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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 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

Hi Team, As a 32-year-old earning 2 Lacs per month, I'm seeking a financial plan for my retirement and my 1-year-old child's education. My current financial details are: Home: 40 Lacs with a 60,000 monthly EMI. Monthly Investments: 15,000 in MFs, 8,000 in LIC. Emergency Fund: 10 Lacs. Other Assets: 3 Lacs (PPF), 4 Lacs (PF), 3 Lacs (NPS), 5 Lacs (stocks). Looking forward to your recommendations.

Ans: You are 32 years old and earn Rs 2 lakhs per month. You are supporting a home loan EMI of Rs 60,000. You invest Rs 15,000 in mutual funds and Rs 8,000 in LIC. You have an emergency fund of Rs 10 lakhs. You also hold Rs 3 lakhs in PPF, Rs 4 lakhs in PF, Rs 3 lakhs in NPS, and Rs 5 lakhs in stocks. Your child is 1 year old, and you are planning for retirement and education goals.

You are already on a good financial path. Let us now design a plan from a 360-degree perspective.

? Monthly Cash Flow Assessment

– You bring in Rs 2 lakhs every month.
– Outgo towards EMI is Rs 60,000.
– LIC takes Rs 8,000 per month.
– Mutual fund SIP is Rs 15,000.
– That totals Rs 83,000 in fixed commitments.

You are left with Rs 1.17 lakhs each month. That is a healthy surplus to build your future.

? Review of Current Commitments

– Rs 60,000 EMI for home is high but manageable.
– Make sure the home loan gives you tax benefit.
– LIC plan of Rs 8,000 monthly needs a review.
– If this is an investment-cum-insurance policy, returns are usually poor.

Check the policy term, premium term, and maturity value.

If it is not pure term insurance, better to surrender and reinvest in mutual funds.

– You already invest Rs 15,000 in mutual funds monthly. That is a good start.
– Your emergency fund of Rs 10 lakhs is excellent.

Keep it separate. Don’t touch it unless it's a real emergency.

? Retirement Goal Planning

– You are 32 now. You may retire at 58 or 60.
– That gives around 26 to 28 years.
– This long horizon suits equity investments.

You already have Rs 3 lakhs in NPS. That can continue.

But don’t rely on NPS alone. NPS has restrictions on liquidity and withdrawal.

It is better to build your own mutual fund-based retirement corpus.

Start a separate SIP for retirement. Use actively managed diversified mutual funds.

Avoid index funds. Index funds just copy market movements.

They do not protect during market falls. They can’t shift to better sectors.

Actively managed funds are handled by expert fund managers.

They make tactical changes and manage downside better.

That matters for long-term goals like retirement.

? Direct Funds Vs Regular Funds

If you are investing in direct funds, think twice.

Direct funds offer no advice. They are do-it-yourself.

You may miss timely switches, rebalancing or risk adjustments.

Investing through a Certified Financial Planner using regular plans is better.

You get ongoing guidance, goal tracking, and emotional support.

Cost difference is very small compared to long-term benefits.

? Ideal Monthly Investment Allocation

Out of Rs 1.17 lakh surplus, split across short, medium and long-term goals.

– Allocate Rs 30,000 towards child education goal.
– Allocate Rs 30,000 towards retirement corpus.
– Allocate Rs 10,000 to short-term goals like travel or car upgrade.
– Keep Rs 10,000 in a liquid fund for near-term contingencies.

This still leaves room for lifestyle spending and festive spends.

Start with this distribution and adjust every year as income grows.

? Education Planning for Child

– Your child is 1 year old now.
– School costs start soon. College costs start in 17 years.

Use goal-based SIPs to fund this.

Long-term education goal needs equity mutual funds.

Split SIP across large cap and mid-cap mutual funds.

Actively managed funds here offer better guidance and returns.

Also, create a separate portfolio just for this goal.

Don’t mix it with retirement or other goals.

This will give clarity and discipline.

Review performance every 6 to 12 months.

? Retirement Planning in Detail

– Retirement fund should grow over the next 25 years.
– Equity mutual funds are best for this.

You already have NPS and PF. Those are good.

But both are low on equity and have withdrawal limits.

So start a flexible, high-growth SIP portfolio in equity mutual funds.

Keep increasing SIP by 10% every year.

This is called SIP top-up. It builds wealth faster.

Use only regular funds with Certified Financial Planner advice.

Direct funds do not give this kind of structured approach.

Avoid any retirement annuities. They offer poor returns and lock-in.

Stay invested for long term. Don’t withdraw mid-way.

? Review of Stock Holdings

You hold Rs 5 lakhs in stocks.

– Are these stocks self-picked? Or advisor-recommended?
– Review performance and risk level every 6 months.
– If stocks are underperforming or too volatile, shift to mutual funds.

Stock picking without proper research can destroy wealth.

Mutual funds are more diversified and professionally managed.

Also, stock returns are taxed as per mutual fund equity rules now.

LTCG above Rs 1.25 lakh taxed at 12.5%. STCG taxed at 20%.

So plan redemptions accordingly.

? PF and PPF

– You have Rs 3 lakhs in PPF and Rs 4 lakhs in PF.

These are safe, fixed income options.

Continue PPF contributions till maturity.

PF will grow with salary. Both will help your retirement.

But returns are limited. Don’t over-rely on these.

They are good for safety. But not wealth creation.

? LIC Investment Review

You invest Rs 8,000 monthly in LIC.

If this is not a pure term plan, consider surrender.

Traditional plans give low returns, around 4% to 5%.

That is not enough for long-term goals.

Check surrender value and reinvest in mutual funds.

Use part of it to buy term insurance.

And part for SIPs. That gives better coverage and returns.

? Health and Life Insurance

You have not mentioned term insurance or health cover.

At 32, term insurance is affordable.

Take a pure term plan based on your income and loan liabilities.

Also, ensure you have family health cover of at least Rs 10 lakhs.

Medical inflation is rising fast.

Without cover, one illness can break your savings.

Don’t delay this part. It is critical.

? Tax Planning

Use mutual fund ELSS to save tax under section 80C.

Avoid locking too much in LIC and PPF.

ELSS has short lock-in and better returns.

Also check your home loan tax benefits under section 24(b) and 80C.

Invest with both returns and tax savings in mind.

? Review and Monitor

– Review your portfolio every 6 to 12 months.
– Rebalance equity and debt as per goal progress.
– Increase SIP amounts with income hike.
– Avoid emotional investing during market ups and downs.
– Don’t stop SIP during market fall. That is when you buy cheaper.

Use a Certified Financial Planner to help you track and plan.

It removes bias and gives peace of mind.

? Avoid Real Estate for Investment

You already own a home. That is enough.

Don’t buy more property for investment.

Rental income is low. Liquidity is poor.

Instead, invest in flexible and tax-efficient mutual funds.

They grow better and are easy to manage.

? Child’s Future Planning Checklist

– Open a separate mutual fund folio.
– Use 100% equity funds for next 10-15 years.
– Start with Rs 30,000 SIP. Increase annually.
– Shift to balanced or hybrid funds after 12th standard.
– Monitor corpus every year.

This gives good preparation for education costs.

? Finally

– You are already on a promising financial path.
– EMI is well managed. Emergency fund is perfect.
– LIC needs review. Consider surrender and switch to mutual funds.
– Avoid direct and index funds. Use regular plans with CFP advice.
– Build separate portfolios for retirement and child education.
– Keep SIP going and increase yearly.
– Don’t touch retirement money for other needs.
– Protect your family with term and health cover.
– Review goals and investments every year with a Certified Financial Planner.

This gives you confidence, clarity, and control over your future.

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.