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Ramalingam Kalirajan |10879 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 04, 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

Question by Saurabh on Jul 20, 2025Hindi

Dear Sirs!! Saurabh this side and serving in merchant navy. Yearly package of around 50 to 60 lacs. Home loan for which i pay 20k per month and investment in MFs of around 30lacs for which due to sudden rise in expense had to stop. Having pure term plan and Medical insurance. Need to ask how can i invest so that i can retire early and also fund my kids further or higher education and save some for myself too. Many thanks in advance.

Ans: Your income, discipline, and proactive mindset are truly admirable. Serving in the merchant navy with a high annual package is no small feat. Having term insurance, medical insurance, and already investing in mutual funds shows commendable awareness. You are clearly on the right path.

Let’s build a strong and complete financial plan for early retirement, children’s education, and long-term personal wealth.

» Income & Cash Flow Evaluation

– Your yearly income of Rs 50–60 lakh is a significant strength.
– With a home loan EMI of Rs 20,000, debt obligations are minimal.
– Sudden rise in expenses is natural. But if not corrected, it may delay your financial goals.
– Creating a simple monthly budget will help.
– Identify fixed and flexible expenses.
– Allocate money intentionally, not reactively.
– Try to save at least 40% of your income once expenses stabilise.

» Revisit Your Emergency Fund

– An emergency fund is essential, especially for you as you are away at sea.
– You should maintain 6 to 12 months of family expenses in a liquid instrument.
– Use fixed deposits or ultra-short duration mutual funds for this.
– Avoid equity or long-term debt funds for emergency reserve.
– This will protect your other investments from sudden withdrawals.

» Strengthen Risk Protection

– Having a pure term insurance policy is a wise decision.
– Review the sum assured. It should be at least 15 to 20 times your yearly expenses.
– This ensures that your family’s lifestyle and goals remain secure in your absence.
– Also ensure personal accident and critical illness insurance.
– This additional layer protects your wealth in case of serious illness or injury.

– Your medical insurance is another smart move.
– Ensure coverage is at least Rs 20 lakh on a floater basis.
– Top-up plans are cheap and effective for increasing coverage.

» Home Loan Strategy

– You are paying Rs 20,000 monthly EMI. This is manageable.
– Don’t rush to prepay aggressively if the interest rate is below 8.5%.
– Instead, focus on wealth-building investments.
– Interest on home loan also provides tax benefits under Sec 24.
– You can partially prepay if surplus funds arise, but avoid disrupting investment flow.

» Restart Investments Systematically

– Your Rs 30 lakh investment in mutual funds is a great foundation.
– Review existing funds for suitability to your goals and risk appetite.
– If these were direct funds, consider switching to regular plans via MFD with CFP.
– Direct funds lack guidance, periodic review, and rebalancing.
– Regular plans help with discipline and planning, and CFP-backed advice ensures suitability.

– Focus on goal-based SIPs.
– Begin with minimum possible amounts and scale up gradually.
– Priority-wise, plan for child education, retirement, and wealth creation.
– Use staggered investment approach across equity, hybrid, and debt funds.
– Avoid thematic or sector-specific funds for now.

– Avoid index funds. They lack downside protection.
– Index funds perform poorly during market corrections.
– Active funds have potential to beat index returns with proper management.
– This is especially true in India’s evolving market environment.

» Goal 1: Children’s Higher Education

– Start by calculating time left for each child’s college education.
– Based on current cost trends, assume 8%–10% annual inflation.
– Use SIPs in diversified mutual funds to fund this goal.
– Equity allocation should be higher in early years, then reduce later.

– If your child is very young, consider 70–80% equity allocation.
– Shift to hybrid and then short-term debt funds as the goal nears.
– Avoid investing in traditional plans like ULIPs, endowment policies, or child plans.
– These give low returns, lack transparency, and have high lock-ins.

» Goal 2: Your Early Retirement

– Early retirement is possible for you with this income and existing corpus.
– Start with a clear retirement age – example: 50 or 52.
– Then calculate years left and lifestyle cost after that.
– Don’t aim only for corpus. Aim for income-generating assets.
– Mutual funds (equity and hybrid) will be key.

– SIPs in growth-oriented diversified equity funds will be core.
– Add dynamic asset allocation and multi-asset funds closer to retirement.
– Avoid annuities. They offer low returns and inflexibility.
– Post-retirement, shift to SWP (Systematic Withdrawal Plan) in hybrid funds.
– This provides monthly income and tax-efficiency.

– Ensure that inflation-adjusted income is planned.
– Factor in lifestyle changes, healthcare costs, and travel needs post-retirement.

» Corpus Segregation & Goal Mapping

– Split your investment portfolio into goal-specific buckets.
– Don’t invest everything in one big basket.
– This approach builds clarity and discipline.
– Suggested buckets: Emergency, Child Education, Retirement, Wealth Creation, Short-Term Needs.

– Emergency corpus must be completely liquid and capital-protected.
– Child education and retirement should have mix of equity, hybrid, and short-term debt.
– Wealth creation fund can take higher risk and have long-term horizon.

» Consider These Practical Investment Guidelines

– Start with SIPs again, even if in small amounts.
– Gradually increase as income and surplus improve.
– Use goal-specific SIPs. Don’t mix multiple goals in one fund.
– Stay away from direct stock investing unless you have time and knowledge.
– Stick to mutual funds through a Certified Financial Planner and MFD.

– Avoid new-age investment fads like crypto, forex trading, or peer-to-peer lending.
– These lack regulatory backing, long-term data, and risk management.
– Instead, build wealth steadily and predictably.

» Monitor, Review, and Rebalance

– Create a fixed review cycle for your investments.
– Every 6 months or once a year, review progress with your MFD + CFP.
– Adjust allocation as per goal proximity and market conditions.
– Rebalancing avoids underperformance and keeps you aligned with goals.

– Never stop SIPs during a market fall.
– In fact, downturns are best for long-term wealth compounding.
– Emotional investing leads to poor results. Discipline creates long-term wealth.

» Tax Efficiency and Liquidity Management

– Long-term capital gains (LTCG) from equity MFs above Rs 1.25 lakh taxed at 12.5%.
– Short-term capital gains taxed at 20%.
– Plan redemption smartly to minimise tax burden.
– Use SWP instead of lump-sum withdrawal.

– Debt MFs taxed as per your income tax slab.
– Hence, they must be used mainly for short- or medium-term needs.
– Keep cash or FD for sudden needs, not long-term money.

– Avoid keeping large money in savings account.
– Idle money loses value to inflation.

» Behavioural Finance Caution

– High income often creates false sense of security.
– Expenses grow silently, especially with kids and lifestyle upgrades.
– Ensure your financial plan is immune to this lifestyle creep.

– Don’t chase quick returns or jump from one scheme to another.
– Stick with the plan. Long-term thinking beats short-term chasing.
– Trust the compounding process.

» Legacy and Family Involvement

– Ensure nomination is updated across all investments.
– Keep your spouse and one close family member aware of your plan.
– Share a simple one-page net worth statement every 6 months.
– Write a basic Will if not already done.

– Financial literacy of the family is equally important.
– Involve them in decisions so that they can manage in your absence.

» How a Certified Financial Planner Adds Value

– A CFP helps build custom plans aligned to your life stage.
– Tracks your progress, and helps correct path when needed.
– Offers handholding during volatility and uncertainty.
– Regular plans through CFP and MFD give better behavioural control.
– No guesswork. Only discipline and smart execution.

» Finally

– You have the income, mindset, and discipline to retire early and fund your kids.
– You are already ahead of many.
– With clear planning and disciplined investing, you can achieve all your goals.
– Don’t be in a rush. But don’t delay decisions either.
– Restart SIPs. Review your insurance. Build liquidity. Allocate per goal.
– Stay the course and review regularly with a trusted CFP.

Best Regards,

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

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