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Sanjeev

Sanjeev Govila  | Answer  |Ask -

Financial Planner - Answered on Jan 18, 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
Sankar Question by Sankar on Dec 28, 2023Hindi
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Hi Sanjeev Sir Can I add RS 2000 in mid cap fund and 2000 in PPF and discontinue the RD and suggest me the mid cap mf. After 4 or 5 months I will add Large cap fund of Rs 2000 and suggest me fund for large cap as well as my salary is going to increase by Rs 5000 ( excepting ) Total would be 35000. Thanks for the reply. Any suggestions would be much helpful.

Ans: I would not be able to suggest any fund to you since I have no idea of your risk profile and your future goals. You can look up a good fund from so many investing websites where all such data is publicly available. However, a good Large Cap fund and PPF is a good idea. A midcap fund would be quite risky but you can go in for it with a time frame of at least 5 years if you are comfortable with it.
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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Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 2024

Money
Hello sir From past 10 month , I am investing in quant small cap MF 25 K And I planning to invest 25 k from next month in Parag Parik flexi cap MF 25 K An Lumsum amount of 5 Lakh ( every month 1 Lakah for five months in HDFC balanced Active fund .. Hope my MF selection is good ? Do you want me to reduce or increase amount in any the above selected funds ?
Ans: Evaluating Your Current Investment Strategy
First, I appreciate your proactive approach to investing. You have chosen a mix of small-cap, flexi-cap, and balanced funds. This approach shows that you are looking for growth while maintaining some level of stability. However, let’s take a closer look at your strategy to ensure it aligns with your financial goals and risk tolerance.

Small-Cap Mutual Fund Investment
Investing Rs 25,000 per month in a small-cap fund can offer high growth potential. Small-cap funds are known for their ability to deliver significant returns over the long term. However, they come with higher risk. These funds can be volatile, especially during market downturns. It’s essential to evaluate if this level of risk matches your risk tolerance and investment horizon.

If you are young and have a long-term horizon, this investment could be suitable. But if you are nearing retirement or have a low-risk tolerance, it might be wise to reduce your exposure to small-cap funds. Consider diversifying into less volatile categories, like large-cap or balanced funds, to balance the risk.

Flexi-Cap Fund Investment
Flexi-cap funds provide flexibility by investing across various market capitalizations. They offer a balanced approach, allowing fund managers to shift between large-cap, mid-cap, and small-cap stocks based on market conditions. Your plan to invest Rs 25,000 per month in a flexi-cap fund is a sound decision. This category is well-suited for investors looking for growth without the extreme volatility of small-cap funds.

However, it's important to keep in mind that flexi-cap funds are actively managed. The success of your investment largely depends on the fund manager's skill. Actively managed funds, like flexi-caps, have the potential to outperform index funds, which simply mirror the market. Actively managed funds are more likely to provide better returns during market fluctuations.

Balanced Fund Lumpsum Investment
You are considering investing Rs 1 lakh per month for five months in a balanced fund. Balanced funds, also known as hybrid funds, invest in a mix of equity and debt instruments. This blend provides growth potential while mitigating some risk through debt allocation. Your strategy of spreading out the Rs 5 lakh investment over five months is a good way to average out the purchase cost. This approach, known as systematic investment, helps in avoiding the pitfalls of market timing.

Balanced funds are ideal for conservative investors who seek moderate growth with lower risk compared to pure equity funds. If your goal is to have a safer investment while still participating in market growth, this is a prudent choice.

Active Funds vs. Index Funds
Your portfolio is focused on actively managed funds. It’s worth noting that actively managed funds have the potential to outperform index funds. Index funds merely replicate the market, while active funds seek to beat the market. Actively managed funds, guided by skilled fund managers, can take advantage of market inefficiencies and deliver higher returns.

Index funds, on the other hand, do not provide this flexibility. They simply follow the index, which might not always align with your investment goals. Actively managed funds can offer better opportunities for growth, especially in volatile markets.

Direct vs. Regular Funds
It's important to highlight the differences between direct and regular funds. Direct funds might seem appealing due to lower expense ratios, but they lack the expertise and guidance that come with investing through a Certified Financial Planner. Regular funds, which are managed by a financial professional, offer the advantage of expert advice. This can be crucial in navigating complex financial markets and ensuring your investments are aligned with your goals.

Investing through a regular fund with a Certified Financial Planner can provide peace of mind, knowing that your investments are actively monitored and adjusted as needed.

Recommendations and Adjustments
Small-Cap Fund: Evaluate your risk tolerance. If you are comfortable with high risk, continue with your Rs 25,000 per month investment. Otherwise, consider reducing the amount or diversifying into less volatile funds.

Flexi-Cap Fund: Your plan to invest Rs 25,000 per month is solid. Flexi-cap funds provide a good balance between risk and reward.

Balanced Fund: Your strategy to invest Rs 1 lakh per month for five months is sound. Balanced funds offer a safer investment with moderate growth potential.

Consider Diversification: If you are heavily invested in equity, consider adding more balanced or debt funds to your portfolio. This can help in reducing overall portfolio risk.

Regular Funds Over Direct Funds: If you are considering direct funds, think again. The guidance of a Certified Financial Planner is invaluable, especially in volatile markets. Regular funds, managed by professionals, provide the expertise needed to optimize your portfolio.

Finally
Your current strategy is thoughtful and has the potential for growth. However, it’s important to continuously evaluate your risk tolerance and make adjustments as needed. Diversification and professional guidance can further enhance your portfolio’s performance. Remember, investment is not just about returns but also about managing risk and aligning with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 20, 2024

Asked by Anonymous - Aug 16, 2024Hindi
Money
Hello Sir, I am 48 years old and I am investing in mutual fund from 2017 and market value of mutual fund portfolio is 37 Lac and I am investing in following MF in through SIP Parag Parikh flexi cap fund 12 K Mirae asset Large and mid cap fund 5K Kotak emerging equity fund 5K Quant Active fund 5K Nippon India small cap fund 5K And following is lumpsum investment Quant large cap fund 250000 DSP Nifty 50 index fund 200000 ICICI pru short term fund 200000 JM flexi cap fund. 100000 Quant mid cap fund. 70000 I am planning to increase SIP by 10000 This I am planning for 10 years plan for retirement Kindly please suggest MF or guide me for any changes if any needed Thank you ???? Raj
Ans: Your current portfolio shows a solid mix of funds across various categories. You have SIPs in Flexi Cap, Large & Mid Cap, Emerging Equity, Small Cap, and Active funds. Additionally, you have lump sum investments in Large Cap, Index, Short Term, and Mid Cap funds. This diversification strategy is commendable as it balances risk across different market segments.

However, there are a few areas that could be optimized for better returns and lower risk, especially considering your 10-year retirement goal.

Disadvantages of Index Funds
You've invested a lump sum in an Index Fund. Index Funds track a specific benchmark, usually the Nifty 50 or Sensex. While they have lower expense ratios, they also lack the flexibility to adapt to market changes.

Active funds, on the other hand, allow fund managers to pick stocks that can outperform the market. In the long term, this can result in higher returns. Therefore, considering your retirement goal, shifting from the Index Fund to an actively managed fund might be more beneficial.

Regular Funds vs. Direct Funds
You haven’t specified whether your investments are in regular or direct funds. If you are considering direct funds, it’s important to know their limitations. Direct funds have lower expense ratios, but they don’t come with professional advice.

Certified Financial Planners (CFP) provide guidance, periodic reviews, and help in rebalancing your portfolio based on market conditions and your financial goals. Investing through a CFP ensures your portfolio is always aligned with your objectives.

Evaluation of Your SIPs
Flexi Cap Fund: This is a good choice, providing flexibility to invest across market caps. However, it might be wise to ensure your exposure isn't overly concentrated in any single market cap.

Large & Mid Cap Fund: This fund offers a balance between stability (large caps) and growth potential (mid caps). Continue this SIP as it aligns with your retirement goals.

Emerging Equity Fund: Mid and small caps tend to be more volatile. Consider reviewing this SIP annually to ensure it meets your risk tolerance.

Active Fund: Active funds can outperform benchmarks if managed well. Continue this SIP, but keep track of the fund’s performance.

Small Cap Fund: Small caps can offer high growth but with higher risk. Given your retirement goal, ensure this SIP doesn’t exceed 20% of your total SIPs, as it could add unnecessary volatility to your portfolio.

Assessment of Lump Sum Investments
Large Cap Fund: Large Cap funds are relatively stable, providing consistent returns. This should be a cornerstone of your portfolio.

Index Fund: As discussed, consider switching this to an actively managed fund for better returns.

Short Term Fund: This is a conservative choice, good for parking funds temporarily. However, for long-term growth, these funds may not be ideal.

Flexi Cap Fund: Diversification is key here, and the fund’s flexibility is advantageous. Continue to monitor its performance.

Mid Cap Fund: This fund offers growth potential but with some risk. Ensure this investment complements your overall portfolio strategy without overexposing you to mid-cap volatility.

Increasing Your SIP
Increasing your SIP by Rs 10,000 is a wise decision. Here’s how you might allocate it:

Allocate Rs 5,000 to a Balanced Advantage Fund: This will add stability to your portfolio by balancing equity and debt exposure. It’s a conservative choice that can offer better risk-adjusted returns.

Allocate Rs 5,000 to a Focused Equity Fund: This can potentially offer higher returns as the fund manager focuses on a limited number of high-conviction stocks.

Portfolio Rebalancing and Monitoring
Rebalancing your portfolio regularly is crucial. Markets can be unpredictable, and what works today might not work tomorrow. Review your portfolio every six months to ensure it’s aligned with your risk tolerance and retirement goals.

Final Insights
Your portfolio is well-diversified, but there are opportunities to optimize it further. By shifting from index funds to actively managed funds, and considering the guidance of a Certified Financial Planner, you can potentially achieve better returns. Increasing your SIP is a positive step towards securing your retirement, but make sure to allocate it wisely across different fund categories.

In summary:

Consider shifting from Index Fund to an actively managed fund.

Evaluate your exposure to small caps and ensure it aligns with your risk tolerance.

Invest the additional SIP amount in balanced and focused equity funds.

Regularly rebalance your portfolio and seek guidance from a CFP.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Nitin

Nitin Narkhede  |36 Answers  |Ask -

MF, PF Expert - Answered on Nov 07, 2024

Asked by Anonymous - Nov 04, 2024Hindi
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I am a 45 year old IT professional with following saving/investment as of now: 30 lacs: EPF 30 lacs: PPF 30 lacs: FD 10 lacs: NPS NOTE: 1. I have monthly expenditure of 50k 2. Additionally, NPS requires 12k monthly investment 3. No liabilities and no loan 4. Staying in own house. Queries: 1. I am planning to retire in next 1-2 years. Pls suggest best way to invest above money. 2. Also, I have gold of worth 25 lacs, so should I keep that with me or instead sell it now and invest money elsewhere?
Ans: Dear Friend,
At 45, retiring at 2 years is 47, with an expense of 50K per month plus 12K per month NPS needs 62K per month. Considering a life expectancy of 77, you need funds for the next 30 years. Not considering medical or any other emergency expenses, you also need 2.25 cr in expenses in the next 30 years. Hence, you can consider rearranging the finances as below.
PPF (?30 Lakhs Total): Continue these as they offer tax-free, secure returns. During retirement, you can withdraw in tranches to maintain liquidity. Keep it as you find financial security; do not touch it, and let it grow.
As you declare retirement at 47, you have EPF (?30 Lakhs Total) and Fixed Deposit (?30 Lakhs). You can withdraw this amount and invest it in Balanced or index MF funds, which offer yearly 12% to 14% average returns. You can also start SWP from this.
NPS is a good retirement investment, but there are many restrictions on premature withdrawals. If you retire at 47, you will not get a withdrawal until age 60 for 60% of the amount, and the balance 40% will be converted to pension after age 60. You can withdraw 60% of the amount from the balance 6 years older for premature withdrawal. If your finances permit, continue investing after retirement.
Gold can be a good hedge against inflation. Gold returns an average of 8 to 10% return on an average. However, if you don't have an emotional attachment or strategic reason to hold it, consider selling and reinvesting in diversified assets like balanced mutual funds or a senior citizen savings scheme for higher returns.
Overall, at 47, you need about 1 cr in your MF for expenses after retirement with 50K PM.
With the amount you have mentioned, you can live a decent life without any frills. My suggestion is that you increase your corpus to fulfill all your life's needs other than your monthly expenses.
Regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

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Nitin

Nitin Narkhede  |36 Answers  |Ask -

MF, PF Expert - Answered on Nov 07, 2024

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Sir i am chitra, i have 30lk credit dueto my family circumstances. All jewell loans, i want close, i have a capability to repay upto 20000/- per month. My salary 25000/- lecturer, i earn extra income 10000/- my sister ask me to help to repay loan. But since i am a guest faculty 15 in college, i have no option to give my salary slip. How camn i get 30lk loan. Any help.
Ans: Here are a few approaches to consider for managing and potentially restructuring your loan obligations: You can Explore Gold Loan Refinance, If your existing ?30 lakh debt is mostly gold loans, you may consider refinancing the loan through a different lender, like a bank or NBFC, which could offer a better interest rate or longer repayment term. For refinancing options, it’s worth checking lenders like SBI, HDFC, or even gold loan providers like Muthoot or Manappuram, as they might not require strict documentation. You can also try to Negotiate with the Lender for Extended Tenure**: If possible, talk to your lender about extending the tenure of your existing gold loan. This would reduce the monthly EMI and allow you to use the freed-up amount to pay off the debt gradually without taking on more loans. Another approach can be to Consolidate Loans with a Gold Loan Top-Up, Since your assets are in gold, a top-up loan on your gold may be easier than getting a new personal loan.
Given that your income and commitment to paying off your debts, a combination of gold loan refinance, top-up, or consolidation might provide a practical path forward. Ensure you review interest rates carefully to avoid additional financial strain
Regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

...Read more

Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 2024

Asked by Anonymous - Nov 07, 2024Hindi
Money
I’m Rajiv from Udaipur. I’m 38 with one son, aged 5. We’re planning to save for our child’s education and our own retirement. Should we invest more in equity mutual funds, or should I look into fixed-income options to balance the risks?
Ans: You’re already thinking wisely about your child’s education and your retirement. This focus sets a solid foundation for financial security. Saving for both these goals needs a careful balance of growth and safety. Let’s examine where equity mutual funds and fixed-income options fit within these plans.

Importance of Equity Mutual Funds for Long-Term Growth
Equity mutual funds are essential for long-term financial goals, especially given inflation's impact on education costs and retirement. Here’s why:

Growth Potential: Equity funds have historically delivered strong returns over time, which can help you build a substantial corpus. This is especially useful for goals with a longer horizon, like your child’s higher education and your retirement.

Power of Compounding: As you continue investing regularly, the compounding effect amplifies returns, giving your investments a significant boost. This can be critical when saving for expenses expected to rise, such as education costs.

Tax Benefits: Equity mutual funds offer tax benefits. For long-term capital gains (LTCG), the first Rs 1.25 lakh is tax-free, and the rest is taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%. These benefits can contribute positively to your overall returns, especially in the long run.

Why Avoid Index Funds in This Strategy?
Though index funds are popular, actively managed funds may be better in your case for specific reasons:

Active Management Advantage: Actively managed equity mutual funds involve professional fund managers making strategic decisions, which can outperform the broader market index during volatility.

Flexibility in Market Conditions: In fluctuating markets, fund managers can adjust portfolios. This dynamic approach can help you manage risks and achieve better results, especially for long-term goals like education and retirement.

So, while index funds may seem appealing, actively managed funds provide professional guidance and potential for higher returns over time.

Benefits of Fixed-Income Options for Stability
Fixed-income investments serve as a safety cushion in any financial portfolio. They can add stability to your investment mix and provide regular income, which might be especially useful as you approach retirement.

Low-Risk Returns: Fixed-income options generally offer lower but safer returns compared to equities. This can protect part of your corpus against market volatility, reducing risk for essential goals.

Capital Preservation: Fixed-income investments are excellent for capital preservation. As you near retirement, they can provide steady returns while preserving your initial investment.

Liquidity Needs: Some fixed-income options offer liquidity, which could be helpful for short-term financial needs without disturbing your core investments in equity funds.

While fixed-income investments don’t match equity funds’ growth potential, they serve a key role in risk reduction.

Regular vs. Direct Funds: Why Go with Regular Funds Through a CFP?
Some investors consider direct funds for potentially lower fees, but regular funds through a certified financial planner (CFP) offer distinct benefits:

Professional Guidance: Regular funds allow you to work with a CFP. They bring years of expertise to help you manage funds effectively, especially in a fluctuating market.

Simplified Process: Investing through a CFP can be simpler, especially if you’re not deeply familiar with the investment landscape. This guidance can be critical for meeting specific goals, like saving for your child’s education.

Holistic Planning: Working with a CFP offers a more comprehensive approach, with advice that adapts to changing market conditions and your unique goals.

Direct funds can seem attractive for cost savings, but regular funds provide a professionally managed route, which can be beneficial for your long-term goals.

Evaluating Equity and Fixed-Income Allocation
Balancing equity and fixed-income investments can help you achieve your goals while managing risk.

For Education: Consider allocating more toward equity funds since you have a medium-to-long-term horizon. This can help grow your corpus to meet the rising costs of education.

For Retirement: Start with a higher equity allocation in the initial years to maximise growth. Gradually increase your allocation to fixed-income investments as you near retirement, creating a steady income stream.

This diversified approach combines growth potential with the stability needed to safeguard your retirement savings.

Making the Most of SIPs (Systematic Investment Plans)
Systematic Investment Plans (SIPs) are powerful for building wealth gradually, especially in equity mutual funds. They’re ideal for disciplined savings and work well for long-term goals.

Market Volatility Benefit: SIPs help you avoid timing the market. By investing at regular intervals, you buy more units during market dips, potentially increasing returns over time.

Easy to Budget: SIPs allow for regular, budget-friendly investments. This approach is manageable while supporting consistent savings for your child’s education and retirement.

SIPs are particularly beneficial when paired with equity mutual funds for long-term goals.

Taxation Insights
Understanding the tax implications of your investments is essential, as it affects net returns.

Equity Funds: For equity mutual funds, LTCG exceeding Rs 1.25 lakh is taxed at 12.5%, while STCG is taxed at 20%. Tax-efficiency is one of the reasons to include equity funds in your portfolio.

Fixed-Income Investments: Gains on debt mutual funds are taxed as per your income tax slab, both for short and long-term gains. Fixed-income options offer stability but come with different tax rules, so they should be balanced within your portfolio.

Balancing equity and fixed-income investments with awareness of tax implications helps you maximise your overall returns while keeping tax liabilities under control.

Flexibility in Financial Planning
Life goals and circumstances evolve. Flexibility is key in adapting your financial plan over time.

Review Regularly: Re-evaluate your investment strategy at least annually to check if it aligns with your goals. This ensures your portfolio stays on track for both education and retirement needs.

Adapt Allocation: Gradually shift to safer investments as you near retirement. This shift reduces exposure to volatility and protects your accumulated wealth.

Adapting your plan keeps it relevant and aligned with your changing life needs.

Final Insights
Balancing equity and fixed-income investments allows you to achieve growth and stability for your financial goals. Equity mutual funds support long-term growth, ideal for education and retirement. Fixed-income options add stability, reducing risk as you move closer to retirement.

By using SIPs and working with a CFP through regular funds, you gain access to professional management. This approach simplifies the investment journey and ensures your portfolio stays aligned with your goals and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Milind

Milind Vadjikar  |589 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 07, 2024

Asked by Anonymous - Nov 06, 2024Hindi
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Hi I am 50 yrs old and now I am jobless. Searching for new job. I have @ 28 lacs in FD 30 lacs in Security, have invested of @ 50 lacs in Mutual funds, 20 lacs in ppf. My monthly expenses are 1.5 lacs. Wife is home maker and have parents who are living with me. Also son is outside India and is yet to get a job. So pl suggest how can I meet monthly expenses still i get a new job @ 6 months down the line
Ans: Hello;

Your current corpus of 1.28 Cr will not be sufficient to cover 50% of your monthly expenses.

Do you have any EPF/NPS corpus available?

Please confirm so that based on that input we could offer you some solution.

Best wishes;

...Read more

Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 2024

Asked by Anonymous - Nov 06, 2024Hindi
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Sir, can you please suggest some good mutual fund in financial services. I m looking for long term and risk appetite is high. I am willing to take higher risk.
Ans: Investing in the financial services sector can offer high growth potential, especially for those with a high-risk tolerance and a long-term horizon. Let’s explore how you can approach this sector through mutual funds while considering both potential and strategic risks.

1. Understanding Sector-Specific Mutual Funds
High Growth Potential: Financial services funds focus on banks, non-banking financial companies (NBFCs), insurance firms, and other financial institutions. This sector has historically delivered good growth as the economy expands, but it is also sensitive to economic cycles.

Volatility Consideration: Financial services funds are inherently more volatile due to their dependence on economic and interest rate cycles. Investors with a high risk tolerance, like you, may find these funds suitable for long-term growth. However, they might experience sharp fluctuations during downturns.

2. Actively Managed Funds over Index Funds
Avoiding Index Funds: While index funds mirror the market’s overall performance, they don’t offer sector-focused options in financial services. Furthermore, index funds don’t leverage fund managers’ expertise in navigating specific sector cycles.

Benefits of Actively Managed Funds: Actively managed mutual funds with a skilled fund manager can capitalise on opportunities within the financial sector, making them suitable for long-term, high-risk investors. These managers carefully select high-growth financial companies and adjust the portfolio based on economic changes, thus offering better growth potential.

3. Choosing Regular Funds with an MFD & CFP
Drawbacks of Direct Funds: Direct funds may appear to have lower expense ratios, but they lack ongoing advisory support. With sector-specific funds, periodic review and expert advice become more critical due to sector volatility.

Advantages of Regular Funds: Investing in regular funds through a Mutual Fund Distributor (MFD) who holds a Certified Financial Planner (CFP) credential adds significant value. They can provide personalised guidance, help rebalance your portfolio, and ensure it aligns with your financial goals, especially given the risks of sector-specific investments.

4. Diversification within Financial Services
Select Sub-Sector Exposure: In financial services, diversification across banking, insurance, and asset management companies can offer balanced exposure. Some funds may concentrate on large-cap financial companies, while others include mid-cap and small-cap players with higher growth potential.

Balancing with Broader Equity Funds: While it’s good to capitalise on financial services, holding a portion of your portfolio in broader, diversified equity mutual funds can add stability. A high exposure to financial services may result in excessive risk during economic downturns, while broader funds provide stability and reduce sector concentration risk.

5. Tax Efficiency and Recent Rules
Equity Mutual Fund Taxation: For long-term capital gains (LTCG) above Rs 1.25 lakh, the tax rate is 12.5%. Short-term gains (STCG) attract a 20% tax. Considering these tax rules, it is best to aim for long-term holding in equity funds to optimize post-tax returns.

Rebalancing Based on Tax Implications: Working with a CFP can help you strategically rebalance based on tax efficiency, avoiding unnecessary churn and capital gains tax.

6. Monitoring and Reassessing Regularly
Regular Portfolio Review: Sector-specific funds require ongoing monitoring due to economic and market cycles. Financial services are highly sensitive to government policies, interest rate changes, and economic conditions.

Guidance from a Certified Financial Planner: A CFP can help you navigate market changes, review your portfolio annually, and adjust based on sector performance. This can help optimise your returns while keeping risk within your comfort level.

Final Insights
Investing in financial services mutual funds can align with your high-risk appetite and long-term goals. By selecting actively managed funds through an MFD with a CFP, you can maximise potential growth and leverage sector-focused insights. Diversifying within the financial sector and balancing with broader equity investments will offer stability and reduce concentrated risk. Regular monitoring and tax-efficient rebalancing are essential for achieving sustainable growth.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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

...Read more

Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 2024

Asked by Anonymous - Nov 05, 2024Hindi
Money
Hello, Need some financial advice. I am 44 and my wife is 41, both are IT professionals and we have a 10 year old daughter as well. We lead a pretty comfortable life with both earning 3.6 and 3.2 lacks respectively each month. Last year we have paid all loans and EMI free now. Below are asset position Real Estate 1. Flat 1 where we live worth around 1.7 CR 2. Flat 2 which is rented out worth around 90 L and earning a rent of 20k 3. Villa plot around 2 CR 4. Villa plot around 40 L 5. We should have a family inheritance of around 7-8 CR Financial assets 1. PF around 1.1 CR 2.PPF & SSY 30L 3.NPS 20L 4.Mutual funds 50L 5. Shared & RSU's 65-70L 6.FD & Bank deposits 30L 7.LIC and other stuff 10L 8.Crypto 7L 9.Bonds and structured products 25L 10.Gold 1-1.5 CR Our monthly expenses is around 1.5-1.7 lacks as we live a non compromised life and taking international vacations every year. Monthly investment outflows are as follows Mutual Fund SIP 2L RD 1.2 L PF 1L (before the take home salary) PPF 25K SSY 12.5K NPS 60K (before the take home salary Pension product 5L every year for next 10 years which will give a pension of 35k for next 35 years as well as the paid amount We have two cars which is also fully paid off. Considering the uncertainty in IT sector we are little worried and need to properly plan for retirement
Ans: let’s review your financial portfolio and focus on a comprehensive plan to ensure a secure retirement. I’ll address various aspects to optimise your finances and help you achieve peace of mind.

Current Financial Overview
Real Estate

Your primary residence and an additional rental property provide stable assets.
The villa plots, while valuable, could benefit from further planning if they’re intended for future liquidation.
Financial Assets

You’ve built a substantial portfolio, diversified across PPF, PF, NPS, mutual funds, stocks, fixed deposits, LIC, bonds, crypto, and gold.
Your mutual fund investments are well allocated with a consistent SIP of Rs 2 lakh.
The presence of family inheritance gives an added layer of financial assurance.
Monthly Investments and Savings

Your disciplined monthly investments in mutual funds, recurring deposits, PF, PPF, SSY, and NPS show a well-rounded approach.
Your ongoing Rs 5 lakh annual investment in a pension plan adds another layer of retirement security.
Retirement Planning Assessment
Given your current financial standing, your goal to secure retirement against IT industry uncertainties is achievable with strategic adjustments.

Asset Allocation Strategy
1. Optimising Mutual Fund Investments

Actively managed funds may provide higher returns compared to index funds, especially in the long run.

Review your mutual fund portfolio to ensure it aligns with your risk appetite and retirement timeline.

Consider investing through a Certified Financial Planner (CFP) who can help track performance and reallocate funds if required.

Benefits of Regular Funds Over Direct Funds: Regular funds through a CFP offer expert monitoring, timely rebalancing, and professional guidance for market fluctuations, ensuring optimal portfolio performance.

Taxation Consideration: For equity mutual funds, note that Long Term Capital Gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, while Short-Term Capital Gains (STCG) are taxed at 20%. For debt funds, gains are taxed as per your income tax slab.

2. Reassessing Fixed Deposits and Bonds

While FD and bond investments offer stability, they may not keep up with inflation.
Explore higher-yielding fixed-income products or debt mutual funds for improved returns while managing risk.
This shift could enhance portfolio growth without significant risk exposure.
3. PF, PPF, and SSY Contributions

Provident Fund (PF), Public Provident Fund (PPF), and Sukanya Samriddhi Yojana (SSY) provide stability with tax benefits.

Continue contributing as planned, especially to SSY for your daughter’s future needs.

With Rs 1.1 crore in PF, this will act as a substantial retirement fund component.

4. Crypto and Structured Products Caution

Crypto can be highly volatile; consider limiting exposure to preserve capital stability.
Structured products may offer diversification, but they need periodic review for relevance and risk exposure.
Consult with a CFP to evaluate these products’ performance against their risk.
5. Liquidating Real Estate Over Time

Your real estate portfolio holds significant value, especially with the potential inheritance.
Over time, liquidating some assets could provide a retirement corpus boost.
Plan the sale of assets based on market conditions to avoid forced liquidation in a downturn.
Enhancing Retirement Corpus with Strategic Investments
1. Build a Retirement Corpus in Mutual Funds

Target a Rs 8-10 crore corpus by age 60 to cover lifestyle expenses and inflation.

SIPs in diversified equity mutual funds and balanced hybrid funds can provide high growth potential.

Review performance annually to stay on track.

2. Systematic Withdrawal Plan (SWP) for Passive Income

For regular income during retirement, an SWP from mutual funds allows tax-efficient withdrawals.
Start by investing in mutual funds intended for SWP to generate monthly income from dividends or capital gains.
3. Increase NPS Contributions Gradually

NPS provides an efficient retirement solution with tax benefits under Section 80CCD(1B).
Gradually increase contributions as the NPS corpus will enhance your pension income in retirement.
4. LIC and Traditional Policies Review

Traditional policies like LIC may have lower returns compared to mutual funds.
Evaluate if it’s beneficial to surrender LIC and reinvest proceeds in higher-yielding mutual funds.
Work with a CFP for a balanced approach, ensuring you maintain life insurance for protection.
Tax Optimisation Strategies
1. Efficient Investment Tax Planning

Make the most of Section 80C benefits through PPF, SSY, ELSS, and life insurance premiums.
Explore additional deductions under Sections 80CCD(1B) for NPS, helping reduce taxable income.
Review mutual fund redemptions annually to avoid excessive LTCG tax.
2. Real Estate and Inheritance Tax Strategy

Plan future inheritances to minimise estate and transfer taxes.
A well-structured inheritance plan can help preserve wealth for future generations.
Risk Management with Comprehensive Insurance
1. Health Insurance Update

Ensure you have adequate health insurance for the entire family, considering the rising healthcare costs.

Enhance coverage if needed, especially considering potential medical inflation over the next 20-30 years.

2. Life Insurance and Contingency Planning

Ensure that you have adequate term insurance to cover financial dependents.
Regularly assess if insurance coverage aligns with current financial commitments and retirement goals.
Lifestyle and Retirement Expenses
1. Budgeting for a Comfortable Retirement

Target a retirement corpus that comfortably supports Rs 1.5-1.7 lakh monthly expenses.
Plan for inflation-adjusted withdrawals to avoid dipping into the principal too soon.
2. Plan for International Vacations Post-Retirement

Designate a portion of your retirement corpus specifically for annual vacations.
Consider periodic returns from liquid mutual funds or SWP income for these leisure expenses.
Final Insights
Your disciplined investments and asset base are commendable.
With systematic planning, you can achieve a secure and comfortable retirement.
Consider working with a CFP for regular reviews and strategic rebalancing.
This guidance will help you confidently reach Rs 8-10 crore by retirement.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |6984 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 2024

Money
My investment as of now 2 Girls SSY with 16 lakh and 9 lakh depositing very year 3 lakh combined for both daughters. NPS 1.5 lakh with 50 K per year . PF 44Lakh with 10 K additional deduction per month. Mutual fund 40 Lakh with 80 K per month. Shars 11.5 Lakh . NSC of 12 Lakh re investing every 5 years. want to retire at 46 right now age 40 per month salary in hand 1.65 lakh is 8 CR enough as I own my house. what should i do more to have 8 CR at the age of 46 means in another 6 to 7 years. daughters age 8 years and 4 years . Family of 4
Ans: You have diligently built a robust portfolio and taken critical steps to secure your family’s future. Your investments across the Sukanya Samriddhi Yojana (SSY), NPS, Provident Fund, mutual funds, and stocks showcase a well-rounded approach to growth and stability.

Your goal is to accumulate Rs. 8 crore by age 46, which is 6-7 years away. Let’s examine your current allocations and recommend strategies to help you achieve your target with minimum risk while ensuring long-term growth for your family.

1. Review of Current Investments

Your investments reflect a thoughtful approach across different instruments. Here’s an overview of their potential impact:

Sukanya Samriddhi Yojana (SSY): With Rs. 16 lakh and Rs. 9 lakh invested for your daughters, contributing Rs. 3 lakh annually is ideal for long-term growth. The SSY interest rate is attractive, offering good returns that can cover educational expenses.

National Pension System (NPS): A yearly investment of Rs. 50,000 in NPS provides moderate growth. However, note that NPS is primarily for retirement benefits, with partial liquidity before 60.

Provident Fund (PF): Your PF of Rs. 44 lakh and Rs. 10,000 monthly addition offers stability. PF rates are generally higher than most fixed-income products, making it a great retirement vehicle.

Mutual Funds: Investing Rs. 40 lakh in mutual funds with an Rs. 80,000 monthly SIP indicates a strong equity focus. This will support higher returns in the long term, aiding in reaching your corpus goal.

Stocks: A portfolio of Rs. 11.5 lakh in direct stocks adds diversification. Continue monitoring these holdings for optimal growth.

National Savings Certificate (NSC): Your Rs. 12 lakh in NSC, reinvested every five years, offers secure returns, though generally lower than equity. NSC is a good component for capital preservation.

2. Retirement Corpus Analysis

To achieve Rs. 8 crore in 6-7 years, let’s consider a balanced growth-focused approach. Your current portfolio value and ongoing contributions provide a solid base. Given a mix of equity, fixed income, and SSY, your potential to reach Rs. 8 crore looks realistic, provided market returns align favorably over time.

Suggested Strategy Adjustments:

Increase SIPs marginally for mutual funds over the next few years. A 10-15% SIP increment can significantly compound your wealth by your target age.

Evaluate your stock portfolio periodically. Aim for quality growth-oriented stocks and avoid high-risk or speculative investments to preserve capital.

3. Enhancing Your Portfolio Strategy

A clear roadmap to enhance growth while managing risk is essential. Here’s a refined strategy for your goal of Rs. 8 crore:

Mutual Funds: Continue prioritizing actively managed funds over index funds. Actively managed funds allow better control over market volatility and have the potential to outperform. Consider increasing your SIP in diversified funds and explore funds that focus on mid- and large-cap equities for stable returns. Avoid direct funds; regular funds through an MFD with a Certified Financial Planner (CFP) provide valuable guidance, optimizing returns with tailored investment insights.

National Savings Certificate (NSC): Consider NSC as a fixed-income backup. Given its low return rate, prioritize reinvestment only if its returns remain competitive against alternative fixed-income options.

National Pension System (NPS): NPS will add value post-retirement, but it lacks liquidity before retirement age. While your annual Rs. 50,000 investment benefits from tax deductions, avoid further increasing it as it will not contribute to your 6-7 year goal.

4. Tax Efficiency and Portfolio Rebalancing

With long-term capital gains (LTCG) on equity mutual funds and short-term gains taxed at 20%, consider:

Setting a long-term strategy to avoid frequent transactions. This will minimize LTCG tax, enhancing net returns. Only redeem equities if essential.

For debt funds, consider short-term fixed-income instruments as they align better with your income tax bracket.

5. Education and Marriage Fund for Your Daughters

Planning for your daughters' future is crucial. SSY is a good foundation, but enhancing it with additional investments will strengthen this corpus:

Balanced Funds: Consider adding balanced mutual funds for your daughters’ future needs. They offer moderate growth with lower risk, making them ideal for long-term goals.

SIPs with Step-Ups: A 10% yearly step-up in your SIPs allocated for their education and marriage could accumulate a strong corpus by the time they reach college-going age.

6. Emergency Fund and Insurance Coverage

Your focus on wealth accumulation should not overlook risk management. Here are essential adjustments:

Increase Emergency Fund: Ensure that your emergency fund covers at least 12 months of expenses. Allocate Rs. 8-10 lakh across liquid instruments like short-term debt funds for instant access during unforeseen events.

Insurance Adequacy: Ensure you have sufficient term insurance to cover your family’s financial security. Verify that your life insurance covers liabilities and future education and lifestyle expenses for your children.

7. Structured Approach Towards Asset Allocation

Balancing your portfolio to align with a moderate risk tolerance for the next 6-7 years will reduce potential losses while achieving growth.

Fixed Income: Gradually increase your PF and other debt allocations, as these provide stability and guaranteed returns. This ensures a steady income during volatile market phases.

Equity Allocation: Keep equities dominant in your allocation, as they are the main growth driver. Equity mutual funds, specifically, will play a significant role in achieving your Rs. 8 crore target.

Regular Portfolio Review: Annually review and adjust your portfolio. A CFP can guide you on specific fund performances and market conditions, ensuring your portfolio stays on track.

8. Aligning Goals with Family Security

Since you aim to retire early, ensuring the financial security of your family is essential. Here’s how to safeguard your family’s future:

Establish a Family Trust: Consider setting up a family trust if you aim to secure and pass on assets seamlessly. It can reduce inheritance issues and provide tax-efficient transfers for your children’s benefit.

Child-Specific Funds: Allocate a separate, conservative fund for each child’s major expenses (e.g., marriage or higher education). Consider child plans with a mix of equity and debt, specifically designed to build wealth for such milestones.

9. Final Insights

Your financial journey so far has been effective and well-structured. Minor adjustments, increased SIPs, and a focus on asset allocation will strengthen your goal of achieving Rs. 8 crore by age 46. Regularly consult a Certified Financial Planner (CFP) to stay on track with evolving market trends and optimize your wealth.

Implementing these strategies will not only help you achieve your retirement corpus but also ensure a secure and comfortable future for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

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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