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Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 2024

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
Krishna Question by Krishna on Jul 22, 2024Hindi
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Dear Sir, Thanks for your response. I have currently 9cr valued assets for retirement. How to make my asset grow to 10 Cr in the next 8 years. I am planning to retire with an asset of 10 Cr. Thanks for your advice in advance. Regards, Krishna Prasad

Ans: To grow your assets to Rs. 10 crore in the next 8 years, consider these strategies:

9 Crore Asset can easily become 10 crores in 8 years.

Increase SIP Contributions: Allocate more to diversified mutual funds for higher returns.
Regular Portfolio Review: Adjust based on performance and market conditions.

Professional Guidance: Consult a Certified Financial Planner (CFP) for tailored advice.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

Asked by Anonymous - May 13, 2024Hindi
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Hi I am 45 years old and have a sum of 60 lakhs in FD..35 lakhs medical coverage ..20 lakhs mutual funds and 12 lakhs stock portfolios..I invest 50k a month..how can I grow my total portfolio to 3 crores in next 10 years ?thanks and regards
Ans: Building a Portfolio to Achieve Your Financial Goals
You have a substantial base to build on, with Rs. 60 lakhs in FDs, Rs. 35 lakhs in medical coverage, Rs. 20 lakhs in mutual funds, and Rs. 12 lakhs in stocks. Additionally, you invest Rs. 50,000 monthly. Let's discuss a strategy to grow your portfolio to Rs. 3 crores in the next 10 years.

Understanding Your Current Portfolio
Fixed Deposits (FDs)
Fixed deposits provide safety but offer lower returns compared to other investment options. Given inflation, the real return on FDs can be quite low.

Medical Coverage
Having Rs. 35 lakhs in medical coverage is crucial for financial security. This ensures that your investments remain protected in case of medical emergencies.

Mutual Funds
Your Rs. 20 lakhs in mutual funds are a solid foundation. Depending on the type of funds, they can offer growth potential while diversifying risk.

Stock Portfolio
With Rs. 12 lakhs in stocks, you have exposure to equity markets. This can provide higher returns but comes with higher volatility.

Monthly Investment of Rs. 50,000
Investing Rs. 50,000 per month consistently can significantly boost your portfolio. The power of compounding can help in achieving your financial goals over time.

Investment Strategy to Achieve Rs. 3 Crores
Diversify Your Mutual Fund Investments
Investing in a mix of equity, debt, and hybrid funds can provide a balanced portfolio. Equity funds offer higher returns, while debt funds provide stability. Hybrid funds combine both to balance risk and return.

Increase Equity Exposure
Given your 10-year horizon, increasing your exposure to equity can help achieve higher returns. Consider investing in large-cap, mid-cap, and small-cap funds for diversification. Equity has historically provided higher returns over the long term.

Systematic Investment Plan (SIP)
Continue your SIPs in mutual funds. SIPs help in averaging the purchase cost and reduce market volatility impact. Allocate a portion of your monthly investment to SIPs in equity mutual funds for growth.

Rebalance Your FD Holdings
Fixed deposits provide safety but lower returns. Consider gradually reducing your FD holdings and reallocating to higher-yield investments like mutual funds and stocks. Ensure you maintain an emergency fund equivalent to 6-12 months of expenses in FDs or liquid funds.

Enhance Your Stock Portfolio
If you have the risk tolerance, consider enhancing your stock portfolio. Invest in fundamentally strong companies with growth potential. Diversify across sectors to reduce risk.

Consider Debt Funds for Stability
Investing in debt funds can provide stability and regular income. Debt funds offer better post-tax returns compared to FDs, especially if you are in a higher tax bracket.

Projecting Your Portfolio Growth
Estimated Growth Rates
Equity Mutual Funds: 12-15% annual returns
Debt Mutual Funds: 6-8% annual returns
Stocks: 12-15% annual returns
Expected Portfolio Value
Assuming a diversified portfolio and an average annual return of around 10-12%, your investments can grow significantly over 10 years. Consistent monthly investments and strategic reallocation will help achieve your goal.

Regular Review and Rebalancing
Importance of Regular Review
Regularly reviewing your portfolio ensures it stays aligned with your goals and risk tolerance. It helps in making necessary adjustments based on market conditions and life changes.

How to Review
Work with a Certified Financial Planner (CFP) to review your investments at least annually. A CFP can provide professional guidance and ensure your portfolio remains on track.

Conclusion
Achieving a portfolio value of Rs. 3 crores in 10 years is possible with strategic investments and regular reviews. Diversify your mutual funds, increase equity exposure, continue SIPs, and rebalance your FDs. With disciplined investing and professional guidance, you can reach your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

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

Asked by Anonymous - Jun 03, 2024Hindi
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I m 42 years old having 5.25 CR of mutual funds and including 2 PMS , want to work till max 52, so next 10 years, i need 25 CR of my corpous for retirement , i am having a sip of 4 lakhs per month, what you suggest what extra should i do to make it happen in 8 years
Ans: You have a clear goal: to accumulate Rs. 25 crores in 10 years for retirement. This is ambitious but achievable with a well-planned strategy. You currently have Rs. 5.25 crores in mutual funds, including two Portfolio Management Services (PMS). You also have a substantial SIP of Rs. 4 lakhs per month.

Let’s break down the approach to achieve your goal, considering the current assets, investments, and strategies you might need to employ.

Current Investments and Strategy
Mutual Funds and SIPs
You already have a significant investment in mutual funds. Mutual funds are a reliable way to grow wealth over time due to their diversified nature and professional management. However, it is crucial to assess whether the current funds align with your risk tolerance and goals.

Your SIP of Rs. 4 lakhs per month shows strong commitment. SIPs help in averaging out market volatility and providing disciplined investment.

Portfolio Management Services (PMS)
PMS offers personalized investment solutions tailored to your financial goals. However, PMS typically involves higher fees compared to mutual funds. It’s important to ensure that the returns justify these costs.

Enhancing Your Investment Strategy
Assessing Risk Tolerance
At 42, with a goal to retire by 52, you still have a moderate investment horizon. It’s essential to balance between growth and capital preservation. Consider diversifying your investments further into mid-cap and small-cap funds for potentially higher returns, but be mindful of the associated risks.

Active vs. Passive Management
You currently hold active funds through your mutual funds and PMS. Active management can potentially offer higher returns as fund managers actively seek to outperform the market. This is crucial in your case, given the aggressive target you have set.

Disadvantages of Index Funds
Index funds simply replicate market indices and do not aim to outperform. They lack flexibility in volatile markets. For your goal, actively managed funds can be more suitable as they aim for higher returns and adapt to market conditions.

Reviewing Direct Funds
Direct mutual funds offer lower expense ratios as they do not involve distributor commissions. However, the disadvantage is the lack of advisory services. For high-stakes goals like yours, having a Certified Financial Planner (CFP) can provide valuable insights and adjustments to your portfolio.

Additional Investment Avenues
Equity and Equity-related Investments
Equities have the potential for high returns but come with higher risk. Given your investment horizon, allocating a higher portion of your portfolio to equities could be beneficial. Ensure a mix of large-cap, mid-cap, and small-cap equities to balance risk and returns.

Debt Instruments
While equities can offer higher returns, including debt instruments in your portfolio can help in balancing the risk. Consider investing in high-quality corporate bonds or debt mutual funds. These provide regular income and are relatively safer.

Gold and Commodities
Allocating a small percentage of your portfolio to gold or commodities can provide a hedge against market volatility. Gold has historically maintained its value over time and can be a safe investment during economic downturns.

Regular Portfolio Review and Rebalancing
Importance of Monitoring
Regularly review your portfolio to ensure it aligns with your goals. Market conditions change, and your portfolio should adapt accordingly. A CFP can help you with periodic reviews and necessary adjustments.

Rebalancing
Rebalancing your portfolio ensures you maintain the desired asset allocation. If equities outperform and grow beyond the intended allocation, selling a portion and reinvesting in underperforming assets can help maintain balance and manage risk.

Tax Planning
Efficient Tax Strategies
Investments in mutual funds and other instruments have tax implications. Equity mutual funds held for over a year qualify for long-term capital gains tax benefits. Understanding and planning for these can help in maximizing returns.

Tax-efficient Withdrawals
Planning your withdrawals to minimize tax impact is crucial. Consider systematic withdrawal plans (SWPs) from mutual funds as they can provide regular income with tax efficiency.

Emergency Fund and Insurance
Maintaining Liquidity
Ensure you have an emergency fund equivalent to 6-12 months of expenses. This provides financial stability in case of unforeseen events and prevents you from liquidating long-term investments.

Adequate Insurance
Review your insurance coverage to ensure it is adequate. Health insurance, term insurance, and critical illness cover are essential to protect your financial goals from unexpected events.

Estate Planning
Securing Your Legacy
Estate planning ensures your assets are distributed as per your wishes. Having a will, and considering trust funds or other instruments, can help in smooth transfer of wealth to your heirs.

Nomination and Beneficiary Details
Ensure all your investments have updated nomination details. This simplifies the process for your family in case of any eventuality.

Final Insights
Reaching Rs. 25 crores in 10 years is challenging but achievable with disciplined and strategic investing.

Ensure a balanced portfolio with a mix of equities, debt, and alternative investments.

Regularly review and rebalance your portfolio to align with your goals and market conditions.

Tax planning, maintaining liquidity, and having adequate insurance are crucial to protect your financial future.

Estate planning ensures your wealth is transferred smoothly to your heirs.

Stay committed to your SIPs and consider additional investments if your cash flow permits.

A Certified Financial Planner (CFP) can provide valuable insights and help in navigating this journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

Asked by Anonymous - Jul 16, 2024Hindi
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Dear Sir I am 47 year old and planning to retire by 55.i have sips in MF for 1.5 lacs and my current portfolio is 75 lacs.started investments in sip from year 2021 and hoping to continue till 55 with at least 10% stepup.In addition , i have an FD of 1.4 crores and employee gratuity of 1 crores which will be received at retirement.i have 2 real estate properties an apartment and a small home where my parents are staying presently.what action can be done futher to make my investments 10cr at the age of 55. Thank you Regards Kumar
Ans: You are 47 and planning to retire at 55. Your SIPs total Rs 1.5 lakhs monthly, with a current portfolio of Rs 75 lakhs. You also have an FD of Rs 1.4 crores and will receive Rs 1 crore in employee gratuity at retirement. You own two real estate properties.

Goal Evaluation

Your target is to have Rs 10 crores by age 55. With a structured investment plan, this goal can be achieved.

Investment Strategy Analysis

Your monthly SIPs with a 10% step-up are commendable. The current portfolio shows good growth potential. However, to meet the Rs 10 crore goal, further optimization is needed.

Disadvantages of Direct Funds

Direct funds require constant attention and expertise. Regular funds managed by a Certified Financial Planner (CFP) can provide professional advice and better returns. This ensures your investments are well-aligned with your financial goals.

Recommendations

Increase SIPs Gradually: Continue with your SIPs and increase them by at least 10% yearly.

Professional Management: Invest through regular funds managed by a CFP. This offers better portfolio management and aligns with your goals.

Diversify Portfolio: Ensure a mix of large-cap, mid-cap, and balanced funds. This diversification reduces risk and maximizes returns.

Review and Rebalance: Regularly review and rebalance your portfolio with the help of a CFP. This keeps your investments on track to meet your goal.

Final Insights

Your goal to reach Rs 10 crores by 55 is achievable with disciplined investing. Gradually increase your SIPs, diversify your portfolio, and seek professional management. Regular reviews and adjustments will help you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 26, 2024

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Hello sir I have started my SIP with 20k before 9 year and right now it’s 40k per month. Right now my portfolio is around 60L. My goal is to built 8cr in anther 13 year. How can it be achieved please guide me ..?
Ans: Your consistent SIP growth is impressive. Reaching Rs 8 crore in 13 years is achievable with structured planning and disciplined investing. Let’s analyse your situation and guide you.

Assessing Your Current Portfolio
Your portfolio has grown to Rs 60 lakh, which reflects strong commitment.

SIPs of Rs 40,000 per month is commendable.

With the right asset allocation, you can potentially meet your goals.

Steps to Achieve Rs 8 Crore in 13 Years
1. Review Existing Investments
Check your portfolio's annualised returns over the past nine years.
Assess if your funds are performing consistently above their benchmarks.
Avoid index funds; consider actively managed funds for better returns.
2. Increase SIP Investments Periodically
Incremental SIPs are necessary to reach Rs 8 crore in 13 years.
Increase SIPs annually by 10%-15%, aligned with your income growth.
Regular increments ensure compounding works effectively over time.
3. Asset Allocation Strategy
Equity exposure should remain significant for wealth creation.
Allocate 70%-80% to equity-oriented mutual funds.
Keep 20%-30% in debt funds for stability and liquidity.
Disadvantages of Index Funds and Benefits of Actively Managed Funds
Index funds replicate market indices but lack flexibility in market fluctuations.
Actively managed funds adapt to changing market conditions.
Skilled fund managers in active funds aim to generate higher returns.
Index funds miss opportunities to outperform during volatile phases.
Role of Diversification
Spread investments across different fund categories like large-cap, mid-cap, and small-cap.
Include sectoral or thematic funds cautiously, if required, for added growth potential.
Tax-Efficient Investments
Long-term capital gains (LTCG) above Rs 1.25 lakh attract 12.5% tax.
Opt for strategies that minimise tax liabilities.
Use systematic withdrawal plans (SWPs) for income generation in retirement.
Emergency Fund and Risk Management
Ensure an emergency fund equal to 12 months of expenses remains intact.
Review your life and health insurance coverage regularly.
Monitoring and Regular Review
Review your portfolio every six months or annually.

Exit funds that consistently underperform or deviate from your goals.

Engage a Certified Financial Planner to guide fund selection and periodic reviews.

Stay Disciplined and Patient
Avoid unnecessary redemptions to let compounding work over time.
Market fluctuations are natural; focus on long-term goals, not short-term noise.
Final Insights

Your disciplined approach and consistent SIPs provide a strong foundation for reaching Rs 8 crore. Enhancing SIP amounts, maintaining proper diversification, and regularly reviewing your investments will ensure success. Start making incremental adjustments and stay focused on your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 04, 2025

Asked by Anonymous - Apr 04, 2025Hindi
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i need guidance. i am 63 yrs with housing loan of 70lakh. Only asset is a house with market value 2 crore. i have 2 daughters to be married. I need to retire and start my practice as doctor. Guie me to a investment to live with 30000 monthly and to buy a house 0f 8 lakhs after disposing the property/ Presently earning 1.5L per month. pl suggest. shud i sell the property
Ans: Your situation requires a well-thought-out financial strategy. You have a housing loan of Rs 70 lakh, a house worth Rs 2 crore, and a need for Rs 30,000 per month after retirement. Additionally, you plan to buy a house worth Rs 8 lakh and have two daughters to be married. Below is a structured approach to help you achieve financial stability.

Selling the Property – A Necessary Step?
Selling your house is a practical option. Your outstanding loan is Rs 70 lakh, and the house is worth Rs 2 crore.

After repaying the loan, you will have Rs 1.3 crore. This can be used for investments and future expenses.

If you continue living in this house, EMIs will be a burden. Selling will free you from debt and give you financial stability.

Consider renting a home instead of buying again. This will keep more money available for investments.

Buying a House for Rs 8 Lakh
If you want to buy a smaller house for Rs 8 lakh, use only a small portion of your funds.

Avoid taking another loan. Pay for the house in full from the sale proceeds.

Ensure the house is in a location with good facilities, medical access, and safety.

Creating an Investment Plan for Rs 1.3 Crore
After selling your house and clearing the loan, you will need an investment plan.

Keep Rs 10-15 lakh in a bank FD or liquid mutual funds. This will act as an emergency fund.

Invest Rs 30-40 lakh in debt mutual funds. These provide stability and liquidity.

Invest Rs 50 lakh in equity mutual funds for long-term wealth growth. Use regular plans with a Certified Financial Planner.

Keep Rs 10-15 lakh in a balanced fund for moderate returns with lower risk.

Generating Rs 30,000 Monthly Income
Debt mutual funds can provide a stable withdrawal option. Withdraw systematically for monthly expenses.

Use a mix of dividend and growth options. This ensures you get both regular income and capital appreciation.

Equity funds will provide growth, helping you sustain your money for 20-25 years.

Managing Daughters’ Marriage Expenses
If you need Rs 20-30 lakh for each daughter’s wedding, set aside Rs 40-60 lakh from the sale proceeds.

Invest this amount in a mix of debt and equity funds. This will help you reach your goal in a few years.

Avoid withdrawing from your retirement corpus for wedding expenses.

Starting Your Medical Practice
If you plan to start a medical practice, keep Rs 10-20 lakh for setting it up.

Avoid heavy investments in infrastructure initially. Work from an existing clinic or shared space.

Ensure you have medical indemnity insurance to protect yourself.

Final Insights
Selling your house will give you financial freedom and remove loan pressure.

Invest wisely to generate a steady monthly income and secure your daughters' futures.

Do not invest in real estate again. Keep your funds liquid and flexible.

Work with a Certified Financial Planner to review your investments regularly.

Focus on financial security rather than high-risk investments.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 03, 2025

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Dear Sir, I am 47 years old IT professional. My current salary is 1.5 lakhs per month. I have a daughter who just completed her 10th board exam. My corpus is around 1.6Cr FD&PPF; 30 lakhs in MF & stocks; 50 lakhs in EPF. I have no debt and living in my own house. Please suggest if I can plan for retirement
Ans: Your financial position is strong, and planning for retirement at 47 is a smart decision. Below is a detailed 360-degree approach to assess whether you can retire comfortably and how to ensure financial security.

Understanding Your Current Financial Position
Income: Rs 1.5 lakh per month.

Corpus:

Rs 1.6 crore in Fixed Deposits (FD) and Public Provident Fund (PPF).

Rs 30 lakh in mutual funds and stocks.

Rs 50 lakh in Employees' Provident Fund (EPF).

Liabilities: No debts.

Assets: Own house, ensuring no rent or EMI burden.

Family Responsibility:

Daughter has just completed the 10th board exam.

Higher education expenses need to be planned.

Key Considerations Before Retirement
Expected Retirement Age

If you plan to retire early (before 55), corpus sustainability needs careful assessment.

If you work till 60, it will provide a larger financial cushion.

Post-Retirement Expenses

Living expenses, healthcare, travel, and lifestyle costs must be considered.

Inflation will increase future expenses.

Daughter’s Education

Higher education costs are significant.

Corpus should cover both education and retirement without compromise.

Medical Expenses

Health costs increase with age.

A high health insurance cover is essential.

Wealth Growth vs. Safety

A mix of equity and debt investments ensures growth while preserving capital.

Excessive reliance on FDs and PPF may limit long-term wealth accumulation.

Assessing If You Can Retire Comfortably
Current Corpus Size

Rs 2.4 crore (excluding house) is a strong starting point.

But, inflation will reduce its real value over time.

Expected Corpus Growth

Investments in mutual funds and stocks should continue to grow.

PPF and EPF offer stable but lower returns.

Withdrawals Post-Retirement

Sustainable withdrawals should not deplete the corpus too soon.

A balanced investment strategy is required.

Gaps in Planning

Heavy reliance on FDs and PPF may not be ideal.

More equity exposure can ensure inflation-beating returns.

Steps to Strengthen Your Retirement Plan
1. Optimising Investment Strategy
Continue investing in mutual funds with a mix of large-cap, mid-cap, and flexi-cap funds.

Reduce dependence on FDs for long-term needs.

Equity mutual funds help counter inflation and grow wealth.

Avoid index funds as they provide average returns without active management.

Regular funds through a Certified Financial Planner (CFP) offer expert monitoring.

Diversify investments between equity, debt, and fixed-income products.

2. Planning for Daughter’s Education
Higher education costs can be Rs 30-50 lakh in the next 5-7 years.

Separate this goal from your retirement plan.

Increase equity investment to build an education corpus.

Avoid withdrawing from retirement savings for education.

3. Building a Healthcare Safety Net
Health insurance should cover at least Rs 30-50 lakh.

Consider super top-up plans for additional coverage.

Maintain an emergency medical fund to cover non-insured expenses.

Review insurance policies periodically.

4. Creating a Sustainable Withdrawal Plan
Avoid withdrawing a large portion of the corpus in early retirement years.

Keep at least 5 years of expenses in liquid assets.

Equity exposure should reduce gradually as retirement progresses.

Use dividends and interest income before selling assets.

Final Insights
Retirement is possible, but adjustments are needed for long-term security.

Continue investing aggressively for the next few years.

Ensure daughter's education is planned separately.

Review investments and insurance regularly.

Keep flexibility in withdrawal strategy post-retirement.

A structured plan will ensure a financially secure and comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 03, 2025

Asked by Anonymous - Apr 03, 2025Hindi
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My employer offers a salary sacrifice scheme for pension contributions, but I don't fully understand how it works. What are the potential advantages and disadvantages of joining such a scheme, and how does it affect my take-home pay and long-term financial planning?
Ans: A salary sacrifice scheme for pension contributions allows you to give up a portion of your salary in exchange for increased employer contributions to your pension. It has tax and National Insurance (NI) advantages but also some potential drawbacks.

How Salary Sacrifice for Pension Works
You agree to reduce your gross salary by a chosen amount.

Your employer contributes this amount directly to your pension.

Since your taxable salary is lower, you pay less income tax and NI.

Your employer also saves on NI and may pass on some or all of this saving to your pension.

Advantages
1. Tax and NI Savings
You don’t pay income tax or NI on the sacrificed amount.

Your employer saves on NI (currently 13.8%) and may increase your pension with these savings.

2. Higher Pension Contributions
Since more money goes into your pension, your retirement corpus grows faster.

Compounding over time enhances long-term wealth.

3. Increased Take-Home Pay
Although you sacrifice part of your salary, the NI savings may offset some of the reduction.

Depending on employer policies, your net pay may not drop significantly.

4. Potential Employer Matching
Some employers pass their NI savings into your pension, increasing your total contributions.

Disadvantages
1. Reduced Gross Salary
A lower salary means reduced future pay rises if they are percentage-based.

Life cover, sick pay, and redundancy pay linked to salary may be affected.

2. Lower Borrowing Capacity
Mortgage applications consider salary; a lower reported income might reduce borrowing potential.

3. Impact on State Benefits
If salary drops below certain thresholds, statutory benefits like maternity pay and state pension could be affected.

4. Restricted Access to Pension
The extra pension savings cannot be accessed before retirement (except under specific conditions).

Effect on Take-Home Pay
Your net pay will be slightly lower, but less than the actual amount sacrificed.

The tax and NI savings cushion the impact.

If your employer adds their NI savings, your total retirement savings increase.

Effect on Long-Term Financial Planning
Your pension fund grows faster, improving retirement security.

Short-term disposable income is slightly reduced, so budget planning is important.

Consider how the reduced salary affects other financial goals like buying a house or saving for education.

Should You Opt for It?
If employer NI savings are passed to your pension, it’s highly beneficial.

If you are close to lower tax bands or state benefit thresholds, assess the impact.

If you plan to apply for a mortgage, check how it affects your eligibility.

A Certified Financial Planner (CFP) can help assess your personal situation before making a decision.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8186 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 03, 2025

Asked by Anonymous - Apr 03, 2025Hindi
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Hi Sir , Greetings of the day!! hope you are doing well !! I want to do a savings of 50 lacs in as much less time span as possible because I want to buy a property in Gurgaon. My monthly salary is 1 lac 11k and I am currently investing 10k in mutual fund monthly and 50k in nps yearly. Can you please guide me how can I save 50 lacs and in how much time ?
Ans: Your goal of saving Rs 50 lakh for a property in Gurgaon is ambitious but achievable with the right strategy. Below is a structured approach to help you reach your target in the shortest possible time.

Understanding Your Current Financial Position
Your monthly salary is Rs 1.11 lakh.

You invest Rs 10,000 per month in mutual funds.

Your annual NPS contribution is Rs 50,000.

You haven't mentioned any liabilities or existing savings. If you have any ongoing EMIs or debts, they should be factored in.

Key Considerations for Achieving Rs 50 Lakh Target
The speed of reaching Rs 50 lakh depends on savings rate and returns.

High savings rate is the most reliable way to accumulate wealth.

Investment returns are uncertain and depend on market conditions.

A balanced approach is necessary to ensure stability and growth.

Increasing Your Savings Rate
Currently, you are investing Rs 10,000 per month.

If you can increase it to Rs 50,000 per month, you will reach Rs 50 lakh faster.

Cutting discretionary expenses will free up more money for investments.

Consider reducing unnecessary spending on dining out, luxury items, and vacations.

Redirect bonuses, incentives, or salary hikes towards savings.

Choosing the Right Investment Instruments
Mutual Funds for Growth
Actively managed equity mutual funds can generate better returns than fixed deposits.

A mix of large-cap, mid-cap, and small-cap funds can balance risk and reward.

Mid-cap and small-cap funds have higher growth potential but also higher volatility.

Avoid index funds as they provide average returns and lack active risk management.

Debt Investments for Stability
Fixed deposits, debt mutual funds, and PPF provide stability.

These should be used for short-term parking rather than long-term growth.

Debt mutual funds are taxed based on your income tax slab.

Avoid locking too much money in low-return instruments.

Balancing Risk and Return
Investing entirely in equity mutual funds can generate high returns but comes with volatility.

A mix of 80% equity and 20% debt can provide stability.

As your target nears, shift more funds towards safer instruments.

Avoid speculation and high-risk investments like cryptocurrency.

Role of NPS in Your Goal
NPS is good for retirement but not ideal for short-term goals.

Partial withdrawal is allowed only under specific conditions.

Do not rely on NPS for your property purchase.

Managing Tax Efficiency
Equity mutual fund LTCG above Rs 1.25 lakh is taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

Debt mutual fund gains are taxed as per your income slab.

Investing in tax-efficient instruments will maximize returns.

Estimating the Timeframe
If you invest Rs 50,000 per month, you can accumulate Rs 50 lakh in about 7-8 years with moderate returns.

If you invest Rs 75,000 per month, you can reach Rs 50 lakh in about 5 years.

The faster you increase your savings, the sooner you will achieve your goal.

Final Insights
Increase your monthly investment to at least Rs 50,000.

Focus on actively managed equity mutual funds.

Keep a small portion in debt for stability.

Avoid unnecessary expenses and invest salary increments.

Do not depend on NPS for this goal.

Monitor and adjust your portfolio as needed.

Stay disciplined and patient to achieve your target.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Dr Dipankar

Dr Dipankar Dutta  |1092 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Apr 03, 2025

Dr Dipankar

Dr Dipankar Dutta  |1092 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Apr 03, 2025

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