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Ramalingam Kalirajan |10874 Answers |Ask -Follow

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

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jul 09, 2025Hindi

Pls suggest safe investments to secure 20 lakhs in 5 years I have salary of 30000 a month

Ans: It is truly good that you are thinking long-term. Planning to save Rs.20 lakhs in 5 years with Rs.30,000 monthly income shows a responsible mindset. This goal is ambitious. But with the right strategy, it can be worked towards.

Let’s look at it in full detail from all angles.

Know Your Current Financial Position First

– Monthly income is Rs.30,000
– Target is to build Rs.20 lakhs in 5 years
– That means you need a large monthly savings portion
– You must balance saving, investing, and living expenses

This will need strong discipline. You may also need to increase income gradually.

Assess Monthly Surplus for Investment

Start by calculating your monthly basic expenses:

– House rent or EMI
– Food and groceries
– Utilities and transport
– Mobile, Wi-Fi, and basic services
– Emergency and medical needs

After this, check how much is left monthly. Even if you can save Rs.10,000, that’s a good start.

Keep an Emergency Fund Before Any Investment

Before chasing big returns, safety comes first. Build an emergency fund:

– Minimum 3 to 6 months of your expenses
– Keep in savings account or liquid mutual fund
– This fund should not be touched for investment goals
– It helps during job loss, illness, or urgent needs

Without this, you may end up breaking investments mid-way.

Don’t Keep Money Idle in Savings Account

– Savings accounts give very low returns
– Most banks give 2% to 4% per year
– This is below inflation

So, your money loses value over time. Instead, invest in proper options through a Certified Financial Planner.

Avoid Real Estate as an Investment Option

Many believe property is safe. But for your income level:

– Property needs large down payment
– EMIs will eat up income
– Property has low liquidity
– Selling takes time and has legal risk

So, avoid real estate for this goal. Focus on safer and more flexible investment tools.

Avoid Index Funds and ETFs for This Goal

You may hear that index funds are low cost. But cost alone is not enough.

Disadvantages of index funds:

– They just copy an index blindly
– No strategy to handle market falls
– No scope for beating market
– All sectors get equal weight, even weak ones
– No fund manager to guide

You may get average returns but no protection in bad markets.

Instead, choose actively managed funds:

– Expert fund managers handle them
– They change portfolio based on market view
– They aim to beat the market
– Risk is managed better
– More aligned with financial goals

Investing through regular plans under a Certified Financial Planner helps even more.

Avoid Direct Mutual Funds – Choose Regular Plans with CFP Support

Many investors go for direct plans thinking they save commission.

But here’s the reality:

– No personalised fund selection
– No help in rebalancing portfolio
– No tax guidance
– No behavioural coaching during market fall
– High chance of wrong fund choices
– Poor goal tracking

Regular plans give full support through a qualified expert.

Benefits of regular plans with a Certified Financial Planner:

– Fund selection as per risk and goal
– Periodic review of portfolio
– Tax planning support
– Protection from panic selling
– Asset allocation advice
– Guidance during market ups and downs

This gives more confidence and better long-term results.

Choose Investments Based on Time and Risk

Your target is 5 years. This is a medium-term goal. For such goals:

– Full equity exposure is not ideal
– Only debt also gives very low returns
– Balanced and hybrid investment mix is best

The mix should include:

– Low risk debt investments for safety
– Select equity mutual funds for growth
– Dynamic asset allocation funds for balance

A Certified Financial Planner can help with the right blend.

Invest Monthly – Don’t Wait to Accumulate Big Amount

Don’t wait for large money to invest. Start SIP (Systematic Investment Plan) every month.

Even Rs.5,000–10,000 monthly can grow well over 5 years.

Benefits of monthly SIP:

– Reduces market timing risk
– Creates investment habit
– Reduces burden on cash flow
– Builds wealth slowly and safely

Increase SIP as income grows.

Avoid These Mistakes While Investing

– Don’t invest based on tips or trends
– Don’t stop SIP during market fall
– Don’t withdraw early unless emergency
– Don’t chase unrealistic returns
– Don’t mix insurance and investment

Be patient. Focus on long-term safety and discipline.

Taxation on Mutual Fund Returns

Keep in mind new tax rules while planning 5-year investments.

For equity mutual funds:

– LTCG above Rs.1.25 lakh is taxed at 12.5%
– STCG is taxed at 20%

For debt mutual funds:

– Gains taxed as per income tax slab
– No LTCG benefit now

A Certified Financial Planner can help reduce this tax impact through proper planning.

Can You Reach Rs.20 Lakhs in 5 Years?

It is difficult, but not impossible. It needs:

– Tight control on expenses
– Higher monthly savings
– Gradual increase in income
– Safe and smart investment mix
– Staying invested for 5 full years
– Avoiding panic withdrawals

If you can start with Rs.10,000 monthly SIP and increase it every year, you have a fair chance. Combine that with a disciplined approach, and you’ll stay close to your goal.

Increase Your Income Actively

With Rs.30,000 monthly income, there’s a limit to saving. So:

– Try for part-time freelance work
– Upskill with certifications to get promotion
– Sell unused items for extra cash
– Ask for small raise if possible
– Start a weekend project with low cost

Any extra income must go into investment, not lifestyle.

Rebalance Portfolio Every Year

Market keeps changing. So, your investments must be reviewed yearly. A Certified Financial Planner does this by:

– Checking fund performance
– Adjusting risk exposure
– Replacing underperforming funds
– Aligning portfolio to your 5-year goal

This ensures your money stays on track.

Don’t Mix Insurance with Investment

Avoid buying any investment-linked insurance or ULIPs.

Disadvantages:

– Low returns
– Lock-in for long term
– High hidden charges
– Confusing structure
– No proper growth for goal-based investing

Keep insurance and investment separate. For protection, use a term plan. For investment, use mutual funds.

Don’t Fall for “Guaranteed Return” Plans

Banks or agents may offer plans with fixed returns. They say things like:

– “Assured returns”
– “Secure investment”
– “Double your money safely”

But many such plans give returns less than inflation. They don’t help in reaching Rs.20 lakh. Also, they lock your money for 10–15 years.

Stay away from these. They are not suitable for your 5-year goal.

Use Goal Tracker With Help of Certified Financial Planner

A Certified Financial Planner helps you:

– Set realistic monthly saving target
– Track the gap between goal and actual
– Adjust investments as needed
– Avoid emotional decisions
– Build wealth with right tools

This gives you clarity and peace of mind.

Final Insights

– Saving Rs.20 lakhs in 5 years with Rs.30,000 income is tough
– But it’s possible with full focus
– Build emergency fund first
– Avoid real estate, annuities, and guaranteed plans
– Avoid index funds and direct funds
– Choose actively managed mutual funds through regular plans
– Take help from a Certified Financial Planner
– Stick to monthly SIP and keep increasing it
– Control expenses tightly for the next 5 years
– Review your progress each year and rebalance investments
– Stay focused, patient and positive

This 5-year plan will also build habits for lifelong wealth.

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

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.