sir plz suggest any liquid fund for create emergency fund? further i have 5 fund in Flexi and 2 Fund in Large and Midcap, further wht if i have a single SIP either in Flexi of Large n midcap, instead of 2, and when i required 50lakh after 10 years , then i withdrawal from that sip?

Ans: Reviewing Your Current Investments
You have been investing in mutual funds since January 2019.

Your initial SIP was Rs. 2,500 in ICICI Prudential Large & Mid Cap Fund.

In May 2021, you added a SIP of Rs. 2,500 in Axis Bluechip Fund.

You also contribute 10% to VPF since 2011, building a substantial PF balance.

Since 2022, you contribute Rs. 1,00,000 yearly to NPS.

These investments are a solid foundation for wealth creation and retirement planning.

Evaluating Mutual Fund Investments
ICICI Prudential Large & Mid Cap Fund:

This fund invests in both large and mid-cap stocks.

It offers a balanced approach with potential for good returns and moderate risk.

Your consistent SIP since 2019 indicates a disciplined investment approach.

Axis Bluechip Fund:

This fund focuses on large-cap stocks, providing stability and steady growth.

Large-cap funds are less volatile compared to mid-cap or small-cap funds.

Starting this SIP in 2021 complements your investment strategy with stability.

Voluntary Provident Fund (VPF)
Your 10% contribution to VPF since 2011 has built a strong PF balance.

VPF offers tax benefits and risk-free returns, making it a secure investment.

It is a reliable component for your retirement corpus due to its steady growth.

National Pension System (NPS)
Starting NPS in 2022 with Rs. 1,00,000 yearly contribution is a prudent choice.

NPS offers tax benefits under Section 80C and 80CCD(1B).

It provides a diversified portfolio with exposure to equities, corporate bonds, and government securities.

Retirement Planning
For effective retirement planning, you need a diversified portfolio.

Your investments in VPF and NPS provide a solid base of secure and tax-efficient returns.

Your mutual fund investments add growth potential through equities.

Building an Emergency Corpus
An emergency fund is essential for financial security.

It should cover 6-12 months of your living expenses.

Consider investing in a liquid or ultra-short-term debt fund for this purpose.

Suggested Fund for Emergency Corpus
Liquid Funds:

These funds invest in short-term debt instruments with high liquidity.

They offer low risk and quick access to your money.

Investing Rs. 5,000 monthly in a liquid fund can build your emergency corpus effectively.

Ultra-Short-Term Debt Funds:

These funds invest in slightly longer-term debt instruments than liquid funds.

They offer slightly higher returns with low risk.

Suitable for building an emergency fund with a bit more growth potential.

Advantages of Liquid and Ultra-Short-Term Debt Funds
Low Risk:

These funds have low credit risk and interest rate risk.

They are suitable for short-term investments and emergencies.

High Liquidity:

You can quickly withdraw funds without significant penalties.

This is crucial for emergencies where immediate access to funds is necessary.

Stable Returns:

These funds offer more stable returns compared to equity funds.

They are not subject to market volatility, providing peace of mind.

Achieving Long-Term Financial Goals
To achieve long-term goals, continue investing in diversified mutual funds.

Consider adding more SIPs in equity-oriented funds for higher growth potential.

Review and adjust your investments periodically based on performance.

Role of a Certified Financial Planner
A Certified Financial Planner (CFP) can help tailor your investment strategy.

They offer personalized advice based on your financial goals and risk tolerance.

Consulting a CFP ensures a structured approach to wealth creation and retirement planning.

Monitoring and Adjusting Investments
Regularly review your investment portfolio to ensure alignment with goals.

Adjust SIP amounts and fund choices based on performance and market conditions.

Stay informed about economic trends to make informed decisions.

Importance of Disciplined Investing
Consistent SIPs in mutual funds create wealth over the long term.

Avoid timing the market; focus on disciplined investing.

Regular investments help average out market volatility.

Tax Planning and Efficiency
Utilize tax-saving investments to reduce tax liability.

NPS, PPF, and ELSS funds offer tax benefits under Section 80C.

Efficient tax planning enhances overall returns and savings.

Diversification for Risk Management
Diversify your investments across different asset classes.

This reduces risk and enhances potential returns.

A well-diversified portfolio balances growth and security.

Emergency Fund Maintenance
Regularly review and replenish your emergency fund as needed.

Ensure it remains separate from long-term investments.

This fund provides financial stability during unexpected situations.

Financial Education and Awareness
Stay educated about financial markets and investment options.

Understanding market trends helps make better investment decisions.

Continuous learning ensures you stay informed and proactive.

Conclusion
Your current investments show a strong foundation for wealth creation and retirement planning.

Consider adding Rs. 5,000 monthly in a liquid or ultra-short-term debt fund for an emergency corpus.

Consult a CFP for personalized advice and regular portfolio reviews.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Smart Saving: Emergency Fund & Long-Term Growth
That's a fantastic approach! Having Rs. 5 lakh as an emergency fund shows you're prepared for the unexpected. And investing Rs. 5 lakh for long-term growth is a smart way to build wealth. Let's explore some options:

Emergency Fund - Park Your Safety Net

Your emergency fund needs to be easily accessible and low-risk. Here are some good options:

High-Yield Savings Account: Look for an account with a competitive interest rate to make your money grow a little.

Liquid Funds: These are mutual funds that invest in very short-term debt instruments, offering easy access to your money and some potential for returns.

Important: Emergency funds are not about high returns, they're about security.

Long-Term Growth - High Risk, High Reward (Potentially!)

Since you have a high-risk tolerance for long-term growth, actively managed mutual funds can be a good fit. Here's why:

Actively Managed vs. Index Funds: Unlike index funds that simply mirror the market, actively managed funds have fund managers who try to outperform the market by picking promising stocks. This approach has the potential for higher returns, but also carries more risk.
Diversification is Key!

To spread your risk and maximize your growth potential, consider investing in different asset classes through actively managed funds:

Multi-Cap Funds: Invest across large, mid, and small-cap companies, offering diversification and growth potential.

Sectoral Funds: Focus on specific sectors like technology or healthcare, which can offer high growth but also come with higher risk due to concentration in one area.

Flexi-Cap Funds: These funds offer the flexibility to invest across market capitalizations based on market conditions.

Investing Rs. 25,000 per Month (SIP) - Patience is Power

Regular investments (SIPs) in actively managed funds can average out the cost of your investment over time. This is a great way to benefit from rupee-cost averaging and ride out market fluctuations.

Remember, this is just a general guideline. It's important to consult with a Certified Financial Planner (CFP) for personalized advice. They can consider your specific financial situation, risk tolerance, and investment goals to create a tailored plan.

A CFP can also help you with:

Choosing the Right Funds: They can recommend actively managed funds with a good track record and experienced fund managers.

Asset Allocation: They can advise on the right mix of asset classes (multi-cap, sectoral, etc.) to achieve your goals.

Regular Reviews: A CFP will monitor your progress and adjust your plan as needed.

Taking Charge of Your Future

By setting up an emergency fund and investing for long-term growth, you're taking control of your financial future. Remember, high-risk investments can potentially lead to higher returns, but also come with greater risk of loss. A CFP can help you navigate these waters and make informed investment decisions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your financial planning shows you are thoughtful and committed. At 34, with a stable income of Rs 1 lakh per month, you are on the right path. You have a daughter and are planning for a second child, which means your financial responsibilities will grow.

Current Investments and EMI
You have an existing EMI of Rs 34,000 per month. Additionally, you have started a SIP of Rs 10,000 per month and an LIC policy of Rs 10,000 per month. This leaves you with Rs 46,000 after these commitments.

Importance of an Emergency Fund
An emergency fund is essential for financial security. It helps in unexpected situations like job loss, medical emergencies, or urgent repairs. Ideally, it should cover 6-12 months of living expenses.

Building an Emergency Fund
Start by saving a portion of your remaining monthly income. Aim to save at least 20% of your monthly income. This would be around Rs 20,000 per month.

Open a separate savings account for your emergency fund. This helps keep it separate from your regular spending.

Monthly Budgeting
Track your expenses to understand where your money goes. Create a budget to control unnecessary spending. Prioritize essential expenses and savings.

Enhancing Savings
With Rs 46,000 left after EMI and investments, allocate a portion for savings and emergency funds. Here’s a suggested allocation:

Rs 20,000 for emergency fund savings
Rs 10,000 for additional savings or investments
Rs 16,000 for living expenses and miscellaneous costs
Reviewing and Adjusting Investments
Your SIP of Rs 10,000 per month is a great start. SIPs in mutual funds provide long-term growth and are flexible. Continue this investment for wealth accumulation.

LIC policy is also part of your plan. However, evaluate its benefits. If it's an investment-cum-insurance policy, consider its returns. If returns are low, you might want to reconsider.

Benefits of Mutual Funds
Mutual funds are versatile and cater to various financial goals. Here’s why they are beneficial:

Professional Management: Managed by experts, offering better growth opportunities.
Diversification: Spreads risk by investing in various assets.
Liquidity: Easy to buy and sell, providing flexibility.
Tax Benefits: Certain funds offer tax advantages under sections like 80C.
Power of Compounding
Mutual funds benefit from the power of compounding. Reinvested earnings generate additional returns over time, accelerating your wealth growth. Regular investments in SIPs harness this power effectively.

Types of Mutual Funds
Equity Funds: Suitable for long-term growth. Higher risk but potential for higher returns.

Debt Funds: Ideal for short to medium-term goals. Lower risk and stable returns.

Hybrid Funds: Mix of equity and debt. Balanced risk and return, suitable for moderate risk-takers.

Risks and Considerations
Equity Funds: Subject to market fluctuations. Requires a long-term investment horizon to manage volatility.

Debt Funds: Exposed to credit and interest rate risks. Choose funds with good credit ratings to mitigate risk.

Hybrid Funds: Offers a balance, but not immune to market risks. Suitable for conservative investors seeking balanced growth.

Regular Funds vs. Direct Funds
Investing in regular funds through a Certified Financial Planner (CFP) offers guidance and expertise. CFPs help in selecting the right funds based on your risk tolerance and goals.

Direct Funds: May seem cost-effective due to lower expense ratios. However, lack of professional guidance can impact your investment decisions.

Regular Funds: Slightly higher expense ratios but offer professional advice and support. Ensures informed decisions and better management of your investments.

Planning for Your Children’s Future
With two children, education and other expenses will increase. Start planning early for their future needs.

Consider child education plans or dedicated mutual funds for long-term growth. Ensure these investments align with your financial goals and risk tolerance.

Life Insurance and Financial Security
Life insurance is crucial for your family’s financial security. Ensure you have adequate coverage to protect your family in case of unforeseen events.

Review your LIC policy. If it’s an investment-cum-insurance plan with low returns, consider surrendering it. Reinvest the amount in mutual funds for better growth and flexibility.

Financial Discipline and Review
Maintain financial discipline by sticking to your budget and savings plan. Regularly review your financial situation and adjust your plan as needed.

Track your investments’ performance and make necessary adjustments to align with your goals.

Engaging a Certified Financial Planner
A Certified Financial Planner (CFP) provides personalized advice based on your financial situation and goals. They help in creating a comprehensive financial plan, ensuring your investments align with your risk tolerance and objectives.

Final Insights
You are on the right track with your current investments and financial planning. Building an emergency fund and maintaining financial discipline are crucial.

Evaluate your LIC policy for returns. Consider reallocating to mutual funds for better growth.

A Certified Financial Planner can guide you in optimizing your investments and achieving your financial goals. Regular reviews and adjustments ensure your plan remains effective.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You should have minimum of 6 months expenses put aside as emergency fund.

Some banks offer higher interest rate on savings account but it is subject to Monthly Average Balance requirement. (For eg IDFC First bank)

Some banks offer flexi fixed deposits, higher rate of interest with flexibility of withdrawal like a savings account but it comes with auto renewal feature. (For eg, Axis Bank)

Mutual funds offer liquid debt funds that can offer better interest rates, flexibility in withdrawal and some also offer instant redemption of 90% of corpus upto max 50K and balance corpus redemption is on T+1 working day. Mostly invests in low maturity secure debt instruments so are associated with low to moderate risk. (For eg. ICICI Pru Liquid Fund-Growth)

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

Ans: You are already taking care of business, loans, and personal needs. It shows discipline and effort. With some structuring, you can manage cash flow better and create stability.

» Importance of emergency fund

Emergency fund acts as safety net.

It protects you when income slows.

It helps avoid borrowing for short-term needs.

It gives peace of mind during business down cycles.

Without this fund, every slowdown will create pressure.

» How to create emergency fund

Start with small monthly savings.

Target 6 to 9 months of expenses.

Use safe and liquid instruments only.

Don’t invest emergency fund in equity.

Good options are:

Bank savings account with sweep-in feature.

Short-term liquid mutual funds.

Fixed deposit with auto sweep and easy withdrawal.

Split across two products. Keep some for instant use, some for slightly higher return.

» Step-by-step method

Write down your monthly household expense.

Add loan EMIs also.

Multiply by at least 6. That is your emergency fund size.

You don’t need to build it in one shot.

Save monthly till you reach the target.

Treat it as non-negotiable like EMI.

» Current loan position

Housing loan EMI: Rs.9560.

CC loan repayment: Rs.12,000.

Car loan EMI: Rs.23,230.

These three add up to a big monthly burden.

Business income fluctuates between Rs.80,000 to Rs.1,00,000.

During low months, EMI pressure creates stress.

» Which loan to clear first

Car loan interest is usually high.

It also loses value as car depreciates.

So, car loan should be first to close.

Next is CC loan. It also has high rate and affects cash flow.

Housing loan has lowest rate and gives tax benefit.

Keep housing loan for last. Don’t rush to prepay it.

» SIP vs loan prepayment

SIP is best for long-term wealth creation.

Loan prepayment is good if interest is high.

For car loan and CC loan, prepayment is better.

For housing loan, continue EMI and don’t rush repayment.

Balance your money between building emergency fund and reducing high-cost loans.

» How to structure cash flow

First, set aside fixed amount monthly for emergency fund.

Second, pay EMIs on time without fail.

Third, save extra towards car loan prepayment.

Once car loan is cleared, redirect EMI amount to emergency fund or SIP.

This snowball method will ease cash flow.

» Business income irregularity

Business always has ups and downs.

That makes emergency fund more important.

During good months, save extra for slow months.

Don’t use surplus for lifestyle spends.

Keep business account and personal account separate.

This avoids confusion and keeps discipline.

» Mutual funds role

Right now, your priority is emergency fund and high-cost loan closure.

Once these are stable, increase SIPs.

Mutual funds are best for long-term wealth.

But don’t compromise liquidity by over-investing in them now.

Build foundation first, then focus on growth.

» Insurance protection

Check if you have health insurance.

Hospital expenses can break savings.

Term insurance is also needed if family depends on you.

Premium is low compared to coverage.

This protection ensures family safety while you focus on business.

» Psychological comfort

Once you build emergency fund, confidence will increase.

EMI stress will reduce when car loan is cleared.

Business slowdowns will not feel scary.

Your financial life will feel more balanced.

» Final insights

Emergency fund is first step for your stability.

Build at least 6 to 9 months of expenses.

Use liquid and safe instruments only.

Prioritise clearing car loan first, then CC loan.

Continue housing loan till end because of low rate and tax benefit.

Avoid heavy SIP till loans and emergency fund are managed.

Later, increase SIPs for wealth creation.

Keep insurance in place for family safety.

This 360-degree approach will give strength in business and personal life.

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

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