Sir shifted from job to do business 3 yrs back....invested n lost around 25 lac in business due to ....no regular or even income )right now. I am 50, single with no major liability/ loan so far. Already MF investment of 15 lac( value 20 lac)- no sip ongoing right now,Equity 8 lac( value 15 lac) emergency fund/FD 2 lac(all done during job years with my own limited knowledge) May I know is it possible how to generate 50 k monthly from above said investment in form of interest/ returns without using the principal amount.????

Ans: Hello, i am glad looking at the returns you have made investing on your own using mutual funds and equity.
We follow a thumb rule of withdrawal of 6% per year as SWP amount from the total portfolio
In your case after 3 yrs , your MF portfolio could be about 3.65crs at 12%
The SWP amount in such case will be Rs.182500 per month.
But since your need is 1L, your portfolio will be growing at a much higher rate as your SWP amount will be less than 6%
Assuming only 12% average returns over the next 20yrs, your portfolio amount will be approx 26crs
** I have ignored the investment you have in stocks as those can be very volatile and should not be used while calculating the SWP amounts

Ans: Assessing Your Financial Situation
You are 44 years old and have quit your job. You have significant savings across various investment avenues. Your goal is to generate Rs. 8 to 10 lakhs annually to cover your expenses. Let's review your assets:

EPF: Rs. 82 lakhs
PPF: Rs. 27 lakhs
Mutual Funds: Rs. 25 lakhs
Gratuity and Other Encashments: Rs. 25 lakhs
NPS: Rs. 1 lakh
EPS: Rs. 3 lakhs
Shares: Rs. 5 lakhs
Your total savings amount to Rs. 168 lakhs (excluding EPS).

Monthly Expense Management
To generate a monthly income of Rs. 50,000, you need a structured approach. Here’s how you can achieve this:

Systematic Withdrawal Plan (SWP) from Mutual Funds
Mutual Funds: Rs. 25 lakhs

SWP Strategy:
Implement an SWP from your mutual fund investments. An SWP allows you to withdraw a fixed amount regularly. This provides a steady income stream while keeping your principal invested.

Monthly Withdrawal:
Withdraw Rs. 50,000 per month from your mutual funds. This will give you Rs. 6 lakhs annually.

Fund Selection:
Choose a mix of debt and hybrid funds for stability and growth.

Interest Income from EPF and PPF
EPF: Rs. 82 lakhs

EPF Interest:
EPF typically earns an interest rate of around 8%. The interest earned annually will be around Rs. 6.56 lakhs. You can withdraw this interest for additional income.
PPF: Rs. 27 lakhs

PPF Interest:
PPF earns an interest rate of around 7.1%. The annual interest earned will be approximately Rs. 1.92 lakhs. You can withdraw this interest while keeping your PPF account active for the next 4 years.
Gratuity and Other Encashments
Gratuity and Other Encashments: Rs. 25 lakhs

Fixed Deposits (FDs):
Park a portion of your gratuity and other encashments in FDs. FDs offer a secure investment option with assured returns. You can ladder these FDs to ensure liquidity.
Dividend Income from Shares
Shares: Rs. 5 lakhs

Dividend Yield:
Invest in dividend-yielding stocks. Dividend income can supplement your monthly needs. Ensure you choose stable companies with a good track record of paying dividends.
Using NPS and EPS
NPS: Rs. 1 lakh

Partial Withdrawal:
NPS allows partial withdrawal under specific conditions. Consider withdrawing from NPS if necessary.
EPS: Rs. 3 lakhs

Pension Income:
EPS provides a pension based on your contributions. This can provide a small, steady income stream.
Creating a Balanced Portfolio
To ensure your savings last and grow, create a balanced portfolio:

Equity Exposure:
Maintain some exposure to equities for growth. Allocate a portion of your mutual funds to equity funds.

Debt Exposure:
Keep a significant portion in debt instruments like FDs, debt mutual funds, and bonds for stability.

Regular Review:
Review your portfolio periodically. Adjust allocations based on market conditions and your financial needs.

Final Insights
Generating Rs. 8 to 10 lakhs annually from your savings is achievable with a structured approach. Use an SWP from mutual funds for a steady income. Withdraw interest from EPF and PPF for additional funds. Invest gratuity in FDs for secure returns. Utilize dividend income from shares. Maintain a balanced portfolio to ensure stability and growth. Regularly review your investments to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You're on the right track by saving up for your dreams. Let's create a plan to help you achieve your goals. Your desire to shift to something you love is inspiring. Balancing your investments and ensuring regular returns is crucial.

Understanding Your Current Financial Situation
Monthly Income: Rs. 2.5 lakhs

Home Loan EMI: Rs. 15,000 (jointly with your father)

Monthly Lifestyle Expenses: Rs. 10,000

Current Assets:

Liquid Cash: Rs. 42 lakhs
Gold: Rs. 11 lakhs
Mutual Funds: Rs. 2.5 lakhs
PPF: Rs. 3 lakhs
Goals and Requirements
You want a regular monthly return of Rs. 25,000 to Rs. 30,000. This income will allow you to focus on your passion without worrying about finances.

Analyzing and Evaluating Investment Options
Systematic Withdrawal Plan (SWP) in Mutual Funds
Why SWP?

SWP is a great way to generate regular income from mutual funds. You invest a lump sum in a mutual fund and withdraw a fixed amount regularly.

Advantages of SWP:

Provides a steady income.
Flexibility in choosing the withdrawal amount and frequency.
Potential for capital appreciation while receiving income.
Risks of SWP:

Market volatility can affect the fund's value.
Withdrawals may reduce the corpus over time if returns are lower.
Mutual Fund Categories
Debt Mutual Funds:

Lower risk, suitable for generating steady income.
Invests in bonds, government securities, and money market instruments.
Balanced or Hybrid Funds:

Combines equity and debt for balanced risk and return.
Suitable for moderate risk appetite.
Equity Mutual Funds:

Higher risk, potential for higher returns.
Invests in stocks of companies.
Power of Compounding:

Mutual funds, especially equity funds, benefit from compounding. Over time, returns can grow significantly.

Professional Management:

Mutual funds are managed by professionals, ensuring strategic investments and diversification.

Regular Review:

It's essential to review your mutual fund performance regularly. Adjustments may be needed based on market conditions and your goals.

Fixed Deposits (FDs)
Why FDs?

FDs provide guaranteed returns and are a safe investment option. However, they offer lower returns compared to mutual funds.

Advantages of FDs:

Guaranteed returns.
Safe and secure investment.
Liquidity options with premature withdrawal.
Risks of FDs:

Lower returns may not keep pace with inflation.
Less flexibility compared to mutual funds.
Public Provident Fund (PPF)
Why PPF?

PPF is a long-term, safe investment with tax benefits. It offers stable returns but with a lock-in period.

Advantages of PPF:

Safe investment with guaranteed returns.
Tax benefits under Section 80C.
Suitable for long-term goals.
Risks of PPF:

Lock-in period restricts liquidity.
Lower returns compared to market-linked investments.
Avoiding Stock Trading
Dangers of Stock Trading:

High Risk: Stock trading involves significant risk. Market volatility can lead to substantial losses.
Time-Consuming: Requires constant monitoring and quick decision-making.
Stressful: Can add to your stress instead of reducing it.
Creating a Diversified Investment Plan
Step 1: Emergency Fund

Maintain at least Rs. 2-3 lakhs in a savings account or FD for emergencies. This ensures liquidity and security.
Step 2: Invest in Mutual Funds with SWP

Allocate a portion of your liquid cash (Rs. 42 lakhs) into a mix of debt and balanced mutual funds. This provides stability and potential for growth.
Set up an SWP to withdraw Rs. 25,000 to Rs. 30,000 monthly. This gives you a steady income stream.
Step 3: Keep Gold as a Safety Net

Gold is a good hedge against inflation and financial uncertainty. Retain your Rs. 11 lakhs in gold.
Step 4: Continue with PPF Contributions

Continue contributing to your PPF for long-term stability and tax benefits. This adds to your retirement corpus.
Optimizing SWP for Regular Income
Step 1: Calculate Withdrawal Rate

Determine a sustainable withdrawal rate to ensure the corpus lasts. Typically, a 4-5% annual withdrawal rate is considered safe.
Step 2: Monitor Fund Performance

Regularly review the performance of your mutual funds. Adjust the SWP amount if needed based on returns and market conditions.
Step 3: Rebalance Portfolio

Periodically rebalance your portfolio to maintain the desired asset allocation. This ensures your investments stay aligned with your goals.
Health and Term Insurance
Health Insurance:

Get a comprehensive health insurance plan. It protects against high medical costs and ensures financial stability.
Term Insurance:

Purchase a term insurance policy with adequate cover. This protects your family’s financial future.
Switching to a Less Stressful Job
Evaluate Financial Impact:

Consider the impact of a lower salary on your financial goals. Ensure you have enough income to cover expenses and investments.
Maintain Regular Investments:

Continue with your investment plan even with a lower salary. Adjust the amounts if needed, but keep investing.
Final Insights
Achieving financial freedom to pursue your passion is possible with careful planning. Your current savings and investments are a good start. By diversifying your portfolio and setting up a Systematic Withdrawal Plan, you can generate the regular income you need. Avoid the pitfalls of stock trading and focus on safer, steady investment options. Regularly review your investments and adjust as needed. Remember, your well-being is paramount. Strive for a balance between financial security and pursuing your dreams.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in