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Should I invest in a liquid fund as a long-term investor?

Ramalingam

Ramalingam Kalirajan  |10874 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 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
Visu Question by Visu on Sep 24, 2024Hindi
Money

Do we Really need liqud fund. we can any time redeem from equity fund and for a long term investor even load will not be there for investment in equity fund for more than 1 year. Even if there is a load it is hardly a bearable portion. I do understand the date of NAV on redemption is subject to market conditions where NAV will be lower. But for which if we keep the funds in liquid fund it will loose an opportunity cost. please advise, Is my perspective is correct. Yes we do require liquid fund to set up an STP by investing in liquid fund than by SIP to avoid bank transactions and bank charges.

Ans: it’s a good question to consider the value of liquid funds, especially when your primary investment focus is on equity funds for long-term growth. While equity funds provide solid returns, the role of liquid funds is more nuanced, adding certain benefits that are essential, even for a long-term investor. Let’s explore how liquid funds can complement your portfolio and address your current concerns from a Certified Financial Planner's perspective.

Understanding Equity Fund Redemptions and Market Risks
Equity Redemptions and Market Conditions: While it’s true that equity fund redemptions after one year avoid exit load, NAV fluctuations can make redemptions unpredictable. Selling equity in a downturn could lead to losses, even in long-term holdings. Liquid funds, however, offer a safety net for such scenarios.

Opportunity Cost Analysis: Keeping a small portion in liquid funds may seem like a lost opportunity. But it’s crucial to weigh this against the risk of having to redeem equity investments in a down market. This slight opportunity cost could save substantial potential loss on equity redemptions during unfavorable market phases.

How Liquid Funds Support Cash Flow and Flexibility
Immediate Liquidity Needs: Liquid funds are ideal for emergency funds. Their easy accessibility ensures quick cash in times of need without touching long-term investments. This immediate liquidity provides comfort, as liquid fund redemptions typically reflect in your account within 24 hours.

STP (Systematic Transfer Plan) Option: A primary advantage of liquid funds is their ability to facilitate STPs into equity funds. STPs allow gradual transfer from liquid funds to equity, reducing exposure to market timing risks. This smooths out volatility, as opposed to direct SIPs from a bank account, which might incur bank charges.

Additional Benefits of Liquid Funds over Equity Funds for Cash Management
Capital Preservation: Liquid funds, being debt instruments, carry minimal risk of capital erosion. They offer a buffer against market risks. Holding short-term cash in equity, by contrast, could expose you to unnecessary market volatility, which may be counterproductive.

Tax Efficiency for Short-Term Gains: Gains in liquid funds held under three years are taxed per your tax slab. While equity funds also offer tax benefits in the long term, the flexibility of liquid funds supports short-term withdrawals without equity’s higher tax impact. Especially for urgent financial needs, this can be a cost-effective choice.

Comparison with Equity for Short-Term Needs
Predictable Returns in Liquid Funds: Liquid funds invest in high-quality, short-term instruments, giving predictable, steady returns. Equity funds, while superior in long-term growth, have inherent volatility. This predictability in liquid funds makes them better for any short-term goals or interim needs.

Avoiding Forced Equity Selling: Liquid funds prevent situations where you may need to sell equity funds at a loss during a market dip. This ability to avoid forced selling in equities protects your long-term gains, as liquid funds serve as an accessible buffer.

Evaluating the Bank Transaction Costs Aspect
STP Convenience Over Bank SIPs: Bank SIPs often attract charges, depending on the bank and fund house. Setting up an STP from liquid to equity funds bypasses these fees, making liquid funds more efficient. STPs from liquid funds also help in better managing your monthly equity investments.

Reduction of Transactional Hassle: Liquid funds simplify cash management within your portfolio, minimizing bank transactions and potential charges. They keep your cash parked in a productive yet safe manner, awaiting deployment into equity funds.

Assessing Liquid Funds in the Context of Portfolio Allocation
Emergency Funds Allocation: Even for long-term investors, an emergency fund is crucial. Liquid funds serve this purpose without disturbing your equity holdings. They are a reliable option for meeting unforeseen expenses while preserving your equity investments.

Risk Management: Liquid funds add a layer of risk management. Instead of drawing from volatile equity funds for unexpected expenses, liquid funds allow you to meet these needs steadily. They ensure that your core equity portfolio remains untouched and continues to grow.

Practical Scenarios Where Liquid Funds Provide Value
Transition Periods: If you’re between investment strategies or waiting to reinvest in equity, liquid funds offer a safe, short-term parking space. This enables you to maintain liquidity while avoiding the volatility of direct equities.

Tactical Cash Allocation: When planning large purchases or payments, liquid funds act as a holding place for cash. For instance, if you plan to reinvest into equities during a market correction, liquid funds let you retain your cash in a secure, yielding environment.

Aligning Liquid Funds with Long-Term Financial Goals
Goal-Based Planning: Liquid funds support goals that require money within three years. For longer-term goals, equity is ideal. But for shorter horizons, liquid funds add a secure layer to your portfolio, ensuring liquidity for near-term needs.

Supporting Large Financial Milestones: Suppose you have a financial milestone in the next few years. In such cases, liquid funds can preserve your principal and generate returns better than a savings account, ensuring your goal is met without equity market exposure.

When Liquid Funds May Be Less Relevant
High Opportunity Cost: If you’re certain you won’t need funds for over five years, then equity funds have the advantage. Equity offers higher returns potential over such long terms, making liquid funds less efficient if no immediate cash needs exist.

Alternative Short-Term Debt Options: Depending on your investment goals and comfort with risk, ultra-short or low-duration debt funds may serve as alternatives. However, these options carry more risk than liquid funds and are less ideal for emergencies.

Final Insights
Liquid funds, while conservative, add immense strategic value to a long-term portfolio. They create a secure, accessible portion of your portfolio, which complements higher-risk equity investments. While liquid funds carry an opportunity cost, their advantages for liquidity, risk management, and tax efficiency often outweigh this downside.

For investors focused on growth, liquid funds enable STP-based investments without disrupting your primary equity allocation. This minimizes bank charges and transactional hassle, helping you build a stable and robust portfolio over time.

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.
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My mutual fund app alerts me to rebalance my portfolio to shift a portion to liquid fund or invest more in liquid fund ????. I understand the Meaning of this rebalance. But my question is When I can withdraw or redeem from my existing equity mutual fund ???? Why should I transfer from equity fund to liquid fund or to invest more in liquid fund. Even if it is a load it is only bearable. Moreover anything can wait for 2 days, even if that is more urgent we can use credit card and defer the payment from 30-55 days. Then why I need liquid fund except for STP while making lump sum investment ????
Ans: Rebalancing your portfolio and shifting part of your investments into liquid funds may seem unnecessary at first glance. However, the idea goes beyond just liquidity. Let's explore why this is important and how it can benefit your financial plan.

1. Portfolio Rebalancing and Risk Management
When your mutual fund app suggests rebalancing, it aims to maintain your desired asset allocation. Over time, your equity investments may outperform, leaving your portfolio more equity-heavy. While this can lead to higher potential returns, it also exposes you to greater risk.

Rebalancing into liquid funds or debt funds reduces exposure to market volatility.

It helps maintain a balanced risk-return profile aligned with your financial goals and risk tolerance.

Liquid funds act as a safety cushion by providing low-risk, low-volatility returns while maintaining liquidity.

2. When to Redeem from Equity Mutual Funds
You can redeem your equity mutual funds whenever needed. However, withdrawing from equities during a market downturn can lock in losses. Timing the market is difficult, so rebalancing gradually by moving some funds to liquid instruments ensures that you protect gains without abruptly exiting the equity market.

Redeem equity funds when they have met your financial goals, or the market reaches your target.

Avoid redeeming equity funds for short-term needs since the market can fluctuate.

Instead of reacting to market changes, you can shift profits into liquid funds and keep the core equity investment intact.

3. Purpose of Liquid Funds Beyond STP
Liquid funds are more than just a tool for Systematic Transfer Plans (STP) when making lump-sum investments. While they help with gradual investment into equity, they also serve as an essential part of your overall financial plan:

Emergency Fund: Liquid funds provide instant liquidity. You can redeem these funds within 24 hours without much hassle, making them an ideal emergency fund. Credit cards may offer short-term relief, but using credit means accumulating debt, which can be costly if not paid off on time.

Regular Withdrawals: If you need funds for ongoing expenses, a Systematic Withdrawal Plan (SWP) from a liquid fund is a convenient and efficient way to meet those needs. This reduces reliance on credit cards.

Short-Term Goals: If you have financial goals within 1-2 years (e.g., a holiday or home renovation), liquid funds are a safer choice compared to equity, which can be volatile in the short run.

4. Why Transfer from Equity to Liquid Fund?
There are several reasons to consider moving part of your investments from equity to liquid funds:

Market Volatility: Equity funds can be highly volatile. Transferring part of your profits to liquid funds helps lock in gains and avoid losses during downturns.

Goal Achievement: As you get closer to achieving your financial goal, reducing equity exposure and shifting to liquid or debt funds helps protect the gains. This strategy ensures your goal is not jeopardized by sudden market fluctuations.

Income Stability: For retirees or those nearing retirement, liquid funds provide a steady, predictable income source through SWP, unlike equity funds which can fluctuate.

5. Cost and Timing Consideration
You mentioned that exit loads in mutual funds are bearable. Indeed, the exit loads in most equity mutual funds are minimal if the holding period is longer than a year. However, there are other factors to consider when switching between funds:

Market Timing: If the market is at a high, it makes sense to rebalance and transfer a portion of your funds to liquid assets. This way, you are securing profits and reducing risk.

Goal-Based Planning: If you have achieved part of your target in equity, moving some money into a less risky asset (like a liquid fund) ensures that you safeguard your progress while still maintaining some exposure to growth.

6. Credit Card vs Liquid Fund for Emergency Needs
While using a credit card may defer payments for 30-55 days, it can lead to unnecessary debt if not managed carefully. Here’s why liquid funds are better for emergency needs:

No Interest Charges: Unlike credit cards, liquid funds don’t come with interest charges. You can access your money without the burden of repayment or interest.

Instant Access: Liquid funds provide quick redemption, often within 24 hours. This ensures you have access to cash whenever needed without the need to borrow.

Credit Card Limits: You are limited by the credit limit on your card, while liquid funds offer flexibility depending on how much you have invested.

Debt Avoidance: Using credit cards for emergencies can lead to a cycle of debt if you’re unable to pay the balance in full. Liquid funds ensure you don’t accumulate unnecessary liabilities.

7. Long-Term Investment Strategy
Liquid funds play a crucial role in building a balanced, diversified portfolio. While equity funds are great for long-term wealth creation, liquid funds serve as a buffer to provide liquidity and reduce volatility.

Liquid funds are ideal for parking short-term surpluses, making them readily available when needed.

Equity funds are for growth, while liquid funds ensure stability and liquidity.

By maintaining a mix of equity and liquid funds, you ensure that your portfolio is aligned with both short-term and long-term needs.

8. No Need to Exit Equity Fully
You don’t need to fully exit equity to invest in liquid funds. Instead, consider moving only a portion of your profits or capital to liquid funds. This ensures that your money is working for you, but you also have liquidity for unexpected expenses.

Maintaining equity exposure is important for long-term wealth creation, but liquid funds give you the flexibility and safety needed for short-term needs and emergency situations.

9. Opportunity for Rebalancing in a Market Correction
By keeping funds in liquid investments now, you prepare yourself for opportunities that may arise during market corrections. When the equity market corrects, you’ll have funds readily available in liquid funds. This allows you to rebalance by moving money from liquid funds back into equity, buying at lower prices.

This strategy ensures you take advantage of market dips and avoid selling equity at a loss during downturns.

A disciplined rebalancing approach can help you build long-term wealth without taking unnecessary risks.

Final Insights
Liquid funds are an important part of your financial strategy, not just for short-term investments or STPs, but also for providing liquidity and stability in your portfolio.

Rebalancing your portfolio by moving a portion from equity to liquid funds helps in risk management and goal protection.

Liquid funds serve as an emergency fund, ensuring that you are not forced to sell equity during market downturns or rely on credit cards for urgent payments.

Consider using liquid funds strategically for goal-based planning, and keep a balanced mix of equity for growth and liquid funds for safety and liquidity.

By keeping funds in liquid investments, you can take advantage of market corrections by rebalancing back into equity at lower prices.

By taking a balanced approach, you can ensure that your investments align with both short-term and long-term goals while reducing the risk of market volatility.

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

..Read more

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Ramalingam Kalirajan  |10874 Answers  |Ask -

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Im investing 5k Monthly in LiC jeevan anandg for past 7 years. Policy plan matures on 21 year. Return around 22 lkh on maturity. Hearing about sip, same amount invetested in sip maturiy amount looks higher. Should i really stop my lic investment and redirect the funds to sip for 15 r 20 years, pls advice
Ans: LIC Jeevan Anand offers both insurance and savings. However, such plans usually provide modest returns. You mentioned your plan will give Rs. 22 lakh on maturity after 21 years. While it offers life cover, the returns from these traditional plans are generally lower than market-linked investments like mutual funds.

Insurance-cum-investment plans bundle insurance with savings, but each may underperform compared to separate insurance and investment solutions. You may want to assess if holding the policy further aligns with your financial growth goals.

Impact of Redirecting to SIPs
SIP investments in mutual funds have the potential for higher returns over the long term. With regular contributions, equity funds can benefit from market growth and compounding.

By stopping your LIC premiums and redirecting to SIPs, you could explore higher returns, particularly over 15 to 20 years. The flexibility of SIPs allows adjustments based on changing financial conditions, unlike fixed traditional plans.

Taxation Benefits and Drawbacks
LIC maturity proceeds are usually tax-exempt under Section 10(10D) of the Income Tax Act. On the other hand, equity mutual funds have new capital gains taxation rules.

For SIPs, long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%. This taxation needs to be considered, but even with taxes, the growth potential could exceed traditional insurance plans.

Insurance and Investments: A Better Approach
Instead of combining insurance and investment in one product, a Certified Financial Planner would suggest separating them. You can retain life cover with a term insurance policy, which offers higher coverage at a lower cost. This ensures your family’s financial security.

Meanwhile, investments through mutual fund SIPs offer targeted financial growth, like child education or retirement planning. Regularly tracking and rebalancing these investments also ensures they stay aligned with your long-term goals.

Should You Surrender LIC? A Careful Evaluation
Surrendering an insurance policy midway can result in a reduced payout. You need to check the surrender value and compare it with your financial situation. If the surrender value is significantly lower, you may decide to continue.

However, future premiums can be redirected toward SIPs to optimise returns. It is a gradual shift rather than an immediate stop. Also, since you have already completed seven years, evaluate if staying invested till maturity aligns with your expectations.

Why Mutual Funds Are a Strong Option
Higher Returns: Equity mutual funds have historically outperformed traditional insurance plans over the long term.

Liquidity: Mutual funds offer liquidity, allowing withdrawals in case of emergencies without penalties.

Professional Management: Mutual fund managers actively manage your investments, aiming for higher growth. This gives you an advantage compared to passive, fixed insurance returns.

Goal-Based Planning: With SIPs, you can create a corpus for retirement, children’s education, or wealth creation.

Avoiding the Pitfalls of Direct Funds
Many individuals are attracted to direct funds because of lower expenses. However, managing your portfolio alone may become overwhelming. Direct plans require constant monitoring and a deep understanding of markets.

Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner can provide expert advice. A professional helps with portfolio rebalancing, tax-saving strategies, and timely switches between funds. This structured support can optimise your wealth-building journey.

Active Funds vs. Index Funds
Index funds passively follow the market, but they may not provide the best results during market volatility. Actively managed funds, on the other hand, aim to outperform the market through the expertise of fund managers.

In volatile times, active funds have the flexibility to adjust holdings. This ensures your investment portfolio remains aligned with market trends. Active management adds value, especially for long-term goals like retirement or wealth accumulation.

Long-Term SIPs and Financial Freedom
Shifting your LIC premium to SIPs for 15 to 20 years can help build substantial wealth. Even with market fluctuations, staying invested ensures you benefit from compounding and market recoveries.

SIPs also offer the flexibility to increase contributions over time as your income grows. This ensures your wealth-building efforts remain in sync with your financial aspirations.

Final Insights
Redirecting your LIC premium to SIPs can enhance your financial growth. However, surrendering the policy needs careful evaluation of costs and benefits. If the surrender value is low, continuing the policy till maturity could be wiser.

Separating insurance and investment ensures better coverage and optimised returns. Mutual funds, through SIPs, offer a versatile approach to building wealth, providing liquidity, flexibility, and professional management.

A balanced approach, where you retain essential life cover and invest systematically, will secure both your financial future and your family's needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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Hi i am 40M. would request your help to understand what should be the corpus required for retirement as i want to get retired in next 3-5yrs. currently my take home is 2.3L monthly & my wife also works but leaving the job in next 2-3 months. we have a daughter 10yrs, currently i stay on rent and total monthly expense is 1.1L month. once i will retire we will shift in our own parental flat, where hopefully there will be no rent. current Investments 1. 50L in REC bonds getting matured in 2029 2. 42L in stocks 3. 17L in MF 4. 16L FD 5. 15L in PPF 6. 1.3L SIP monthly i do My Wife Investments 1. 30L corpus 2. flat with current value 40L and we get rental of 10K monthly. Please guide what should be the retirement corpus required combined to retire, assuming i need 75L for my daughter post grad and marriage and we would be requiring 75K monthly for our expenses after retiring
Ans: You have explained your income, goals, current assets, and future plans with great clarity. Your early planning spirit is strong. This gives a very good base. You can reach a peaceful retirement with smart steps in the next few years.

» Your Current Position

You are 40 years old. You plan to retire in 3 to 5 years. You earn Rs 2.3 lakh per month. Your wife also works but will stop working soon. You have one daughter aged 10. Your current monthly cost is around Rs 1.1 lakh. This cost will reduce after retirement because you will shift to your parental flat.

Your investment base is already good. You have saved in bonds, stocks, mutual funds, PPF, FD, and SIP. Your wife also has her own savings and rental income from a flat. All these create a good starting point.

This early base helps you plan stronger. It also gives room for more shaping. You are on the right road.

» Your Family Goals

You need Rs 75 lakh for your daughter’s higher education and marriage.

You want Rs 75,000 per month for family living after retirement.

You want to retire in 3 to 5 years.

You will shift to your parental flat after retirement.

You will have rental income of Rs 10,000 from your wife’s flat.

These goals are clear. They give direction. They allow a strong plan.

» Your Present Investments

Your investments include:

Rs 50 lakh in REC bonds maturing in 2029.

Rs 42 lakh in stocks.

Rs 17 lakh in mutual funds.

Rs 16 lakh in fixed deposits.

Rs 15 lakh in PPF.

Rs 1.3 lakh as monthly SIP.

Your wife holds:

Rs 30 lakh corpus.

A flat worth Rs 40 lakh with rent of Rs 10,000 each month.

Your combined net worth is healthy. This gives good power to build your retirement fund in the coming years.

» Understanding Your Expense Need After Retirement

You expect Rs 75,000 per month after retirement. This includes all basic needs. You will not have rent. That reduces cost. This assumption looks fair today.

Your cost will rise with inflation. So you must plan for rising needs. A strong retirement corpus must support rising cost for 40 to 45 years because you are retiring early.

An early retirement needs a large buffer. So you need safety along with growth. Your plan must include growth assets and safety assets.

» How Much Monthly Income You Will Need Later

Rs 75,000 per month is Rs 9 lakh per year. In future years, this cost can rise. If we assume steady rise, your future cost will be much higher.

So the retirement corpus must be designed to:

Give monthly income.

Beat inflation.

Support you for 40 to 45 years.

Protect your family even in market down cycles.

Allow flexibility if your needs change.

A strong retirement fund must support both safety and long-term growth.

» How Much Corpus You Should Target

A safe target is a large and flexible corpus that can support long years without running out of money. For early retirement, the usual thumb rule suggests a very high number. This is because you need income for many decades.

You need a corpus big enough to produce rising income. You also need a cushion for unexpected health costs, lifestyle shocks, and inflation changes.

Your target retirement corpus should be in a strong range. For your needs of Rs 75,000 per month and for goals like daughter’s education and marriage, you should aim for a combined retirement readiness corpus in the higher bracket.

A safe range for your family would be a very large number crossing multiple crores. This large range gives you:

Income safety.

Inflation protection.

Peace during market cycles.

Comfort in long life.

Room for daughter’s future.

Strong backup for health.

You are already on the way due to your existing assets. You will reach close to this range with systematic building over the next 3 to 5 years.

» Why You Need This Larger Corpus

You will retire early. That means more years of living from your corpus. Your corpus must not fall early. It must grow even after retirement. It must give monthly income and long-term family protection.

This is only possible when the corpus is strong and well-structured. A weak corpus creates stress. A strong corpus creates freedom.

Also, your daughter’s future cost must be kept aside. This must be parked in a separate fund. This must not touch your retirement money.

A strong corpus makes these two worlds separate and safe.

» Your Existing Assets and Their Strength

You already have good diversification:

Bonds give safety.

Stocks give growth.

Mutual funds give managed growth.

FD gives stability.

PPF gives tax-free long-term savings.

This blend is already a good start. But you need to make the blend more structured for early retirement.

Your Rs 1.3 lakh monthly SIP is also strong. It builds your future fast. You should continue.

Your wife’s rental income is small but steady. This adds strength.

Your combined financial base can reach your retirement target if you refine your allocation now.

» Your Daughter’s Future Fund Need

You need Rs 75 lakh for your daughter’s education and marriage. You should keep this goal separate from your retirement goal.

Your current SIP and future allocations should create a dedicated fund for this goal. A long-term fund can grow well when managed actively.

Do not mix this fund with your retirement needs. Mixing leads to shortage in old age. Always keep this corpus ring-fenced.

» A Strong Asset Mix For Your Retirement Path

A balanced mix is needed. You need growth assets to beat inflation. You also need stable assets for income.

You must avoid index funds because they do not give flexibility. Index funds follow a fixed index. They cannot make active changes in different markets. They cannot move to better stocks when markets change. They force you to stay in weak sectors for long. They also do not help you in down cycles because they cannot protect you by shifting to safer options. This can hurt retirement planning.

Actively managed funds are better because:

They give active asset selection.

They give scope for better returns.

They give flexibility to change sectors.

They give downside management.

They give access to a skilled fund manager.

They support long-term planning more safely.

Direct plans also carry risk. Direct plans do not give guidance. They do not give behavioural support. They do not give market timing help. They do not give portfolio shaping. They leave all the judgement to you. One mistake can cost years of wealth.

Regular plans with guidance from a Certified Financial Planner help you shape decisions. They help you remain disciplined. They help you avoid panic. They help you decide allocation changes at the right time. This saves wealth in long-term.

» How Your Investment Journey Should Grow in the Next 3–5 Years

Continue your SIP.

Increase SIP when your income rises.

Shift part of your stock holding into planned long-term mutual funds to reduce concentration risk.

Build a defined daughter’s education fund.

Keep a part of your REC bond maturity amount for long-term.

Avoid locking too much into fixed deposits for long periods.

Build a safety fund for one year of expenses.

This will create a full structure.

» Your Rental Income Role

Your rental income of Rs 10,000 per month is small but steady. Over time it will rise. This income will support your monthly cash flow after retirement.

You can use this for utilities or health insurance premiums. This gives a cushion.

» Your Emergency Buffer

You should keep at least one year of essential cost in a safe place. This can be in a liquid account or short-term fund. This protects you in shocks.

Since you plan early retirement, a strong buffer is important. It gives peace even in low months.

» A Structured Retirement Approach

A complete retirement plan for you should include:

A clear monthly income plan after retirement.

A corpus that can grow and protect.

A rising income system that matches inflation.

A separate daughter’s future fund.

A health cover plan for your family.

A tax-efficient withdrawal plan.

A market cycle plan to protect you in tough times.

This holistic approach keeps your family strong for decades.

» What You Should Build by Retirement Year

Your aim should be to reach a strong multi-crore range in investments before retirement. You already hold a large amount. You will add more in the next 3 to 5 years through SIP, stock growth, bond maturity, and disciplined saving.

Once you reach your target range, you can start the shifting process:

Move a part to stable assets.

Keep a part in long-term growth assets.

Create a monthly income strategy.

Keep a reserve bucket.

Keep a child future bucket.

Keep a long-term growth bucket.

This structure protects you in all market conditions.

» Final Insights

Your financial journey is already strong. You have a good income. You have saved well. You have multiple asset types. You have a clear timeline. And you have clear goals. This foundation is solid.

In the next 3 to 5 years, your focus should be on growing your combined corpus to a strong multi-crore range, keeping a separate fund for your daughter, reducing risk in unplanned assets, and building a stable long-term structure.

With the present path and a disciplined structure, you can retire peacefully and support your family with confidence for many decades.

Best Regards,

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

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

...Read more

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Hello my name is saket, I monthly salary is 43k and my saving is zero. My Rent is 15 k and 10 k i send to my parents. How can i save money and investments.
Ans: 1. Your Current Monthly Numbers

Salary: Rs 43,000

Rent: Rs 15,000

Support to parents: Rs 10,000

Left with: Rs 18,000 for food, travel, bills, and savings

You have very little room, but saving is still possible if done smartly.

2. First Step: Build a Small Emergency Buffer

You must build Rs 10,000 to Rs 20,000 emergency money.
This protects you from taking loans for small issues.

How to build it:

Save Rs 3,000 to Rs 5,000 every month in a simple bank savings account

Do this for the next few months

Don’t touch it unless truly needed

3. Create a Mini Budget (Very Simple One)

Try this split from the remaining Rs 18,000:

Daily living (food + transport): Rs 10,000 – 11,000

Personal expenses (phone, internet, basics): Rs 3,000 – 4,000

Savings + investments: Rs 3,000 – 5,000

If this feels difficult, reduce food/transport costs by small adjustments.

4. Where to Invest Once You Have Emergency Money

(For minors: This is general education. For actual investing, get guidance from a trusted adult or family member.)

After you build emergency money, start small monthly investing.

You can begin with:

Rs 1,000 to Rs 2,000 SIP in a simple, diversified equity fund

Increase the SIP whenever salary increases or expenses reduce

Avoid complicated products.
Keep it simple.
Focus on consistency.

5. Easy Practical Ways to Increase Saving

These small moves help a lot:

Avoid food delivery

Use public transport as much as possible

Reduce subscriptions you don’t use

Fix a daily expense limit

Keep a separate bank account only for savings

Even Rs 200 saved daily = Rs 6,000 monthly.

6. Increase Income Slowly

Try small income boosters:

Weekend tutoring

Freelancing

Part-time projects

Selling old gadgets

Learning new skills for future salary growth

Even Rs 3,000 extra income changes your savings life.

7. Build the Habit First

The amount doesn’t matter in the beginning.
The habit matters more.

Even saving Rs 500 every month is better than zero.
Once salary grows, you will already know how to save.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

...Read more

Money
Radheshyam

Radheshyam Zanwar  |6737 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Dec 08, 2025

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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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