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Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 14, 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
Rajiv Question by Rajiv on Oct 14, 2024Hindi
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Sir, read ur answers/ solutions. You r giving suoerficial answers ie u don't suggest or give calculations in figures that one has to invest in PPF, MFs, etc so that the amount grows to 3Cr. Say a client wants to raise 3Cr in 15 yrs &:has a salary of 2.5L/ mth,pl elucudate how much should he invest in figures and not only the strategy.

Ans: To raise Rs 3 crores in 15 years through systematic investments, here's a breakdown:

SIP with 12% return:
By investing Rs 62,000 per month in an SIP with a 12% return, you will accumulate approximately Rs 3 crores in 15 years.

SIP with Step-up Approach:
Alternatively, if you start with Rs 35,000 per month and increase your SIP by 10% every year, at a 12% return, you will also reach Rs 3 crores in 15 years. The step-up approach helps adjust for inflation and increasing income.

These strategies depend on consistent investment, disciplined savings, and regular monitoring to ensure optimal returns over the long term.

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.
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Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

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

Asked by Anonymous - May 26, 2024
Money
I have in hand salary of 40k and I am 29. I have 2L invested in stocks. And 2500rs sip in UTI nifty index grown direct plan for last 7 months. 2L FD in AU bank with 7% interest. And I want to create 3Cr in next 10 years. I have expenses only of 20K. No emi, no loan. I have 6 month daughter and husband is into Father in law business which is always in loss. How to do 3cr in 10 years.
Ans: Achieving your financial goal of Rs 3 crore in 10 years is ambitious but possible with a well-planned strategy. Given your current financial situation, let's break down the steps to reach your goal.

Understanding Your Current Financial Situation
You have a monthly income of Rs 40,000 and expenses of Rs 20,000. This leaves you with a monthly savings potential of Rs 20,000. You also have Rs 2 lakh invested in stocks and a Rs 2 lakh fixed deposit (FD) with a 7% interest rate. Additionally, you have a SIP of Rs 2,500 in an index fund.

Evaluate Your Existing Investments
Stock Market Investment
Your Rs 2 lakh investment in stocks can offer high returns but also carries high risk. Stock market volatility can significantly impact your investment, positively or negatively. Diversification within your stock portfolio could help manage risks better.

Fixed Deposit
Your Rs 2 lakh FD at a 7% interest rate is a safe investment, but it offers limited growth potential. Fixed deposits are good for capital preservation but not ideal for high growth.

SIP in Index Fund
You have been investing Rs 2,500 monthly in a UTI Nifty Index fund. Index funds track market indices and generally have lower expenses. However, their returns depend on the market's performance, which can be unpredictable.

Advantages of Actively Managed Funds Over Index Funds
Actively managed funds, unlike index funds, have a team of professional managers making investment decisions. These managers aim to outperform the market by selecting securities they believe will perform well. While actively managed funds have higher fees, the potential for higher returns can justify the costs.

Importance of Financial Goals
Setting clear financial goals is crucial for effective planning. You want to accumulate Rs 3 crore in 10 years. To achieve this, you need a strategic approach, combining high-growth investments with risk management.

Creating a Comprehensive Financial Plan
Step 1: Increase Your Savings and Investment Capacity
You currently save Rs 20,000 per month. Increasing this amount can accelerate your progress. Consider cutting non-essential expenses or exploring additional income sources to boost your savings.

Step 2: Assess Risk Tolerance
Understanding your risk tolerance is key. High-risk investments can offer high returns but also come with greater potential for loss. Balancing high-risk and low-risk investments is crucial.

Step 3: Diversify Your Investment Portfolio
Diversification spreads risk across different asset classes. Instead of relying heavily on one type of investment, diversify into various mutual funds, equities, and debt instruments. This approach can help mitigate risks and enhance returns.

Benefits of Investing Through Certified Financial Planners
Certified Financial Planners (CFPs) offer professional advice tailored to your financial situation and goals. They can help you select the right mutual funds and other investment instruments. Investing through a CFP ensures you get personalized advice and better portfolio management.

Reconsidering Direct Funds
Direct funds require you to manage your investments without professional help, which can be challenging. Regular funds, managed through a CFP, provide expert guidance and can help optimize your portfolio's performance.

Strategic Investment Approach
Monthly SIPs
Consider increasing your SIP amount. If possible, invest Rs 10,000 to Rs 15,000 monthly in actively managed mutual funds. This strategy can offer better returns compared to index funds.

Lump Sum Investments
Utilize your existing Rs 2 lakh FD to invest in diversified mutual funds. This can potentially yield higher returns than the FD's 7% interest rate.

Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of your expenses. This ensures financial stability in case of unforeseen circumstances.

Investment Calculation to Achieve Rs 3 Crore in 10 Years
To accumulate Rs 3 crore in 10 years, you need a strategic investment plan with an estimated annual return of 12-15%. Here's a simplified calculation:

Initial Investment: Rs 4 lakh (Rs 2 lakh in stocks + Rs 2 lakh from FD)
Monthly SIP: Rs 20,000
Assumed Average Annual Return: 12%
Using these inputs, you can estimate the future value of your investments using compound interest formulas and financial calculators.

Future Value Calculation

P is the monthly investment (Rs 20,000)
????
r is the monthly interest rate (12% annual return / 12 months = 1% per month)
????
n is the number of months (10 years x 12 = 120 months)
For a more detailed calculation, you can use financial tools or consult a CFP to get precise numbers based on your exact investments and returns.

Continuous Monitoring and Adjustment
Regularly review your investment portfolio with the help of a CFP. Adjust your strategy based on market conditions and your financial goals. Staying informed and flexible is key to successful long-term investing.

Risk Management
Diversification, as mentioned earlier, helps in managing risks. Additionally, consider investing in debt funds or bonds for stable returns and lower risk. Balancing equity with debt investments can stabilize your portfolio.

Insurance and Protection
Ensure you have adequate life and health insurance coverage. This protects your family's financial future and prevents unexpected medical expenses from derailing your investment plans.

Future Planning for Your Daughter
Start a separate investment plan for your daughter's future education and other needs. Child education plans or dedicated mutual funds can help accumulate a substantial corpus over the years.

Conclusion
Reaching Rs 3 crore in 10 years requires disciplined saving, smart investing, and continuous monitoring. Leveraging the expertise of a Certified Financial Planner can significantly enhance your chances of achieving this ambitious goal. With a balanced approach, strategic planning, and regular reviews, you can secure a prosperous financial future for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 08, 2024

Money
Hello Sir, I am 35 Yr old, investing in PPFF-10K, Axis Small cap 6K, Mirae large cap- 10k, Hdfc multicap - 5k, nippon small cap - 10k Quant ELSS - 5OK lumsum i want 1.5cr in 6-7 years of my business setup, so how much do I need to save or add on to sip or any other mode of investment to be made so i can achieve this. thanks - Hemant Singh
Ans: Dear Hemant Singh,

Thank you for sharing your investment goals and portfolio details. Your determination to build a significant corpus for your business setup is commendable. At 35, you have a reasonable time frame of 6-7 years to achieve your target. Let’s assess your current investments and devise a strategy to reach your goal of Rs 1.5 crore.

Current Investment Portfolio
Your current SIP investments are as follows:

PPFF: Rs 10,000
Axis Small Cap: Rs 6,000
Mirae Large Cap: Rs 10,000
HDFC Multicap: Rs 5,000
Nippon Small Cap: Rs 10,000
Quant ELSS: Rs 50,000 (lumpsum)
Let's calculate the potential future value of these investments over the next 6-7 years.

Estimating Future Value of SIP Investments
To estimate the future value, we assume an average annual return of 12% for your mutual fund investments. This rate is based on historical performance but can vary.

Calculations for SIP Investments
We use the future value of SIP formula:

A = P × [(1 + r)^n - 1] / r × (1 + r)

Where:

A = Future Value
P = Monthly SIP amount
r = Monthly rate of return (12% annual return / 12 months = 1% = 0.01)
n = Total number of months
Let's calculate for each SIP:

PPFF: Rs 10,000 per month
P = 10,000, r = 0.01, n = 84

A = 10,000 × [(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)

A ≈ 10,000 × 118.41 × 1.01

A ≈ 11,92,125

Axis Small Cap: Rs 6,000 per month
P = 6,000, r = 0.01, n = 84

A = 6,000 × [(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)

A ≈ 6,000 × 118.41 × 1.01

A ≈ 7,15,275

Mirae Large Cap: Rs 10,000 per month
P = 10,000, r = 0.01, n = 84

A = 10,000 × [(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)

A ≈ 10,000 × 118.41 × 1.01

A ≈ 11,92,125

HDFC Multicap: Rs 5,000 per month
P = 5,000, r = 0.01, n = 84

A = 5,000 × [(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)

A ≈ 5,000 × 118.41 × 1.01

A ≈ 5,96,063

Nippon Small Cap: Rs 10,000 per month
P = 10,000, r = 0.01, n = 84

A = 10,000 × [(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)

A ≈ 10,000 × 118.41 × 1.01

A ≈ 11,92,125

Total Future Value of SIPs
Adding up the future values of all your SIPs:

11,92,125 + 7,15,275 + 11,92,125 + 5,96,063 + 11,92,125 = 48,87,713

Estimating Future Value of Lumpsum Investment
Assuming an average annual return of 12% for your lumpsum investment:

A = P × (1 + r)^n

Where:

A = Future Value
P = Principal amount (lumpsum)
r = Annual rate of return
n = Number of years
P = 50,000, r = 0.12, n = 6.5

A = 50,000 × (1 + 0.12)^6.5

A ≈ 50,000 × 2.01

A ≈ 1,00,500

Combining SIP and Lumpsum Investments
Total Future Value = SIP Future Value + Lumpsum Future Value

Total Future Value = 48,87,713 + 1,00,500 = 49,88,213

Gap Analysis
You aim to accumulate Rs 1.5 crore in 6-7 years. Based on current investments, you would accumulate approximately Rs 49,88,213.

Gap = 1,50,00,000 - 49,88,213 = 1,00,11,787

Additional Investments Needed
To calculate the additional monthly SIP needed to bridge this gap, we use the future value of SIP formula:

A = P × [(1 + r)^n - 1] / r × (1 + r)

Where:

A = 1,00,11,787
r = 0.01
n = 84
Rearranging to solve for P:

P = A / {[(1 + r)^n - 1] / r × (1 + r)}

P = 1,00,11,787 / {[(1 + 0.01)^84 - 1] / 0.01 × (1 + 0.01)}

P ≈ 1,00,11,787 / (118.41 × 1.01)

P ≈ 84,700

Investment Strategy
To achieve your target, consider increasing your SIP by Rs 84,700 per month. This might seem substantial, so here are a few strategies to help:

Review and Adjust Portfolio
Regularly review your portfolio to ensure it aligns with your goals. Consider reallocating funds to higher-performing mutual funds, if needed.

Increase Contributions Gradually
If increasing your SIP by Rs 84,700 at once is challenging, consider doing it gradually. Incremental increases can help you adjust your budget over time.

Explore Additional Investment Avenues
While mutual funds are excellent, consider diversifying into other investment options like bonds or gold ETFs to balance risk.

Stay Disciplined and Consistent
Consistent contributions and disciplined investing are key to achieving your goals. Avoid withdrawing funds prematurely to allow compounding to work its magic.

Seek Professional Guidance
Working with a Certified Financial Planner (CFP) can provide personalized advice tailored to your financial situation and goals. A CFP can help optimize your investment strategy, manage risks, and ensure you are on track to achieve your business setup target.

Final Insights
Your proactive approach and disciplined investment strategy are commendable. By increasing your monthly SIP contributions and regularly reviewing your portfolio, you can bridge the gap and achieve your goal of Rs 1.5 crore in 6-7 years. Stay committed to your financial plan, and consider seeking professional guidance to maximize your investment potential.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 2024

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Money
I am having 46lakh mutual fund and monthly investment is 22k, I wanted 2cr in next 3year. What else I can do to achive that also I have share of 13lakh. And running two home loan one is 25lakh and another is 48lakh
Ans: Current Financial Position
Mutual Fund Investments: Rs 46 lakh
Monthly Investment: Rs 22,000
Share Investments: Rs 13 lakh
Home Loans: Rs 25 lakh and Rs 48 lakh
You aim to accumulate Rs 2 crore in 3 years.

Let's analyze and suggest a strategy to achieve this goal.

Assessing the Goal
Aggressive Goal
Your goal is ambitious. Achieving Rs 2 crore in 3 years will require a high growth rate.

Current Investments
You are investing in mutual funds and shares. This is good but may not be sufficient for your goal.

Investment Strategy
Increase Monthly Investments
Consider increasing your monthly investment. Even small increases can significantly impact over time.

Focus on Equity Funds
Actively managed equity funds can offer high returns. Fund managers can outperform the market, unlike index funds.

Balanced Funds
Balanced funds provide a mix of equity and debt. This can offer stability and growth.

Avoid Index Funds
Index funds are passively managed. They cannot outperform the market. Actively managed funds, with professional oversight, aim to exceed market returns.

Avoid Direct Funds
Direct funds might have lower fees. But investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential can provide professional guidance. This can lead to better fund selection and higher returns.

Systematic Investment Plan (SIP)
Set up SIPs for regular investments. SIPs help in averaging out market volatility. They ensure disciplined and consistent investing.

Debt Management
Home Loans
You have two home loans. Consider refinancing to reduce interest rates. Pay extra towards higher interest loan if possible.

Emergency Fund
Maintain an emergency fund. This should cover at least 6 months of expenses. It's essential for financial security and to avoid liquidating investments prematurely.

Diversification and Regular Review
Diversify Portfolio
Diversify your portfolio across different asset classes. This reduces risk and increases potential returns.

Regular Review
Review your portfolio regularly. Make adjustments based on market conditions and your goals.

Seek Professional Guidance
Consult a Certified Financial Planner (CFP) for personalized advice. They can help design a strategy tailored to your financial goals and risk tolerance.

Final Insights
Achieving Rs 2 crore in 3 years is challenging but possible.

Increase your monthly investments and focus on equity and balanced funds. Avoid index and direct funds for better returns.

Maintain an emergency fund and consider SIPs. Manage your home loans wisely. Seek professional guidance for a well-rounded investment strategy.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

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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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