month without skipping your SIPs. Over time, your money will grow, and even small amounts will compound into a larger corpus.

Don’t Panic: Markets can be volatile. However, do not panic and withdraw during market corrections. Stay invested for the full 20 years to reap the benefits of compounding.

Review Regularly: Meet with your Certified Financial Planner at least once a year to review your portfolio. This ensures you stay on track and make adjustments as needed.

Final Insights
At the age of 40, investing Rs 50,000 per month in equity mutual funds through SIPs can help you accumulate Rs 5 crore in 20 years. If this amount seems high initially, start smaller and increase your SIPs each year. Avoid index funds and direct mutual funds to ensure you get the best professional advice and fund management.

Focus on disciplined investing, avoid panic during market fluctuations, and diversify your portfolio for stability.

Best Regards,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 24, 2024

Money
Hello Sir, My Age is 31 From This Month, I started my SIP Details r as below 1). SBI Small Cap Fund Direct Growth 2K 2).Tata Small Cap Fund Direct Growth 2k 3).HDFC Health Care and Pharma Fund Direct Growth 2k 4). Motilal Oswal Midcap Fund Direct Growth 3L. Lumsum (One Time Investment) Above listed my investment is Good Or Required any Changes, kindly suggest I want to build my corpus 2 cr in another 15 year & how much I have to invest more to achieve Target. From- Gangadhar C.
Ans: At 31, you have plenty of time to grow your wealth, and it’s good to see that you’ve already started investing. You have specific goals, and it’s crucial to evaluate your investments and align them with your long-term objectives.

Let’s assess your current investments, their potential, and what adjustments may be required to achieve your goal of building a Rs 2 crore corpus in the next 15 years.

Overview of Your Current Investments
You’ve made investments in the following areas:

SBI Small Cap Fund (SIP of Rs 2,000)
Tata Small Cap Fund (SIP of Rs 2,000)
HDFC Health Care and Pharma Fund (SIP of Rs 2,000)
Motilal Oswal Midcap Fund (Lump sum of Rs 3 lakhs)
Let’s break down each category to see how it fits into your overall financial plan.

Analysis of Your Investments
Small Cap Funds (SBI and Tata): Small cap funds can offer high returns but also come with higher risk. They can be volatile in the short term but have the potential to deliver strong growth over a long period. You’ve allocated Rs 4,000 per month in small cap funds, which is a fairly aggressive strategy.

Sectoral Fund (HDFC Health Care and Pharma): Sectoral funds focus on specific industries and are much riskier than diversified funds. Healthcare and pharma can perform well during certain cycles, but they may underperform in others. It’s important not to overexpose yourself to one sector, as it can reduce diversification.

Midcap Fund (Motilal Oswal Midcap, Rs 3 lakh lump sum): Midcap funds are typically less risky than small cap funds and can provide a balance of growth and stability. Your lump sum investment in midcap funds adds a layer of diversification to your portfolio. It’s a good choice, but let’s see if your overall allocation aligns with your goal.

Suggestions for Improvements
Your current portfolio is focused heavily on small caps and a sectoral fund. While these investments can offer good returns, they come with high risks, especially when overexposed to volatile segments like small caps and sectoral funds. Let’s consider some improvements.

1. Reduce Exposure to Small Cap Funds
You have Rs 4,000 invested in small cap funds. While small caps have growth potential, they are more prone to market fluctuations. A small cap-heavy portfolio can be risky, especially when aiming for long-term stability.

Suggestion: Consider reducing your allocation to small cap funds to balance your risk. You could diversify into more stable options like flexi-cap or large-cap funds. These funds invest in companies across various market capitalisations, offering more stability while still providing growth opportunities.

2. Diversify Away from Sectoral Funds
Sectoral funds, like the HDFC Health Care and Pharma Fund, carry concentrated risk as they depend on the performance of a single sector. While the healthcare sector has potential, it may not always perform consistently over the long term.

Suggestion: Instead of investing Rs 2,000 monthly in a sectoral fund, consider moving some of this money to a diversified equity fund that invests across sectors. This will reduce your risk and give you more balanced exposure to the overall market.

3. Continue with Midcap Fund but Stay Balanced
Your one-time investment of Rs 3 lakhs in the Motilal Oswal Midcap Fund provides a good balance between growth and risk. Midcap funds tend to perform well over the long term but are also less volatile than small cap funds.

Suggestion: Keep this midcap investment intact, but make sure you monitor its performance and adjust it if needed. Avoid making additional lump sum investments into the same fund, as it’s essential to maintain diversification.

Building a Rs 2 Crore Corpus in 15 Years
To achieve your target of Rs 2 crore in 15 years, you need to assess if your current investments will grow at a pace that will help you reach this goal. While small caps and midcaps can deliver good returns, relying heavily on them may not provide the required stability over the long term.

Estimated Additional Investment Required
Based on a reasonable rate of return for a balanced portfolio, you will need to invest more than your current Rs 6,000 SIP. Considering the Rs 3 lakh lump sum you’ve invested, you may need to increase your SIP by another Rs 7,000 to Rs 10,000 per month, depending on how much risk you’re willing to take and the potential returns.

If you increase your SIP by Rs 8,000 to Rs 10,000 and invest consistently in a balanced portfolio, you will have a better chance of reaching your goal of Rs 2 crore in 15 years.
Asset Allocation and Diversification Strategy
To build a robust portfolio, diversification is key. Here’s a suggested allocation to achieve your financial goals while managing risk effectively:

Large Cap Funds (40%): Large-cap funds provide stability and steady growth. They invest in established companies with lower volatility compared to mid and small cap funds. Allocating a portion of your funds to large caps will ensure stability in your portfolio.

Midcap Funds (30%): Midcap funds offer higher returns than large caps, but with more risk. Your Rs 3 lakh investment in the Motilal Oswal Midcap Fund is already in place, which is a good starting point.

Flexi-cap Funds (20%): Flexi-cap funds offer flexibility by investing in companies across market caps. They balance growth and risk and are a good option for long-term growth.

Small Cap Funds (10%): Keep a small allocation to small caps as they can deliver high returns. However, reduce your SIP contribution to small caps from Rs 4,000 to around Rs 2,000 per month to limit exposure to risk.

Why Actively Managed Funds Are Better Than Index Funds
Index funds follow the market passively and may not provide downside protection during market downturns. Actively managed funds, on the other hand, have the potential to outperform the market, as fund managers can make adjustments based on market conditions. They also offer better risk management, which is crucial for long-term wealth creation.

Disadvantages of Direct Plans
Direct mutual fund plans do not offer the guidance and expertise of a Certified Financial Planner (CFP). Investing through a CFP allows you to get professional advice and ongoing portfolio management. A regular plan with the assistance of a CFP ensures that your investments are aligned with your financial goals, and any necessary adjustments are made over time. The slight extra cost of regular plans is worth the expert guidance you receive.

Tax Implications
Equity Mutual Funds: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, and short-term capital gains (STCG) are taxed at 20%. Keep these tax rules in mind while planning your withdrawals.
Final Insights
Diversify Your Portfolio: Move away from sectoral and small-cap-heavy investments. Increase exposure to large-cap and flexi-cap funds for better balance.

Increase Your SIP: To achieve your Rs 2 crore goal, you need to increase your SIP by at least Rs 8,000 to Rs 10,000 per month.

Monitor Your Portfolio: Review your investments regularly with the help of a Certified Financial Planner (CFP). This will ensure that your portfolio remains aligned with your financial goals.

Avoid Direct Plans: Continue investing through a CFP to benefit from professional advice and portfolio management.

Tax Planning: Be mindful of the tax implications of your investments to optimise your returns and minimise taxes.

By making these adjustments, you’ll be in a strong position to reach your goal of Rs 2 crore in 15 years.

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2025

Money
Hi Sir, I am 32 years old, married and have a 4 month old daughter. I am working in a defense based private company. I earn 53K in hand. My monthly expenses come to around 20K. I have just started investing in mutual funds and doing a SIP of Rs.8000 per month. I have invested around 1.5 lakhs across multiple funds by now. I also have around 1.2lakhs in my EPFO account. I have saved 20K per month for my daughter for the past year which totals around 2 lakhs right now which I want to invest in her name for the long term. Besides these, I do not own any assets or have any liabilities as of now. Please suggest where to invest the amount I have saved for my daughter for best returns. And also please suggest how to plan for my retirement considering similar monthly expenditure with addition of daughters education and marriage.
Ans: You are in a very important phase of life. At 32, with a young child and a steady income, you have made a solid beginning. Your habit of saving and investing early will give you a big edge. Your family is depending on you, and your discipline will secure their future.

Let’s look at everything in a structured and simple way.

? Understanding Your Current Financial Situation

– Your income is Rs.53000 in hand.
– You spend Rs.20000 monthly.
– You save and invest the rest, which is very good.
– You already do SIP of Rs.8000 per month.
– You have Rs.1.5 lakhs in mutual funds.
– You have Rs.1.2 lakhs in EPFO.
– You have Rs.2 lakhs saved for your daughter.
– You have no loans.
– You have no assets like house or gold.

This is a healthy start. You are already spending only 40% of your income. That gives room to build wealth. Now, let us look at what to do next.

? Investing Your Daughter’s Rs.2 Lakhs: Long-Term View

This is for your daughter’s future. Likely uses could be higher education or marriage. Both are long-term goals.

– She is only 4 months now.
– You have 15 to 20 years time.
– This gives scope for growth-based investing.

Here’s what you can do:

– Invest this Rs.2 lakhs in 2 or 3 equity mutual funds.
– Choose actively managed funds for better long-term returns.
– Avoid index funds. They only copy the market and don’t beat inflation.
– Actively managed funds have expert fund managers.
– They adjust based on market opportunities.
– Over 15 years, they usually outperform index funds.

Also,

– Use Regular Plans through a CFP-backed Mutual Fund Distributor.
– Avoid Direct Plans unless you can manage and review investments on your own.
– Direct plans don’t provide support, review, or portfolio balancing.
– Regular Plans through a Certified Financial Planner help you stay disciplined.
– A qualified planner monitors the market and guides rebalancing.
– You avoid costly emotional mistakes.

Strategy for daughter’s funds:

– Divide Rs.2 lakhs across 2 or 3 good equity mutual funds.
– Stay invested for 15 years minimum.
– Do not withdraw in between.
– Review yearly with help of Certified Financial Planner.
– This can grow into a good education or marriage corpus.

Also, since you are already saving Rs.20000 every month for her, keep it up.
Even Rs.5000 or Rs.10000 monthly in SIP for her will make a big difference over time.

? Planning Your Retirement: Long-Term but Needs Focus

Retirement planning should start now. You have time, but the earlier, the better.

– You are 32 now.
– You can aim to retire at 60.
– That gives you 28 years to save.
– But inflation reduces the value of money.
– So Rs.20000 expenses today will grow a lot by retirement.

You need to plan for:

– Your own expenses after retirement
– Your wife’s needs
– Medical costs in old age
– Travel and emergencies
– No income after retirement

What you should do:

– Increase your SIP gradually as income rises.
– Right now, you invest Rs.8000 in mutual funds.
– Increase it by Rs.1000 every year.
– Also start a new SIP only for retirement.
– Separate from daughter’s goal.

Why equity mutual funds help:

– Equity mutual funds beat inflation over long term.
– They build wealth over 20+ years.
– Don’t choose debt mutual funds for retirement goals.
– Debt funds give stable returns but low growth.
– They are good for short-term goals.

Continue EPFO contribution:

– EPFO is a good long-term tool.
– It gives safe and tax-free corpus at retirement.
– Don’t withdraw EPF for other uses.
– Let it grow till retirement.

? Tracking Your Monthly Budget and Investing Discipline

Your expenses are only Rs.20000.
You save nearly Rs.30000 each month.
This gives you enough to grow wealth for all goals.

– Continue SIP of Rs.8000 or increase it.
– Start SIP of Rs.5000 for daughter.
– Start SIP of Rs.5000 for retirement.
– Keep Rs.5000 to Rs.7000 for emergency savings.
– Maintain Rs.1 lakh as emergency fund.
– Park it in liquid fund or FD for easy access.

This way:

– You cover child’s needs.
– You build retirement wealth.
– You stay ready for emergencies.

? Life Insurance and Health Insurance: Non-Investment but Vital

These are not investments. But they are must-haves.
They protect your family and finances from sudden shocks.

– Buy a term insurance of Rs.50 lakhs to Rs.1 crore.
– Choose only pure term insurance.
– Do not take ULIPs or endowment policies.
– They give low returns and high costs.
– If you already have such products, you may consider surrendering.
– Reinvest that amount in mutual funds.

– Also buy family floater health insurance.
– You, your wife and daughter should be covered.
– Minimum Rs.5 lakhs coverage.
– Health costs rise every year.

? Education and Marriage Planning for Daughter

These are big goals. But they are long-term, so time is your friend.

Education Planning:

– Higher education needs large funds.
– Start a separate SIP of Rs.5000 per month.
– Use equity mutual funds.
– Review every year and increase SIP.
– Don’t touch this investment for any other need.

Marriage Planning:

– This is 20+ years away.
– You can use lumpsum investments here.
– The Rs.2 lakhs you saved can be for this.
– Also, build this goal slowly after education fund is stable.

Do not mix marriage and education planning.
Treat them as two different goals.

? Building Assets for Financial Stability

You currently do not have any physical assets. That’s not a problem.

Focus on building financial assets.

– Mutual funds are liquid and can grow well.
– EPFO adds stability and long-term safety.
– Emergency fund ensures peace of mind.
– Term insurance covers family needs.
– Health insurance protects savings.

Stick to these. Do not get distracted by gold or real estate.

Real estate has low liquidity and high maintenance.
Also, resale or rental is not easy and returns are uncertain.

? Why You Should Avoid Index Funds

Index funds may look cheap. But they have limitations.

– They only copy the market index like Nifty.
– They don’t outperform the market.
– In falling markets, they fall fully.
– No active fund manager to manage risk.
– Inflation can beat index fund returns.

On the other hand:

– Actively managed funds have experienced managers.
– They reduce exposure to weak sectors.
– They increase exposure to strong sectors.
– Over long term, they create better value.

Always go with active mutual funds through a CFP-led advisor.
They help you rebalance and stay on track.

? Why Direct Mutual Funds Are Not Ideal

Direct funds have low expense ratio. But they lack guidance.

– No help with fund selection.
– No review or rebalancing support.
– No risk profiling.
– No hand-holding during market falls.

Investors often panic or stay emotional.
This hurts long-term returns.

On the other hand:

– Regular plans give guidance.
– Through Certified Financial Planner, you get yearly reviews.
– You get portfolio alignment based on goals.
– Mistakes are avoided.

The slightly higher cost is worth the value it brings.
Long-term discipline beats small cost difference.

? What To Review Every Year

Every year, review these points:

– SIP amount and growth
– Fund performance
– Daughter’s goal progress
– Retirement corpus projection
– Changes in income or expenses
– New responsibilities or medical needs
– Emergency fund adequacy

Your planner can guide this review well.
This ensures all your goals stay on track.

? Finally

You are doing very well for your stage in life.

– You have no loans.
– You are disciplined in savings.
– You are planning for your daughter.
– You are thinking of retirement.

This mindset will help you build wealth peacefully.

Follow these steps:

– Stay invested for long term.
– Don’t chase returns.
– Review yearly.
– Invest goal-wise.
– Increase SIPs as income grows.
– Avoid distractions like gold and real estate.
– Avoid mixing insurance and investment.
– Take professional help where needed.

With this, you can confidently build your financial future.

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

...Read more

Ramalingam

Ramalingam Kalirajan  |9736 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2025

Money
Sirji I had claimed 54 F last financial year ie 2023-24 of Rs. 74,58,474 shares sold on 10/08/2023 flat purchased on 25/08/2023 I purchased another flat in FY 2024-25 on 18/11/2024 . since i have purchased another flat ( on 18/11/2024 ) within TWO years of sale of original asset ( sold on 10/08/2023) Undertsand that the LTCG caimed in last fy 23-24 of rs 74.58 lacs will be disallowed and added back to fy 24-25 income QUERRY - Since the sale of shares transaction took place before 23 july 2024 ( on 10/08/2023) will I be taxed at 10 % LTCG tax ?? Or at 12.50 % since the condition was broken on 18/11/2024( after 23 rd July 2024) Regards Narayanan
Ans: ? Your Transaction in Brief

– You sold listed shares on 10th August 2023.
– You claimed exemption under capital gains against purchase of a flat on 25th August 2023.
– You have now bought another flat on 18th November 2024.
– You are aware this may disallow the earlier exemption of Rs. 74.58 lakhs.
– You are rightly asking if tax will be 10% or 12.5%.

This is a very thoughtful and forward-looking question. Let’s decode it point by point.

? When is the Exemption Reversed?

– Capital gains exemption is condition-based.
– One such condition is – you should not buy another residential flat within 2 years.
– You violated this condition on 18th November 2024.
– So, the exemption taken earlier gets reversed.
– The amount of Rs. 74.58 lakhs becomes taxable again.
– This reversal happens in the financial year when condition is broken.
– So, this income will be added back in FY 2024-25.

? Which Tax Rate Will Apply on this Reversed LTCG?

– You sold shares in August 2023, that is before 23rd July 2024.
– This date is very important for taxation rules.
– The new LTCG rate of 12.5% is applicable only for transactions on or after 23rd July 2024.
– Your original transaction happened before this cut-off.
– Hence, the older LTCG tax rule of 10% applies in your case.

So, even though the exemption is reversed now, tax rate remains at 10%.
This is because the transaction date is the deciding factor.
Not the date of exemption being withdrawn.
So your understanding is correct, and that’s appreciated.

? Should You Worry About Indexation or STCG?

– No. Since shares were held for more than 1 year, it is clearly LTCG.
– Short-term capital gain rules will not apply here.
– Also, no indexation benefit is available for equity shares.
– But 10% rate on LTCG above Rs. 1 lakh is fair and reasonable.

? How Will This Affect FY 2024-25 Tax Filing?

– The Rs. 74.58 lakhs will now show as LTCG income in FY 2024-25.
– You should report this under capital gains section in ITR.
– Pay advance tax on this if not yet paid.
– Otherwise, you may end up paying interest under sections 234B and 234C.
– Please coordinate with your Chartered Accountant for the tax filing part.

This is important to keep your records clean and avoid scrutiny.

? Will This Impact Your Overall Financial Goals?

– A one-time tax outgo of 10% on Rs. 74.58 lakhs = approx. Rs. 7.45 lakhs.
– If you had planned this well, it can be absorbed easily.
– But if not planned, it could dent liquidity.
– You should relook at your emergency corpus and contingency planning.
– A Certified Financial Planner can help rebalance your goals accordingly.

? Why This Tax Rule Exists – An Insight

– The law allows you to reinvest LTCG into one residential flat.
– This benefit is to encourage home buying, not to speculate.
– That’s why, buying another home within 2 years is seen as a misuse.
– So exemption is withdrawn and LTCG is added back.
– This keeps the rule balanced and fair for all taxpayers.

? Should You Surrender Insurance Policies if Any?

– If you have ULIPs or traditional LIC policies with investment tag, please review.
– These give very low return and poor flexibility.
– If they are more than 5 years old, you may surrender them.
– Reinvest those amounts in mutual funds through a MFD-CFP route.
– That can give you better return, liquidity and transparency.

? Why Not to Go for Direct Mutual Funds?

– Direct funds look cheap, but they come with risks.
– No guidance, no risk-mapping, no goal alignment.
– They expose you to poor fund selection and wrong SIP allocation.
– MFD with CFP gives handholding and better fund filtration.
– Also, regular plans have built-in advisory value.
– This cost is worth paying for financial peace.

? Why Index Funds Are Not the Best Route

– Index funds are passive. They just follow market trend.
– They don’t outperform or give alpha returns.
– In volatile or falling markets, they give poor protection.
– They don’t adapt to sectoral changes or economic cycles.
– Actively managed funds adjust portfolio as per market moves.
– They have research backing, fund manager intelligence, and alpha generation.

In your case, where capital gains are involved, risk-managed returns are key.
So actively managed funds through regular route is more suitable.

? How to Absorb This LTCG Tax Impact

– Start an SIP-based STP to gradually invest surplus in balanced mutual funds.
– Create a buffer fund equal to 6 months’ living expenses.
– Maintain a separate fund for LTCG tax impact of Rs. 7.45 lakhs.
– Don't keep it in equity or risky instruments.
– Use ultra-short or low duration fund for this.

? Tax Planning Insight for You Going Ahead

– Before taking exemption, always review lock-in and restriction period.
– Never buy second property within 2 years unless you're ready to pay tax.
– Document all property purchases and sales in a simple Excel sheet.
– Keep timelines and lock-in periods marked.
– This avoids surprises and ensures smooth tax planning.

Also, keep your CA and Certified Financial Planner in sync.
They must work as a team for your financial health.

? What Could Have Been Done Differently

– You could have waited beyond 2 years to buy second property.
– Or, you could have avoided claiming exemption initially.
– Then invested gains in active mutual funds and booked 10% tax.
– This could have kept your financial strategy more flexible.
– But yes, past cannot be changed. Let’s focus ahead.

You still have ample time to plan FY 2024-25 tax outflow.
You’ve also gained clarity from this experience. That itself is an asset.

? What Should Be Your Next Steps

– Set aside Rs. 7.45 lakhs for LTCG tax.
– Inform your CA in advance for FY 2024-25 tax projection.
– Avoid buying another residential property again for next few years.
– Reassess your long-term asset allocation.
– Avoid ULIPs, traditional LICs, direct funds and index funds.
– Stay focused on goal-based MF portfolio managed via MFD with CFP.

? Finally

You are thinking ahead and keeping track of taxation. That is highly appreciated.
You have acted with good intent. The tax law has its own constraints.
But this clarity now gives you the power to act wisely.
Take a few right steps today, and you can still stay fully on track.
Please don’t panic. The 10% rate is a relief in this scenario.
Keep your documents clean and your CA informed.

For your long-term wealth journey, stay with a Certified Financial Planner.
They will help you stay aligned to your goals, taxes and peace of mind.

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x