Hi sir, I am planning to invest in Bajaj ULIP plan for my child future for 7000 per month. Kindly give me your advice

Ans: I appreciate your trust in seeking financial advice. Let’s dive into your financial situation and plan a robust strategy for your future.

Your Current Financial Landscape
You have a well-diversified portfolio with investments in mutual funds, fixed deposits, gold, and insurance. Here’s an overview:

Home: You own a home in Nagpur worth Rs. 75 lakhs.

Mutual Funds: You have invested Rs. 4 lakhs in mutual funds as a lump sum in December 2023. Additionally, you have been doing SIPs of Rs. 30,000 per month for the last year.

Fixed Deposits: You have Rs. 10 lakhs in fixed deposits with HDFC Bank at a 7% interest rate.

Gold: You have invested Rs. 14 lakhs in gold bars.

Insurance: You have a TATA AIA ULIP plan with an annual premium of Rs. 1.5 lakhs, currently in its second year of a five-year term. Additionally, you have a monthly LIC policy with an annual premium of Rs. 80,000.

Future Plans: You plan to increase your SIP to Rs. 30,000 per month from July 2024. You are also considering a term plan with an annual premium of Rs. 1.75 lakhs for the next 10 years, offering a cover of Rs. 2 crores until the age of 85.

Evaluating Your Investments
Mutual Funds
Mutual funds are a fantastic way to grow your wealth over the long term. They offer the benefits of professional management, diversification, and the power of compounding.

Advantages of Mutual Funds:
Diversification: Mutual funds invest in a variety of securities, reducing risk.

Professional Management: Experienced fund managers make investment decisions on your behalf.

Liquidity: You can easily redeem your investments when needed.

Flexibility: With options like SIPs, you can start with a small amount and increase it over time.

Power of Compounding
Compounding is the process where the returns on your investments generate their returns. The longer you stay invested, the more your money grows. This is why starting early and staying consistent with your SIPs is crucial.

Actively Managed Funds vs. Index Funds
Actively Managed Funds:

Fund managers actively select stocks to beat the market.
Potential for higher returns than index funds.
Regular reviews and adjustments based on market conditions.
Index Funds:

Passively track a specific index like Nifty or Sensex.
Lower expense ratios, but often lower returns compared to actively managed funds.
Lack of flexibility to adjust to market changes.
In your case, actively managed funds might offer better growth potential.

Regular Funds vs. Direct Funds
Regular Funds:

Invest through a Certified Financial Planner (CFP).
CFP provides personalized advice and ongoing support.
Slightly higher expense ratio due to advisory fees.
Direct Funds:

Invest directly with the fund house, bypassing a CFP.
Lower expense ratio but lack of professional guidance.
Suitable for experienced investors with time to manage their portfolios.
Given your busy career, regular funds through a CFP could provide valuable support and expertise.

Fixed Deposits
Fixed deposits are safe and offer guaranteed returns. However, their growth potential is limited compared to mutual funds. Given the current inflation rates, FD returns might not keep pace with the rising cost of living.

Gold Investment
Gold is a good hedge against inflation and market volatility. However, it doesn’t generate regular income. It’s essential to balance your portfolio with growth-oriented investments like mutual funds.

Insurance Plans
ULIP Plan
ULIPs combine investment and insurance. They have higher costs due to insurance charges and fund management fees. You have already completed two years out of five. It might be beneficial to surrender the plan after the lock-in period and reinvest in mutual funds for better returns.

Term Plan
A term plan is essential for risk cover. Ensure the cover amount aligns with your family’s financial needs. A Rs. 2 crore cover until age 85 is a prudent decision, providing long-term security.

LIC Policy
LIC policies offer traditional savings with insurance. However, the returns are generally lower than mutual funds. It might be worth reviewing this policy and considering surrendering it to reinvest in more lucrative options.

Strategic Recommendations
Enhance Your SIPs
You are planning to increase your SIP to Rs. 30,000 per month. This is a smart move. SIPs instill financial discipline and benefit from rupee cost averaging. Here’s how to optimize your SIPs:

Diversify: Invest in a mix of large-cap, mid-cap, small-cap, and sectoral funds.
Review: Regularly review your portfolio with your CFP.
Increase: Gradually increase your SIP amount as your income grows.
Rebalance Your Portfolio
Mutual Funds: Increase your allocation to equity mutual funds for higher growth.
Fixed Deposits: Consider reducing your FD holdings and reallocating to mutual funds.
Gold: Maintain your gold investments but avoid further additions.
Insurance: Focus on pure term insurance for risk cover.
Long-Term Wealth Creation
Retirement Planning
Start planning for retirement early. Aim to build a corpus that supports your lifestyle and healthcare needs. Here’s how:

EPF and PPF: Maximize contributions to these tax-free retirement schemes.
NPS: Consider the National Pension System for additional retirement savings.
Equity Funds: Allocate a significant portion to equity funds for long-term growth.
Children's Education
If you have children, plan for their higher education expenses. SIPs in mutual funds can help build a substantial corpus over time.

Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses. This provides financial stability during unforeseen events. Your fixed deposits can serve this purpose.

Tax Planning
Optimize your investments for tax efficiency. Utilize tax-saving instruments like ELSS, PPF, and NPS. Seek guidance from a tax advisor to minimize tax liability.

Risk Management
Adequate Insurance
Ensure you have adequate health insurance for your family. Consider critical illness and accident covers. Your term insurance plan should provide sufficient risk cover.

Asset Allocation
Maintain a balanced asset allocation based on your risk tolerance and financial goals. Regularly review and rebalance your portfolio to align with changing market conditions.

Regular Review
Regularly review your financial plan with your CFP. Adjust your investments based on your life goals, market conditions, and financial situation.

Avoiding Common Pitfalls
Emotional Decisions: Avoid making investment decisions based on market emotions.
Over-diversification: Don’t invest in too many funds; it dilutes returns.
Ignoring Inflation: Ensure your investments grow faster than inflation.
Final Insights
You have a solid foundation with your current investments. Enhancing your SIPs, optimizing your portfolio, and strategic planning will ensure robust growth and financial security. Keep an eye on market trends, stay disciplined, and regularly review your plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello;

Most people make this mistake of mixing investment with insurance.

Insurance whether life cover(only term) or healthcare cover is just a protection and should never be used as a investment instrument.

For retirement planning NPS is the best solution however investments should start now and continue till 60 years of age.

EPF/EPS come to you as a default option if you are employed.

EPF can serve as a corpus for varied goals depending on the stage of life. EPS(employer contribution)serves as a supplimentary pension in your retirement.

PPF shouldn't be missed either due to its E-E-E status for 15-20 yr horizon.

Mutual funds are excellent investment instruments suited to every individual who has low-moderate to high risk profile across asset classes(equity, debt, gold, real estate) and best alternative to ULIP.

You should take the call on your Ulip investment as you deem appropriate. Ultimately it's your money and has to be your decision after through evaluation.

Happy Investing!!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: At the age of 25, your financial decisions today can have a long-term impact. You’ve mentioned you are currently paying Rs 1.5 lakh annually into the India First Life Money Balance Plan, which is a ULIP (Unit Linked Insurance Plan). Let's assess whether continuing with this plan is beneficial or not.

ULIP: Combining Insurance with Investment
ULIPs offer both life insurance coverage and investment in market-linked instruments like equity or debt. While this might seem convenient, it’s important to understand that combining insurance with investment is often not the best way to build wealth.

High Costs Involved
ULIPs come with various charges such as premium allocation charges, fund management fees, policy administration charges, and mortality charges. These charges can eat into your returns, especially in the initial years of the policy. The returns from the investment portion may not be as high as mutual funds due to these costs.

Limited Flexibility
ULIPs lock your funds for a period of five years, limiting your liquidity. While long-term investments are good, having some liquidity options is essential. The flexibility to switch or withdraw funds is much lower compared to mutual funds.

Insurance and Investment Should Be Separate
It’s generally recommended to keep your insurance and investment separate. Why?

Term Insurance for Coverage
A term insurance plan provides a large sum assured for a low premium. It offers pure life coverage without mixing it with investments. You should consider a term insurance plan to secure your life. For example, a Rs 1 crore term plan at your age will be affordable and provide sufficient coverage for your family.

Mutual Funds for Wealth Building
Mutual funds are better suited for wealth building over the long term. They have lower costs, more transparency, and give you access to a variety of funds based on your risk profile. Actively managed equity mutual funds can generate better returns over time compared to ULIPs.

Should You Continue with the ULIP?
Given your age, you have a long time horizon to invest and build wealth. While ULIPs may provide some returns, they are not the most cost-effective way to invest. Here’s what you should consider:

Surrendering the ULIP
If you are in the early stages of the ULIP, you can consider surrendering it after the lock-in period (if applicable). Yes, there may be charges for early surrender, but in the long run, redirecting your funds into a more efficient investment strategy will likely yield better results.

Switch to Term Insurance + Mutual Funds
If you decide to stop the ULIP, you can opt for a term insurance plan for your life coverage and invest the Rs 1.5 lakh annually in mutual funds. This combination will provide both security and growth for your wealth.

Investment Options for Long-Term Growth
Now, let's discuss where you can invest your Rs 1.5 lakh annually to get better returns over your long-term horizon.

Equity Mutual Funds for Growth
Equity mutual funds are one of the best long-term investment vehicles. Since you are only 25, you can afford to take more risk for higher returns. Equity mutual funds allow you to benefit from the growth of the stock market. Actively managed funds, in particular, can outperform the market, unlike index funds which simply replicate the market’s performance.

Debt Mutual Funds for Stability
While equity gives you growth, it’s important to balance your portfolio with debt funds. Debt mutual funds provide stability and reduce overall risk. A mix of equity and debt will ensure you are not overly exposed to market volatility.

Systematic Investment Plan (SIP)
Consider starting a SIP to invest consistently in mutual funds. With SIPs, you can invest monthly, which helps in averaging the cost of investment and reduces the impact of market volatility.

Public Provident Fund (PPF)
The PPF is a safe and long-term investment option, especially for retirement planning. It offers tax-free returns and is backed by the government. You can consider allocating a portion of your annual Rs 1.5 lakh towards PPF for tax benefits and safety.

Focus on Tax Efficiency
When planning your investments, tax efficiency should be a key consideration. Mutual funds, particularly equity funds, offer favorable tax treatment compared to ULIPs.

Equity Mutual Fund Taxation
Long-term capital gains (LTCG) above Rs 1.25 lakh from equity mutual funds are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%. Over the long term, mutual funds can provide better post-tax returns compared to ULIPs, which have higher costs.

Debt Mutual Fund Taxation
Gains from debt mutual funds are taxed according to your income tax slab, both for short-term and long-term capital gains. Keeping your money in debt funds for more than three years helps you benefit from indexation, which lowers the taxable amount.

Long-Term Wealth Creation
At 25, you have time on your side, which is a great advantage. By investing wisely in a diversified portfolio of equity and debt, you can create substantial wealth over the next 10-15 years.

Rebalance Periodically
Over time, markets fluctuate, and so will the value of your investments. It is important to review your portfolio regularly and rebalance it as necessary. A Certified Financial Planner (CFP) can help you make adjustments and stay aligned with your financial goals.

Stay Disciplined
The key to long-term success in investing is discipline. Continue to invest regularly, increase your contributions as your income grows, and remain patient to allow your investments to grow over time.

Final Insights
At your young age, it’s better to separate your insurance from your investment. A term plan combined with mutual funds will serve you much better than a ULIP. Mutual funds offer greater flexibility, lower costs, and better growth potential. If you decide to stop the ULIP, ensure that you invest regularly in a diversified portfolio of equity and debt funds.

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

Ans: Evaluation of Your Current ULIP Investment for Your Child’s Future

You have started a ULIP for your child’s future.

Your investment is Rs 7,000 per month.

The total invested value is Rs 70,000 till now.

The current fund value is only Rs 52,300.

You are investing in a small-cap fund under this ULIP.

Your son is 4 years old now.

Let us now assess this decision step by step.

Appreciating Your Intention

You have thought about your son’s future early.

You are trying to build wealth with discipline.

This is a very good habit.

Starting early always gives a good advantage.

Protecting your child’s future is always a wise move.

You are also investing monthly without fail.

This kind of consistency is rare.

Understanding the Nature of ULIPs

ULIP means Unit Linked Insurance Plan.

It mixes insurance and investment.

You pay premiums monthly or yearly.

A small part goes to life insurance cover.

The remaining is invested in the market.

Charges are very high in the first 5 years.

Fund management charge, allocation charge, mortality charge.

These charges reduce your investment value.

You also have lock-in for 5 years.

You can’t withdraw before that period.

Small-Cap Fund in ULIP – Risk Factor

You have selected small-cap fund.

Small-cap funds are very volatile.

They fall sharply in market correction.

They rise more during market rally.

It is not safe for child’s future goals.

Risk is high and return is not steady.

Also, in ULIP, the fund performance is not very transparent.

You can’t track fund managers or detailed strategy.

ULIP Performance – Present Situation

You invested Rs 70,000 in total.

Current value is only Rs 52,300.

That means you are in a loss now.

The loss is nearly 25%.

This is not acceptable in short time.

The charges have eaten the returns.

Market may also be volatile.

Small-cap correction affects your value badly.

Compare ULIP vs Mutual Fund for Child Goal

Mutual fund gives more flexibility.

You can choose from many categories.

Charges are lower in mutual funds.

You get full transparency in funds.

Mutual funds are better regulated.

You can track performance easily.

You can switch any time without high costs.

You get better returns for long-term.

Why You May Consider Surrender of ULIP

You have already seen negative growth.

Charges are high and will continue.

Fund selection is very limited.

Child’s future needs stable, reliable returns.

ULIPs don’t support goal-based investing properly.

After lock-in, no reason to continue.

Even if loss is there now, stopping further loss is wise.

Shift money to better product for long-term.

Where to Shift After Surrender – A Better Path

Start SIP in mutual funds through Certified Financial Planner.

Choose regular plans via qualified Mutual Fund Distributor.

Don’t go for direct plans – they lack expert guidance.

Avoid index funds – they just copy the market.

Use active funds – they aim to beat the market.

Let expert select best funds for you.

Create mix of large-cap, mid-cap, balanced funds.

Invest based on time frame and goal.

Review every year with your Certified Financial Planner.

Why Direct Mutual Funds Are Risky for You

No one to guide you in choosing funds.

You may select wrong fund unknowingly.

No one reviews your investments regularly.

You may react emotionally during market falls.

No discipline without expert support.

Regular plans through MFD and CFP give full service.

Why Index Funds Are Not Ideal for Child Planning

Index funds only match the market returns.

They don’t beat the market ever.

During market falls, they fall completely.

Fund manager has no control.

All stocks are included, good or bad.

No downside protection.

Not suitable for child’s long-term needs.

Active funds are better with risk management.

What to Do Now – Step-by-Step Guidance

Continue paying ULIP till lock-in completes (if under 5 years).

After lock-in, check surrender value.

Surrender policy and stop further payments.

Take the fund value even if at slight loss.

Reinvest that amount into mutual fund SIP.

Start SIP with regular fund through CFP support.

Invest monthly same Rs 7,000 amount.

Select diversified fund mix for stability and growth.

Set goal for your son’s education and milestones.

Use goal calculator to fix amount and duration.

Stay disciplined for next 14 to 16 years.

Don’t withdraw in between for other needs.

Monitor performance with expert every year.

Switch funds if any underperforms consistently.

Avoid high-risk sector funds.

Avoid guaranteed return insurance-cum-investment policies.

Additional Tips for Child Financial Planning

Buy pure term plan for yourself.

Term plan gives full life cover at low cost.

Use health insurance for family protection.

Create emergency fund of 6 months expenses.

Don’t depend only on child policies.

Build your own wealth systematically.

Children need money, not policies, for education.

Review portfolio every year.

Increase SIP with your income rise.

Don’t panic in market fall – stay invested.

Finally

You started early – that’s good.

But current product is not helping your goal.

ULIP has high charges and low flexibility.

Small-cap funds increase volatility.

You may consider surrendering it after lock-in.

Reinvest wisely in mutual funds.

Use Certified Financial Planner’s help for proper fund mix.

Active funds through MFD give better value.

Avoid index funds and direct plans.

Align investment to your son’s future education needs.

Stay focused, review regularly, and be patient.

This approach can build better wealth for your child.

Long-term vision with proper planning works best.

You deserve better returns with low risk for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: You are already doing many things right.
You are saving. You are investing. You are repaying loans.
You have taken term insurance. You have an emergency fund too.
That is a solid starting point.

Still, your concerns are valid.
Late start, uncertain job, young child, and loans can create pressure.
But a right plan can bring clarity and peace.

Let’s now plan in a 360-degree way.

» Income, Expenses and Savings Analysis

You earn Rs. 1 lakh per month.

Spouse earns Rs. 25,000 monthly on contract.

So, household income is Rs. 1.25 lakh per month.

You are paying Rs. 9,200 EMI on personal loan.

Also, Rs. 50,000 per month goes to repay relative’s loan.

This large outgo is temporary. Only for 10 months.

Once Rs. 50,000 monthly outgo ends, channel it to investments.
It will give your plan a big boost.

» Loan and Liability Evaluation

Personal loan of Rs. 5 lakh is running.

You are paying Rs. 9,200 monthly EMI.

Try to close this in 3 years.

If possible, prepay once relative’s loan is over.

You also borrowed Rs. 5 lakh from family.

That is interest-free. You are repaying Rs. 50,000 per month.

That will be over in 10 months.

No other home loan means less financial pressure.
This puts you in a stronger long-term position.

» Insurance and Protection Review

You have a term insurance of Rs. 1 crore.

But premium is Rs. 43,000 yearly for 15 years.

That seems high. Review the policy once.

Term plan should be pure cover, no returns.

You can take a cheaper term plan for higher cover.

Buy health insurance this month.

You are doing the right thing here.

Rs. 30,000 family floater is a good move.

Don’t depend only on corporate cover.

Health insurance protects long-term savings.

You also have a ULIP from PNB MetLife.

Your father is paying Rs. 2 lakh per year.

Maturity is Rs. 35 lakh in 15 years.

Since 5 premiums are paid, don’t stop now.

Let your father complete the full 10 years.

But don’t consider ULIP in your own investment strategy.
It is better to separate insurance and investments.

» Emergency and Liquidity Check

You have Rs. 1 lakh emergency fund.

And Rs. 1 lakh cash flow buffer.

You also add to emergency fund from bonuses.

This is a great habit.
Keep building this to at least Rs. 2.5 lakh.
Try to park it in a liquid mutual fund.
This will earn better than savings account.

Emergency fund is like a seat belt.
It protects your financial life from unexpected bumps.

» Investment Assessment and Consolidation

Let’s assess your current investments one by one:

PPF – Rs. 7 lakh.

Good for long-term tax-free corpus.

Continue till full 15 years.

EPF – Rs. 4 lakh.

Keep contributing through salary.

Don’t touch it early.

NSC – Rs. 5 lakh.

Matures in 2026.

Use maturity amount to invest in mutual funds.

Mutual Funds – Rs. 1.2 lakh (ICICI and HDFC).

Monthly SIP: Rs. 2,000.

Amount is low. But direction is right.

You must increase SIPs steadily.

Stocks – Rs. 2.8 lakh.

Individual stocks need active tracking.

Keep them limited to 10–15% of your total assets.

Consider shifting to diversified mutual funds slowly.

Your asset base is decent.
But monthly investment amount is low.
That is the gap to fill.

» Real Estate Note

One flat is available for rent.

Monthly rent of Rs. 20,000 is possible.

Get it rented soon.

Use rental income to invest monthly.

Avoid buying more real estate.
Don’t lock money in land or property again.
Real estate is illiquid and slow-growing.

Focus on financial assets instead.

» Retirement and Child Planning Concerns

You are 37. Retirement may be 18–20 years away.
Child is 2 years old.
College expenses will start after 15 years.

Your challenge is to grow wealth smartly now.
Job risk makes this even more urgent.

You need flexibility, liquidity and high growth.
Mutual funds are the best option.

Avoid index funds.
They only mirror the market.
They don’t protect capital in a fall.
No active risk management. No expert control.

Choose actively managed funds only.
They aim to beat the market.
They manage risk during volatility.

Also, avoid direct funds.
They come with lower cost but no guidance.
Regular funds via CFP and MFD are better.
They offer review, rebalancing, and behaviour control.

This is crucial when market falls or emotions rise.

» Action Plan: What to Do Now

Repay Rs. 5 lakh borrowed from relative in 10 months.

Don’t prepay PNB ULIP. Let your father complete 10 years.

Increase your emergency fund to Rs. 2.5 lakh.

Don’t increase stock investments.

Start SIPs of Rs. 20,000 per month from April 2025.
(Rs. 50,000 loan repayment will get over by then)

Split SIP across 4 fund categories:

Multi-cap fund

Flexi-cap fund

Small-cap fund

Balanced advantage fund

Start ELSS mutual fund of Rs. 1.5 lakh yearly for tax saving.

Invest only in regular plans via a Certified Financial Planner.

Review SIPs every year and increase by 10%.

Use NSC maturity amount in 2026 to invest in mutual funds.

Use rental income of Rs. 20,000 per month for additional SIP.

Avoid NPS or annuity plans. They have liquidity issues.

» Retirement Target Strategy

PPF + EPF + Mutual funds will form your core retirement corpus.

ULIP maturity can support some lifestyle goals.

Keep increasing SIP every year.

Avoid lifestyle inflation even if income grows.

Direct all extra money into investments.

Job uncertainty can be managed through this approach.
Diversified funds and SIPs give peace and flexibility.
You can even achieve early retirement if plan is consistent.

» Child Education Planning

Start a separate SIP of Rs. 5,000 for child goal.

Increase it to Rs. 10,000 by April 2026.

Choose one small-cap fund and one hybrid fund.

Don’t invest for child in real estate or insurance plans.

Keep the corpus flexible.
Withdraw in parts as needed after 15 years.

Also, take one child-specific rider in your term insurance.
That ensures financial safety even in emergencies.

» Finally

You are on the right track.

Loans are manageable and will be over soon.

Your base is strong – EPF, PPF, ULIP, NSC, cash flow.

Just shift the focus fully to mutual funds now.

Avoid direct funds, avoid index funds, avoid ULIPs in future.
Rely on regular mutual funds through Certified Financial Planner only.

Start with Rs. 20,000 SIP from next year.
Add rental income and bonus to SIPs.
Increase SIPs each year by 10% at least.
Hold these funds for 15+ years without panic.

This one disciplined strategy will secure both retirement and child goals.
Even job risks will not bother you if this plan is followed.

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