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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 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 10, 2025Hindi

I am retirinig after 15 years service in armed forces, i am getting a lumsum around 40,00,000, and have a home loan of 7,00,000, my daughter is 5 years old. How and where can i invest the money recieved. Please guide

Ans: Thank you for your dedicated service to our nation.
Retiring after 15 years in the armed forces is a proud achievement.
Receiving Rs. 40 lakh lumpsum is a great opportunity to secure your next phase.

You also have a home loan of Rs. 7 lakh.
And a lovely responsibility—a 5-year-old daughter.
Now is the right time to plan with care and clarity.

Let us structure your financial journey with full care from every angle.

? Assessing your current financial picture

– You are receiving Rs. 40 lakh as lumpsum
– Home loan outstanding is Rs. 7 lakh
– Your daughter is just 5 years old
– You are at a stage of life shift – from forces to civil

– The Rs. 40 lakh must cover multiple goals:
– Loan clearance
– Emergency buffer
– Investment for growth
– Child’s future planning

– You must protect the money and grow it wisely

? Handling your home loan immediately

– Home loan is only Rs. 7 lakh
– Interest may be low, but still a monthly burden
– Best to clear this from your lumpsum now

– This frees up cash flow every month
– You can then divert EMIs towards investment

– Peace of mind also improves without debt
– So pay off the Rs. 7 lakh first from the Rs. 40 lakh

– That leaves you with Rs. 33 lakh to plan with

? Setting up an emergency fund first

– Life after service brings new uncertainties
– Job search, new income flow, health events etc.

– You must keep aside Rs. 3–4 lakh as safety buffer
– Put this in liquid mutual funds or short-term instruments

– It should cover 6–9 months of household expenses
– Never mix this money with long-term investments

– This buffer protects your other plans from interruptions

? Secure your daughter’s future goal early

– Your daughter is 5 now
– Higher education goal is at least 12–13 years away

– This is the perfect time to start equity investment for her
– You can start a long-term SIP in actively managed mutual funds

– Create a separate investment goal for this
– Allocate Rs. 8–10 lakh from your lumpsum towards this goal

– Use large & midcap, flexicap, and some midcap allocation
– Avoid smallcap funds for this goal due to volatility

– You can do monthly SIP or one-time lumpsum
– But better to stagger lumpsum over 6 months

– This will average out the market levels

– Review this goal every 2 years
– As you near the goal, slowly shift to hybrid or safer funds

– Do not use any LIC, ULIP or insurance-based education plans
– They offer low returns and poor flexibility

– If you already have such policies, assess their returns
– If below 6%, consider surrendering and reinvesting in mutual funds

? Investing for your own retirement

– You have retired from defence, but second career may continue
– Still, your future retirement must be planned well

– After loan, emergency and daughter’s fund, you have around Rs. 20–22 lakh left

– This should be invested in a mix of growth and balanced funds
– Do not put everything in one fund type

– Allocate 40% to flexicap and large & midcap funds
– Allocate 30% to hybrid or equity savings funds
– Allocate 20% to pure debt mutual funds
– Keep 10% in liquid or ultra-short funds for flexibility

– This creates a balanced portfolio with good growth potential
– At the same time, you get safety from market drops

– Use only regular plans through a Certified Financial Planner
– Avoid direct funds. They have many hidden issues

– Direct plans give no guidance or rebalancing
– Regular funds via CFP-backed MFD give long-term value and care

– Also avoid index funds
– Index funds only follow markets, they do not protect downside

– Active funds managed by experts adjust better in falling markets
– They also offer more suitable diversification

– So choose quality active funds under expert guidance

? Build consistent monthly investment habit

– After settling into your second career, you’ll have regular income
– From that, start SIPs in long-term mutual funds

– Even Rs. 10,000–15,000 SIP monthly can build large wealth in 10–15 years
– Increase the SIP amount every year as your income grows

– Combine this with your existing investments to reach goals faster

– Don’t stop SIPs during market downs
– These are the times you actually buy more units at lower cost

? Avoid real estate and traditional products

– Do not buy new property for investment
– Real estate is illiquid, costly, and has poor returns now

– Also avoid insurance-linked savings products
– Endowment plans, ULIPs, and guaranteed returns give very low growth

– They lock your money and give little flexibility
– You may lose on time value and opportunity cost

– Always invest in mutual funds for real long-term growth
– Separate insurance and investment strictly

? Ensure proper insurance protection for the family

– Take a pure term insurance policy
– It gives large cover for small premium

– Your daughter’s future must be protected if anything happens to you
– Take cover of at least 10 times your annual income

– Also take health insurance for you and your family
– Don't depend only on ex-servicemen health schemes

– Medical costs in private hospitals can be high
– A good health policy gives choice and better comfort

? Nomination and estate planning

– Add proper nominations to all your bank and investment accounts
– This avoids delay and confusion for your family

– Create a simple Will
– Include your daughter’s guardian details if needed

– A Will gives peace of mind to your loved ones
– Review it every few years or after major life events

? Tax planning with your new investments

– Equity mutual funds have new tax rules
– LTCG above Rs. 1.25 lakh taxed at 12.5%
– STCG taxed at 20%

– Debt mutual funds taxed as per your slab rate
– So plan exits and rebalancing with a Certified Financial Planner

– Avoid selling funds too often
– Let money grow for 5+ years to get full benefit

– Tax-efficiency improves with long-term view

? If you plan to start a business or new job

– Keep part of your corpus liquid
– Avoid locking entire Rs. 40 lakh in long-term assets

– You may need capital for business or new career expenses
– Maintain flexibility in your investments

– You can later move unutilised portion into long-term investments

? Stay focused on discipline and tracking

– Money discipline is more powerful than product selection
– Do not react to market noise

– Review your investments once a year
– Take help from a Certified Financial Planner to stay on course

– Avoid random investing or jumping funds frequently
– Stay with your plan for 10–15 years

– Small adjustments with proper advice are better than full changes

? Finally

– Rs. 40 lakh is a strong financial base
– With right guidance, it can build lasting wealth

– Use this to clear debt, secure daughter’s future, and plan your retirement
– Choose active mutual funds only
– Avoid direct and index options

– Get insurance protection in place
– Keep investments simple, goal-based, and long-term

– You have served the country. Now let your money serve you and your family

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.