rediff.com
Rediff Gurus Logo
Home > Money > Question
Language:
Now in हिन्दी too
Need Expert Advice?Our Gurus Can Help
Sanjeev

Sanjeev Govila  | Answer  |Ask -

Financial Planner - Answered on Feb 05, 2024

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more
Asked by Anonymous - Jan 24, 2024Hindi
Listen
Money

I am recently retired. I have retirement corpus of 26 lakhs. How can I invest the above amount to cover my monthly cost

Ans: Congratulations on your recent retirement. To effectively manage your ?26 lakh corpus, it is essential to consider various factors. We would like to discuss your investment plan in more detail by obtaining additional information such as your age, risk profile, current asset allocation, and investment time horizon.

Emergency Fund: Safeguard with six months' living expenses.

Immediate Annuity: Secure a steady income through an annuity plan.

SWP: Set up regular withdrawals to balance current needs and long-term preservation.

Diversification: Optimize returns with diversified investments in equity, debt, and liquid funds.

Tax-Efficient Investments: Explore options like SCSS and PMVVY for attractive returns.

Health Insurance: Ensure comprehensive coverage for peace of mind.

For a personalized plan, share crucial details with your financial planner. Link your financial goals and diversify into mutual funds, FDs, and Bonds for effective risk management.

Connect with your financial planner for goal-based planning and a detailed explanation tailored to your unique situation.
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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7376 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Asked by Anonymous - Jun 15, 2024Hindi
Listen
Money
After retirement I got corpus of Rs.1 crores, please advise me for investment to incur monthly expenses. My monthly expenses is Rs.50k.
Ans: Congratulations on building a retirement corpus of Rs. 1 crore! That's a significant achievement. I understand your concern about managing your monthly expenses of Rs. 50,000 post-retirement. Let's delve into a comprehensive strategy to ensure your funds are managed wisely.

Systematic Withdrawal Plan (SWP)
An SWP allows you to withdraw a fixed amount from your mutual fund investments regularly. This helps in managing cash flow efficiently while keeping your principal invested.

Benefits of SWP
SWP provides regular income, which suits your monthly expense needs.

It offers flexibility, allowing you to adjust the withdrawal amount.

Invested capital continues to grow, balancing withdrawals.

SWP is tax-efficient compared to withdrawing a lump sum.

Selecting the Right Mutual Funds
Choosing the right mutual funds is crucial. Diversification across categories ensures stability and growth.

Equity Mutual Funds
Equity mutual funds invest in stocks, offering high returns. They're suitable for long-term growth. However, they carry higher risks due to market volatility.

Debt Mutual Funds
Debt mutual funds invest in bonds and other debt instruments. They offer stable returns with lower risk. Ideal for preserving capital and generating steady income.

Balanced Mutual Funds
Balanced or hybrid funds invest in both equity and debt. They provide a mix of growth and stability. Suitable for those seeking moderate risk and returns.

Advantages of Mutual Funds
Mutual funds are managed by professional fund managers. This ensures informed investment decisions.

They offer diversification, reducing risk by spreading investments.

Mutual funds are highly liquid, allowing easy access to your money.

They provide transparency with regular updates and disclosures.

Power of Compounding
Compounding is the reinvestment of earnings, generating earnings on previous earnings. Over time, this significantly boosts your investment growth.

Evaluating Risk
Every investment carries risk. Understanding and managing risk is key to a successful strategy. Equity funds are riskier but offer higher returns. Debt funds are safer but with lower returns. Balancing both types mitigates risk and ensures steady growth.

Implementing SWP with Mutual Funds
Here's how to implement an SWP effectively.

Step 1: Diversify Investments
Diversify your Rs. 1 crore corpus across equity, debt, and balanced funds. This ensures growth, stability, and regular income.

Step 2: Calculate Monthly Withdrawals
Determine the monthly withdrawal amount considering inflation and future needs. Rs. 50,000 is your current need. Plan for gradual increments.

Step 3: Monitor Performance
Regularly monitor the performance of your investments. Adjust allocations if needed to maintain the desired income flow.

Disadvantages of Direct Funds
Direct funds require constant monitoring and expertise. They lack guidance from financial professionals. This increases the risk of poor investment decisions. Opting for regular funds through a Certified Financial Planner (CFP) provides professional management and advice.

Benefits of Regular Funds
Regular funds involve a small fee but offer professional management. CFPs provide personalized advice based on your financial goals. They help in selecting the right funds, balancing risk and returns. This ensures optimal growth and income stability.

Tax Efficiency of SWP
SWP is tax-efficient as it benefits from capital gains taxation. Withdrawals from equity funds held for more than a year are taxed at 10% on gains above Rs. 1 lakh. Debt funds held for more than three years are taxed at 20% after indexation. This reduces your overall tax liability compared to lump-sum withdrawals.

Regular Reviews and Adjustments
Regularly reviewing your investment portfolio is essential. Market conditions and personal needs change over time. Adjust your SWP and fund allocations accordingly. This ensures continued growth and stability of your income.


You've done an excellent job by accumulating a significant retirement corpus. Managing your funds wisely will ensure a comfortable and stress-free retirement. Your dedication to securing your financial future is commendable.


I understand the challenges of managing retirement funds. It's crucial to balance growth and stability while meeting monthly expenses. Your proactive approach in seeking advice shows your commitment to a secure future.

Final Insights
Investing your Rs. 1 crore corpus through a well-planned SWP in mutual funds ensures regular income and growth. Diversify across equity, debt, and balanced funds to balance risk and returns. Regular reviews and adjustments keep your strategy aligned with your needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Money
Ramalingam

Ramalingam Kalirajan  |7376 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Listen
Money
My monthly in hand salary is 66820, I have to spend around 38K per month, so how to invest the remaining amount, so that I have the corpus of 1.6cr - 2 Cr Cr, when I am 50?, I am now 33 year old.
Ans: Assessing Your Financial Goals
You want to build a corpus of Rs. 1.6 to 2 crore by age 50. At 33, you have 17 years to achieve this goal. Your monthly in-hand salary is Rs. 66,820, and you spend around Rs. 38,000 per month. This leaves you with Rs. 28,820 for investments. Let’s plan a strategy to help you achieve your target.

Monthly Savings Allocation
With Rs. 28,820 available monthly, consider diversifying your investments. Diversification helps in balancing risk and returns. Here’s a suggested allocation:

Equity Mutual Funds:
Invest in equity mutual funds for long-term growth. Equity funds have the potential for high returns, which can help in reaching your target corpus.

Debt Mutual Funds:
Allocate a portion to debt mutual funds for stability. These funds are less volatile and provide steady returns. They balance the risk of equity investments.

Public Provident Fund (PPF):
Consider PPF for tax-free returns and safety. It’s a long-term investment with a lock-in period, aligning well with your 17-year horizon.

Benefits of Actively Managed Funds
Actively managed funds involve professional fund managers making investment decisions. They aim to outperform the market. Here are some benefits:

Professional Expertise:
Fund managers use their expertise to select stocks, aiming for higher returns.

Flexibility:
Actively managed funds can adjust portfolios based on market conditions.

Disadvantages of Direct Funds
Direct funds might seem attractive due to lower expense ratios. However, investing through a Certified Financial Planner (CFP) offers several advantages:

Expert Guidance:
A CFP provides personalized advice based on your financial goals.

Regular Monitoring:
They monitor your investments and make adjustments as needed.

Peace of Mind:
Having a professional manage your investments reduces the stress of decision-making.

Investing Through a CFP
Investing through a CFP ensures a comprehensive approach. They consider all aspects of your financial life:

Risk Tolerance:
They assess your risk appetite and recommend suitable investments.

Tax Efficiency:
They help optimize your investments for tax benefits.

Goal-Based Planning:
Your investments are aligned with your financial goals.

Suggested Investment Plan
To achieve your target corpus, here’s a suggested investment plan:

Equity Mutual Funds:
Allocate 60% to equity mutual funds. These funds offer high growth potential.

Debt Mutual Funds:
Allocate 20% to debt mutual funds. These funds provide stability and regular returns.

PPF:
Allocate 20% to PPF. This ensures safety and tax-free returns.

Regular Review and Adjustments
Review your portfolio regularly. Market conditions change, and your portfolio should adapt. A CFP can help with this:

Performance Review:
Check the performance of your funds annually.

Rebalancing:
Adjust your portfolio to maintain the desired asset allocation.

Final Insights
Achieving a corpus of Rs. 1.6 to 2 crore by 50 is attainable with disciplined investing. Diversify your investments across equity, debt, and PPF. Invest through a CFP for expert guidance and regular monitoring. Stay committed to your investment plan and review it regularly. This approach will help you reach your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Money
Milind

Milind Vadjikar  |812 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 26, 2024

Listen
Money
Ramalingam

Ramalingam Kalirajan  |7376 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 03, 2024

Asked by Anonymous - Oct 01, 2024Hindi
Money
Age 62 Corpus 1.30 Cr Require 1 Lakh per month how to invest
Ans: At the age of 62, you have accumulated a corpus of Rs 1.30 crore, and you require Rs 1 lakh per month to cover your living expenses. This translates to an annual withdrawal requirement of Rs 12 lakhs. Ensuring that your corpus lasts for the rest of your life while meeting your monthly requirements is a delicate balance. Let’s assess the best investment strategy to achieve this goal.

Assessing Withdrawal Needs
Your corpus of Rs 1.30 crore needs to generate a consistent income of Rs 12 lakhs per year. A sustainable withdrawal rate that prevents your corpus from depleting too quickly is around 6-8%. At a withdrawal rate of Rs 12 lakhs per year, you’re targeting roughly a 9-10% return on your investments. This is feasible but requires a careful balance between risk and return.

Investment Strategy for Regular Income
Debt and Fixed Income Investments
A significant portion of your portfolio should be invested in safer, debt-based instruments. These will provide you with stable returns and protect your capital. Consider allocating 60-70% of your portfolio to the following options:

Senior Citizens’ Saving Scheme (SCSS): This is a safe, government-backed scheme that offers decent returns. It also provides regular payouts to meet your monthly needs.

RBI Floating Rate Bonds: These bonds are safe and provide a regular income that can help cover part of your expenses.

Post Office Monthly Income Scheme (POMIS): This scheme provides steady monthly income and is a low-risk investment option.

Corporate Bonds or High-Rated Debt Funds: While slightly riskier than government schemes, corporate bonds or high-rated debt funds offer higher returns and can be considered for a portion of your investment.

Balanced or Hybrid Mutual Funds
Since you need regular income and want to preserve your capital for the long term, hybrid or balanced mutual funds are ideal. These funds invest in both equity and debt, providing moderate returns with lower risk. Consider allocating 20-30% of your portfolio to:

Aggressive Hybrid Funds: These funds invest about 65% in equities and the rest in debt. They offer growth potential while maintaining some level of safety.

Balanced Advantage Funds: These funds dynamically shift between equities and debt based on market conditions, offering a mix of growth and safety.

Systematic Withdrawal Plan (SWP)
To ensure a regular income stream, you can set up a Systematic Withdrawal Plan (SWP) in your mutual fund portfolio. This will allow you to withdraw a fixed amount every month while the remaining corpus continues to grow. SWPs from balanced or hybrid funds can help you generate income and offer some capital appreciation over time.

Inflation and Rising Expenses
One of the key challenges in retirement planning is inflation. While your expenses are Rs 1 lakh per month today, they will likely increase over time. Therefore, it’s important to invest in instruments that can offer growth above inflation. This is where equity investments come in.

Equity Exposure for Long-Term Growth
To counter the effects of inflation, a small portion of your corpus should be invested in equity mutual funds. Consider allocating 10-15% of your portfolio to equity mutual funds. These funds will help grow your corpus and ensure you don’t run out of money in the long term. Focus on:

Large-Cap Equity Funds: These funds are relatively stable and invest in established companies, offering consistent long-term returns.

Dividend Yield Funds: These funds invest in companies that regularly pay dividends, providing you with an additional income stream.

Emergency Fund
Given your need for regular income, it’s important to have an emergency fund. Set aside 6-12 months of expenses in a liquid form, such as a savings account or short-term FD. This will ensure you don’t have to dip into your investments for unforeseen expenses.

Tax Implications
Tax planning is crucial, especially when withdrawing from your corpus. Here’s a brief overview of taxation on mutual funds:

Equity Mutual Funds: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Funds: LTCG and STCG are taxed as per your income tax slab.

By withdrawing strategically using an SWP, you can reduce your tax liability and ensure efficient tax management.

Final Insights
At 62, preserving your capital while generating regular income is essential. A diversified portfolio of debt instruments, balanced mutual funds, and a small exposure to equity can help you achieve your goal of generating Rs 1 lakh per month. Focus on:

Allocating 60-70% to debt instruments for stable, regular income.
Investing 20-30% in hybrid mutual funds for growth and safety.
Allocating 10-15% to equity mutual funds for long-term growth and inflation protection.
Setting up an SWP for monthly withdrawals while allowing your corpus to grow.
Maintaining an emergency fund to cover unforeseen expenses.
By following this balanced approach, you can ensure a steady income throughout retirement and maintain your financial independence.

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

..Read more

Money
Latest Questions
Ramalingam

Ramalingam Kalirajan  |7376 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 31, 2024

Asked by Anonymous - Dec 30, 2024Hindi
Money
Best investment option ULIP or Mutual Fund
Ans: Understanding the differences between ULIPs (Unit Linked Insurance Plans) and mutual funds is essential to make an informed choice. Below is a detailed explanation from a Certified Financial Planner's perspective.

What Are ULIPs?
ULIPs are hybrid products offering life insurance and investment. A portion of the premium goes towards life insurance, while the rest is invested in various funds, such as equity or debt.

Key Benefits of ULIPs
Dual Purpose: Provides life insurance coverage along with potential investment growth.

Tax Savings: Premiums are eligible for tax deductions under Section 80C. Maturity proceeds may also be tax-free under Section 10(10D), subject to conditions.

Compulsory Discipline: The five-year lock-in period ensures disciplined long-term investing.

Major Drawbacks of ULIPs
High Costs: Includes multiple charges such as premium allocation, fund management, and mortality costs. These charges reduce overall returns.

Complexity: Understanding ULIP charges and performance can be confusing due to a lack of transparency.

Limited Fund Choices: Investment options are restricted to funds offered by the insurer.

Lower Returns: High costs and fund limitations may result in below-average returns compared to mutual funds.

What Are Mutual Funds?
Mutual funds are pure investment products that pool money from investors and invest in equity, debt, or a mix of both, depending on the fund type.

Key Benefits of Mutual Funds
Variety of Options: Mutual funds offer options like equity, debt, hybrid, and sector-specific funds to suit different financial goals and risk profiles.

Transparency: Investors can track fund performance, portfolio holdings, and expense ratios.

Low Costs: Mutual funds generally have lower charges compared to ULIPs, making them more cost-effective.

Flexibility: You can switch funds, adjust SIP contributions, or redeem investments anytime (subject to exit load).

Higher Returns: Over the long term, mutual funds tend to deliver better returns due to active management and lower costs.

Major Drawbacks of Mutual Funds
No Insurance Coverage: Unlike ULIPs, mutual funds are purely for investment and do not provide life insurance.

Tax on Gains: Gains from mutual funds are taxed based on the holding period and type of fund.

Comparative Analysis of ULIPs and Mutual Funds
Objective
ULIPs aim to provide both life insurance and investment returns.
Mutual funds focus solely on investments, leading to better fund management.
Transparency
ULIPs are less transparent due to their complex fee structures and limited fund details.
Mutual funds are highly transparent, offering regular updates on performance, portfolio composition, and costs.
Costs
ULIPs have high charges, including mortality, administration, and fund management costs. These significantly reduce returns.
Mutual funds are more cost-efficient, with lower expense ratios and no hidden charges.
Returns
ULIP returns are moderate due to high costs and limited fund options.
Mutual funds offer potentially higher returns due to professional fund management and diversified investment choices.
Flexibility
ULIPs have limited flexibility, as you are restricted to funds offered by the insurer.
Mutual funds provide greater flexibility, allowing you to switch funds, adjust investments, and even redeem partially.
Lock-in Period
ULIPs have a mandatory lock-in period of five years.
Mutual funds are more flexible, with no lock-in period except for tax-saving ELSS funds, which have a three-year lock-in.
Tax Benefits
ULIP premiums qualify for tax deductions under Section 80C. The maturity proceeds are tax-free under Section 10(10D), provided conditions are met.
Mutual funds offer tax benefits only for ELSS funds under Section 80C. Gains are taxable, as per the holding period.
Why Mutual Funds Are a Better Option
Focused Investment Approach
Mutual funds concentrate solely on investments, ensuring professional management and efficient fund allocation.

Higher Returns Potential
The absence of high charges allows mutual funds to deliver better returns over the long term.

Flexibility and Control
Mutual funds allow you to choose or switch between funds based on market conditions or financial goals.

Cost-Effective
Mutual funds are more cost-efficient due to lower expense ratios compared to ULIPs.

Why ULIPs May Not Be Suitable
High Charges
ULIPs have various charges that reduce your net returns. This makes them less attractive compared to mutual funds.

Limited Fund Options
You are restricted to investing only in the funds offered by the insurance company. This limits diversification.

Complexity
The structure of ULIPs, with their multiple charges and insurance components, makes them difficult to understand and monitor.

Final Insights
Mutual funds are the better investment choice for long-term wealth creation due to their focused investment strategy, flexibility, and cost-efficiency. ULIPs, on the other hand, are best avoided unless you specifically need life insurance along with investments.

For life insurance, consider a term plan, and for investments, focus on well-managed mutual funds. This combination will help you achieve your financial goals more effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Money
Mayank

Mayank Chandel  |1957 Answers  |Ask -

IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Dec 31, 2024

Listen
Career
Mayank

Mayank Chandel  |1957 Answers  |Ask -

IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Dec 31, 2024

Asked by Anonymous - Dec 29, 2024Hindi
Listen
Career
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Asked by Anonymous - Aug 16, 2024Hindi
Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Asked by Anonymous - Nov 30, 2023Hindi
Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Asked by Anonymous - Dec 29, 2024Hindi
Listen
Health
Dr Rajiv

Dr Rajiv Kovil  |18 Answers  |Ask -

Diabetologist - Answered on Dec 30, 2024

Health
See more questions »
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.
© 2024 Rediff.com - Disclaimer - Privacy - Terms of use - Grievances - Feedback

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x