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Ramalingam

Ramalingam Kalirajan  |7206 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 24, 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
Rahul Question by Rahul on Jan 02, 2024Hindi
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Sir i have Parag Parikh Flexicap, Sbi Mid cap & Axis Small cap fund each with 5k total 15k per month sip for 25 year's and 10 percent step up every year I want 10 crores for my retirement, is this portfolio Good..? I am 33 year's old ????

Ans: At 33, you're in a great position to plan for your retirement with a long-term perspective. The funds you've chosen offer a diversified mix across different market caps, which is a good start. But let's ponder a few questions together.

Firstly, have you considered the potential volatility that comes with mid-cap and small-cap funds? While they offer higher growth potential, they can be more volatile. Are you comfortable with potential fluctuations in your investment journey?

The step-up in SIPs is a smart move to increase investments over time, but have you accounted for the impact of inflation and its erosion on purchasing power? It's essential to factor this in to ensure your target of 10 crores is adjusted for the future value of money.

Lastly, while 10 crores is a significant amount, is it aligned with your expected expenses during retirement? Have you factored in lifestyle choices, healthcare, and other post-retirement commitments?

Remember, the journey to 10 crores isn't just about the funds you pick but the consistency, discipline, and adaptability in your investment approach. A Certified Financial Planner can help fine-tune your strategy and navigate the challenges ahead.
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  |7206 Answers  |Ask -

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

Money
Sir i have Parag Parikh Flexicap, Sbi Mid cap & Axis Small cap fund each with 5k total 15k per month sip for 25 year's and 10 percent step up every year I want 10 crores for my retirement, is this portfolio Good..? I am 33 year's old ????
Ans: It is great that you have a well-structured SIP plan in place for your retirement. Starting early gives you a significant advantage, as your investments will benefit from compounding over time. Your goal of accumulating Rs 10 crores by retirement at 33 years of age is both ambitious and achievable with the right strategy.

However, let us take a 360-degree view of your portfolio and evaluate it across multiple parameters.

1. Diversification of Portfolio
You have invested in Flexi-cap, Mid-cap, and Small-cap funds. This diversification across different market capitalizations is smart because:

Flexi-cap funds invest across all types of companies, ensuring flexibility in capturing growth from various sectors.

Mid-cap funds focus on companies that have significant growth potential, though they may carry higher volatility.

Small-cap funds are riskier but can yield high returns over a long horizon.

However, your portfolio seems tilted toward higher-risk categories (mid-cap and small-cap). Although it increases potential returns, the volatility could cause significant short-term fluctuations. You may want to ensure some allocation in large-cap funds, which offer stability. Large-cap funds perform well in market downturns, helping cushion your portfolio's overall risk.

Insight: Adding a large-cap component or hybrid funds could bring more balance and reduce volatility in market downturns.

2. SIP Step-Up Strategy
Your decision to step up SIP contributions by 10% each year is a solid plan to combat inflation and meet long-term goals. Stepping up ensures that you keep increasing investments as your income grows, which will be essential in reaching your Rs 10 crore target.

Insight: Continue increasing your SIPs consistently. Ensure that your step-up rate matches your income growth to keep pace with rising expenses.

3. Regular vs Direct Funds
You have mentioned your investments but not the type of funds—whether they are direct or regular. It is worth noting that direct funds come with lower expense ratios but require active monitoring.

If you are going through a Certified Financial Planner (CFP), it is better to opt for regular funds. A CFP can guide you based on market conditions and financial goals. They help optimize your returns while ensuring disciplined investing.

Insight: Direct funds may seem attractive with lower fees, but without professional advice, you could miss out on timely rebalancing. Regular funds, invested through a trusted CFP, ensure more personalized management of your portfolio.

4. Assessing 25-Year Horizon for Rs 10 Crores
Your portfolio's return will depend on the market performance over the long term, and the funds you have selected generally aim for higher growth. Historically, equity mutual funds, particularly small-cap and mid-cap funds, have offered high returns but with more volatility. While 10% step-up and 25 years of disciplined investing create strong prospects for achieving Rs 10 crores, you will need to:

Monitor performance periodically: Your funds need periodic rebalancing to align with market conditions. If any underperform, you may need to switch to better-performing funds.

Account for taxation: The Long Term Capital Gains (LTCG) tax on mutual funds is an important factor to consider. For equity mutual funds, LTCG above Rs 1.25 lakh is taxed at 12.5%, while Short Term Capital Gains (STCG) are taxed at 20%. As your portfolio grows, the tax liability will also increase.

Insight: Be aware of tax impacts on your withdrawals closer to retirement, and consider switching funds if needed to ensure optimal returns.

5. Consideration of Market Conditions
The performance of mid-cap and small-cap funds is heavily reliant on market conditions. In bull markets, these funds tend to outperform, while in bear markets, they can drop significantly.

Equity market volatility: Over 25 years, you will likely see both significant market booms and corrections. Having a strategy in place to weather market downturns is crucial.

Focus on consistent investing: Avoid timing the market or making impulsive changes during market corrections. Continue your SIPs during both bullish and bearish phases, as this will average out the buying price of your units.

Insight: Consider market downturns as opportunities to accumulate more units at lower prices through SIPs. Resist panic selling during corrections.

6. Flexibility and Adjustments Over Time
You have 25 years until retirement, which is a long horizon. In that time, your financial situation, risk tolerance, and market conditions will change. It is essential to:

Review and rebalance annually: At least once a year, review your portfolio with your CFP to ensure it aligns with your goals and adjust based on performance.

Reallocate closer to retirement: As you approach retirement, move some of your investments into safer assets (like large-cap funds or hybrid funds) to lock in the gains you have made and protect against volatility in the final years.

Insight: Flexibility in your financial plan is key. Revisit and adjust your portfolio regularly to ensure it continues to meet your long-term objectives.

7. Inflation Impact on Retirement Corpus
While Rs 10 crore seems like a large amount today, inflation will reduce its purchasing power by the time you retire. The expenses that Rs 10 crore can cover today will be far less 25 years later. Keep this in mind as you plan your target corpus.

Retirement income needs: You should calculate your future monthly expenses, keeping inflation in mind. If your goal is Rs 10 crore, assess whether that corpus will be enough to generate the monthly income you need in retirement.

Plan for inflation protection: As you age, inflation will continue to impact your purchasing power. Ensure part of your corpus is invested in assets that beat inflation.

Insight: Focus on inflation-adjusted returns rather than absolute numbers. Consider increasing your retirement target if inflation erodes purchasing power significantly.

8. Long-Term Wealth Creation Strategy
Building a Rs 10 crore corpus requires discipline, consistency, and strategic investing. A few additional points to consider:

Diversify across assets: Although equity mutual funds offer growth, you should ensure you have a broader asset mix to reduce risks.

Use goal-based investing: Allocate specific funds for retirement and avoid mixing it with other financial goals.

Emergency fund: Always maintain an emergency fund with 6-12 months' worth of expenses. This will ensure you do not have to break your SIPs in case of emergencies.

Insight: Stick to long-term wealth creation by being consistent with your SIPs, managing risks, and ensuring a clear focus on your retirement goals.

Final Insights
Your portfolio is well-thought-out, with a strong SIP strategy that can lead to substantial wealth creation over 25 years. With regular reviews, a focus on diversification, and disciplined investing, you are on track to achieve your Rs 10 crore retirement corpus.

However, consider adding a large-cap component for stability, and review your risk tolerance as you move closer to retirement. Keep in mind the impact of inflation, taxation, and the need for flexibility in your portfolio.

Stay committed to your SIPs, but also ensure you are periodically revisiting your strategy with the help of a Certified Financial Planner to stay aligned with your long-term objectives.

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

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Ramalingam

Ramalingam Kalirajan  |7206 Answers  |Ask -

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

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Janak

Janak Patel  |8 Answers  |Ask -

MF, PF Expert - Answered on Dec 04, 2024

Asked by Anonymous - Nov 30, 2024Hindi
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Hi, i am 52years old, wanted to retire early, following are my investments, MF - INR 65L, Equity - INR 22L, 3 houses, one is self-occupied, other 2 houses valued at INR 90 L and INR 32L respectively, i have home loan outstanding of INR 12L, FD of INR 36L , PF INR 32L, monthly expenses requirement is INR 1 L, kindly help me to plan my early retirement. Thank you in advance for your reply on my question.
Ans: Hi,

As there are many things to consider for an early retirement, one of the first is to start thinking about it in a more realistic manner. An early retirement is not necessarily stop working life, but think of it as a more comfortable schedule that provides you opportunities to relax and pursue your passion and interests and live life on your own terms. You may or may not undertake an activity which can be monetized, meaning which provides you some sort of income - not necessarily to cover your living expenses in whole/part. So do give it some thought of how you intend to keep yourself occupied once you retire from your "current schedule". Will you generate any source of income or will you incur/require more expense.

At current age of 52, an early retirement even if we consider at 55 years of age, it a still a long life ahead. I will make a lot of assumptions in my response as these are not known from your query - such as life expectancy of another 30 years, average return of 8% on all investments for future etc. Are the 2 real estate properties earning any kind of rent that can be considered as income.
There are too many variables that go into the calculations for retirement which are specific to each individual and their circle of life.

Generic solution - You have a currently accumulated investments valued at INR 2.65 Cr (all investments less loan).

Current monthly expenses is INR 1 Lac, over which inflation needs to be applied each year (depends on lifestyle and composition of items of expenses).

So if your cumulative investments appreciate at average 8% annually, and your monthly expense increases at 6% annual inflation, your current accumulated investments are just about enough to manage expenses for next 30yrs (excluding tax implications - refer below).

Points to consider -
1. Inflation in real world is more than 6% (depends on the individual)
2. Liquidation of investments e.g. Real estate attract expenses/fees and tax on capital gains as it will be lumpsum
3. PF post retirement will earn interest only for 3 years, so you need to plan to re-invest the amount
4. Interest income on FD attracts tax at slab rate
5. Withdrawal of amount for monthly expense from your investments will attract tax on capital gains (MF and Equity)

I strongly recommend you connect with a Certified Financial Planner for personalized guidance and prepare a plan that will take into consideration your risk profile and overall investment management towards the retirement. Benefits will include a more tax efficient plan which will consider your requirements and ensure retirement goals are achieved and if there is a shortfall - what alternatives you need to consider.

Hope this is helpful and all the best for the future.

Regards
Janak Patel
Certified Financial Planner.

...Read more

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Dr Nagarajan J S K   |174 Answers  |Ask -

Health Science and Pharmaceutical Careers Expert - Answered on Dec 04, 2024

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Sir I am preparing for mbbs, but I'm not able to crack that. I'm a middle class student. Can I pursue mbbs in abroad under 8 lakhs in a best college for mbbs?After that can I able to be a doctor in India?
Ans: Hi Lagna,

It seems you haven’t provided the details clearly on this platform. If you could share more information, I’m sure you will receive helpful input.

Based on your message, I understand that you are considering pursuing a career in medicine. If you intend to enroll in a medical program either in India or abroad and plan to practice in India after completion, here are some important guidelines according to the National Medical Commission (NMC):

You must appear for the NEET exam, as it is a mandatory requirement for anyone wishing to pursue graduate medical education in India or elsewhere while intending to return and practice in India. According to the NMC eligibility criteria: “No student shall be eligible to pursue graduate medical education either in India or elsewhere (if they want to return and practice in India), except by scoring the minimum eligible score at the NEET UG exam. The UGMEB will announce the list of eligible students periodically.”

Therefore, I recommend preparing for the NEET exam and trying to secure admission in India itself. If you choose to pursue medical education abroad, you can still practice in India, but you will need to pass exit exams as well.

Regarding your question about pursuing MBBS abroad for under 8 lakhs, are you asking if this is per year or for the entire course? Studying abroad at that cost per year is possible. However, when you take into account the total expenses, which include course fees, accommodation, food, travel, visa, and other costs, it might be more feasible to complete your MBBS in India.

I hope this clarifies your queries!

...Read more

Patrick

Patrick Dsouza  |879 Answers  |Ask -

CAT, XAT, CMAT, CET Expert - Answered on Dec 04, 2024

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Career
Hi Sir, I am 41 years old. I've 15 years of experience in Finance (FP&A) domain. In last 2.5 years I have changed 3 companies due to lay off, Cultural misfit and latest one due to Personal and family issue. I quit my last job in Sept'24 (from Apr;24 to Sept'24). Due to some family issues, Lay offs, Challenges faced on the job I am feeling very low. I don't have any confidence left as a result don't want to return to work out of fear and anxiety. However, I also want to upskill myself and thinking of pursuing US CMA. But I am in dilemna that with around 15 years of work experience would it open any gates for growth opportunities going forward. Another dilemna that I am constantly fighting is to whether think of making a switch from Finance domain to Learning & Development domain. I have good communication & interpersonal skills and have always had a liking towards L&D domain. Now myself on a Career break I am not sure how to proceed further - Whether to pursue my Career in Finance and look for jobs in Finance domain and then gradually look to switch to L&D domain or Look for the opportunities only in L&D domain. I have an emergency fund that can take care of my expenses for next 6-8 months. Looking forward to your guidance that can help me bounce back in my career as I am feeling lost, depressed and Lack of Confidence at present in life. Thanks.
Ans: Learning is a continuous process. So doing a course in Finance should not be a problem. As far as getting into LnD domain, start with being a faculty in one of the colleges or can start with taking private tuitions. See if it suits you. If it does, then you can decide to make the switch.

...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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