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Ramalingam

Ramalingam Kalirajan  |6993 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 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
Nikesh Question by Nikesh on May 21, 2024Hindi
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Money

Dear sir, have a very warm day to you. I ANS now 32, currently working as assistant professor in a college( recently joined). I have a lic term insurance with term plan of 40 lac sum.imsured at my age of 60 Currently I have around 6.5 lac in my NPS. I have a son (2 month old) now. My net salary around 75k currently which may further increases as the time.My wife is also working and she also earned around 40 k now I have a loan of around 2.5 lac which I have to pay in a year. I want to get a corpus of around 5 cr at the time of my retirement and also have to secure at least 25-40 lac for my son higher education. Now, my request is that please tell me some better plans for the better future of my family and me when I will be retired from my job as well as to secure the education support of my child

Ans: Securing Your Family's Future: Financial Planning for Long-Term Goals
Dear ANS, congratulations on the newest addition to your family and your commitment to securing their future. Let’s explore some effective financial strategies to achieve your goals of retirement planning and providing for your son’s education.

Current Financial Overview
Income and Expenses
You and your wife collectively earn around ?1.15 lakhs per month, with the potential for future salary increases.
You have a manageable loan of ?2.5 lakhs, which will be paid off within a year.
Savings and Investments
You have a LIC term insurance plan providing coverage of ?40 lakhs until the age of 60.
Your NPS balance is approximately ?6.5 lakhs, providing a foundation for retirement savings.
Planning for Retirement: Building a Corpus of ?5 Crores
Retirement Age: Assumed at 60
Determine your desired retirement age and estimate your post-retirement expenses based on your current lifestyle and inflation projections.
Retirement Corpus Calculation
Calculate the corpus required to maintain your desired lifestyle post-retirement, considering inflation and expected longevity.
Strategies for Retirement Planning
1. Increase Retirement Savings
Maximize contributions to your NPS account to benefit from tax benefits and build a substantial retirement corpus.
Consider diversifying retirement savings by investing in other tax-efficient instruments like PPF and ELSS mutual funds.
2. Regular Financial Reviews
Regularly review and reassess your retirement goals and investment strategy to ensure they remain aligned with your evolving financial situation and objectives.
Education Planning: Securing ?25-40 Lakhs for Your Son’s Education
Estimated Education Cost: Consider Inflation
Estimate the future cost of your son’s higher education, factoring in inflation and the duration until he starts college.
Education Fund Accumulation
Start a dedicated education fund for your son’s future expenses, such as a combination of mutual funds, SIPs, and fixed deposits.
Gradually increase contributions to this fund over time to meet the desired corpus by the time he begins his education.
Risk Management and Contingency Planning
Emergency Fund
Maintain an emergency fund equivalent to at least six months' worth of living expenses to cover unforeseen financial setbacks.
Adequate Insurance Coverage
Review your insurance coverage regularly and consider increasing the sum assured on your term insurance policy to ensure adequate protection for your family's financial security.
Long-Term Wealth Creation Strategies
Diversified Investment Portfolio
Build a diversified investment portfolio comprising equities, mutual funds, and fixed income instruments to achieve long-term wealth creation goals.
Professional Financial Advice
Consult with a Certified Financial Planner (CFP) to develop a comprehensive financial plan tailored to your specific needs, goals, and risk tolerance.
A CFP can provide personalized guidance, investment recommendations, and ongoing portfolio management to help you achieve your financial objectives.
Conclusion: Working Towards a Brighter Future
ANS, by implementing these strategies and staying disciplined in your financial planning, you can work towards achieving your long-term goals of a comfortable retirement and securing your son's education. Remember to review and adjust your financial plan periodically to adapt to changing circumstances and ensure you remain on track to meet your objectives.

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  |6993 Answers  |Ask -

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

Money
Greetings I am 42 years old, dependent my wife 36years and Kid 5Years old. I need suggestion for my retiring planning as well as my Child Education Plan at the same time. Please advice me.
Ans: It's commendable that you are thinking ahead about your retirement and your child's education. Balancing these priorities requires careful planning. With your current age at 42, your wife's age at 36, and your child's age at 5, you have some time to plan effectively.

Retirement Planning: Key Considerations
Assessing Retirement Needs
Estimate Retirement Corpus: Calculate how much you need for retirement. Consider your desired lifestyle, inflation, and life expectancy.

Current Savings and Investments: Evaluate your existing savings, investments, and any retirement benefits. This gives you a clear starting point.

Gap Analysis: Identify the gap between your current savings and the required retirement corpus. This helps in determining the required monthly savings.

Investment Strategies for Retirement
Diversified Portfolio: Invest in a diversified portfolio of actively managed mutual funds. This can potentially provide higher returns and reduce risk.

Regular Contributions: Ensure regular contributions to your retirement fund. Consistency is key to building a substantial corpus over time.

Professional Guidance: Work with a Certified Financial Planner (CFP) to select the right mix of funds. They can help you navigate market complexities and optimize returns.

Monitoring and Adjusting
Regular Review: Review your retirement plan annually. Adjust your contributions and investments based on performance and changing goals.

Rebalance Portfolio: Periodically rebalance your portfolio to maintain the desired asset allocation. This keeps your investments aligned with your risk tolerance and goals.

Child's Education Planning: Key Considerations
Estimating Education Costs
Future Education Costs: Estimate the future cost of your child's education, considering inflation. This includes school, college, and any specialized courses.

Current Savings: Evaluate your current savings and investments for your child's education. This helps in understanding the shortfall.

Monthly Savings Requirement: Calculate the amount you need to save monthly to meet the future education costs. This should be realistic and achievable.

Investment Strategies for Education
Long-Term Investments: Invest in long-term instruments like mutual funds. Actively managed funds can potentially offer higher returns compared to traditional savings.

Education-Specific Funds: Consider investing in funds specifically designed for education goals. These funds are structured to provide growth aligned with education timelines.

Systematic Investment Plan (SIP): Use SIPs for regular investing. This method helps in averaging costs and benefits from market volatility.

Professional Guidance
Certified Financial Planner: Engage with a CFP to create a tailored education plan. They can recommend the best funds and strategies based on your risk profile and goals.

Regular Monitoring: Monitor the performance of your investments regularly. Make adjustments as needed to ensure you stay on track.

Balancing Retirement and Education Planning
Prioritizing Goals
Balance Both Goals: It’s crucial to strike a balance between saving for retirement and your child's education. Neither should be neglected.

Emergency Fund: Maintain an emergency fund to handle unexpected expenses. This prevents the need to dip into retirement or education savings.

Allocating Resources
Proportional Allocation: Allocate a portion of your savings to both goals. A CFP can help determine the best split based on your financial situation.

Increase Savings Gradually: As your income grows, increase the amount allocated to both retirement and education savings.

Risk Management
Insurance Cover: Ensure you have adequate life and health insurance. This protects your family and your financial goals in case of unforeseen events.

Diversified Investments: Diversify your investments to spread risk. This helps in managing market volatility and ensuring steady growth.

Benefits of Actively Managed Funds
Higher Potential Returns
Actively managed funds can potentially offer higher returns compared to index funds. Fund managers actively select stocks to outperform the market.

Professional Management
Professional fund managers with expertise in market analysis manage actively managed funds. They make informed decisions based on market conditions.

Flexibility
Actively managed funds offer flexibility in investment strategy. Fund managers can adjust the portfolio based on market trends and economic factors.

Risk Management
Professional fund managers actively manage risk. They diversify the portfolio and make adjustments to mitigate potential losses.

Disadvantages of Index Funds and Direct Funds
Index Funds: Lower Flexibility
Index funds track a specific index, offering limited flexibility. They cannot adjust to market conditions or take advantage of specific opportunities.

Lower Potential Returns
Index funds typically offer lower returns compared to actively managed funds. They are designed to match the market performance, not exceed it.

Direct Funds: Lack of Guidance
Investing in direct funds without professional guidance can be risky. You might miss out on valuable insights and strategies provided by a CFP.

Time and Effort
Managing direct funds requires significant time and effort. You need to stay updated on market trends and make investment decisions independently.

Conclusion
Balancing retirement planning and your child's education requires careful planning and disciplined investing. Working with a Certified Financial Planner can provide you with tailored strategies to achieve both goals.

Stay focused on your financial objectives and adjust your plans as needed. Your proactive approach and commitment to your family's financial future are commendable.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |6993 Answers  |Ask -

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

Money
Hello Sir, I am now 45+ now and investing through sip since last 5 yrs in 1) 3k in sbi small cap, 2) 4k in axis small cap, 3) 3k in nippon small cap, 4) 4k in mirea asset emerging bluechip, 5) 6k in hdfc mid cap, 6) 4k in kotak flexi cap, 7) 6k in parag parikh flexi cap, 8) 4k in icici pru value discovery. Risk high and tenure 15-20 yrs for asset allocation. Sir is it necessary to change any fund?
Ans: you have built a diverse SIP portfolio with various equity funds. Your disciplined investment over the last five years shows commitment to wealth building. With a high-risk tolerance and a long-term goal of 15-20 years, let’s take an in-depth look at your fund choices. I’ll provide insights to help you optimise this portfolio further.

Strengths of Your Current Portfolio
Good Diversification: Your portfolio includes funds from small-cap, mid-cap, flexi-cap, and value categories. This spread across segments is a strong approach to capture growth across the market.

Discipline in SIPs: Regular SIP contributions show a systematic approach that will help in rupee-cost averaging. It’s a proven method for long-term investors like you.

High-Risk Appetite: You are investing with a long horizon and high risk tolerance. This aligns well with your fund choices, especially in high-risk categories like small-cap and mid-cap.

Reviewing Small-Cap Fund Exposure
Current Allocation: Your portfolio allocates Rs 10,000 per month to small-cap funds. These funds often offer high growth potential but also come with significant volatility.

Growth Potential: Small-cap funds are beneficial in long-term portfolios due to their high potential for growth. Over 15-20 years, they can contribute significantly to wealth creation.

Suggested Changes: With three small-cap funds, there may be a lot of overlap. You might consider consolidating into one or two well-performing small-cap funds. This will simplify tracking and reduce redundancy.

Examining Mid-Cap and Flexi-Cap Fund Allocation
Mid-Cap Fund Benefits: Mid-cap funds bring a blend of growth and moderate stability. Your allocation here balances the aggressive small-cap investments.

Flexi-Cap Fund Role: Flexi-cap funds invest across large-, mid-, and small-cap stocks. This flexibility allows these funds to adjust according to market conditions, adding a layer of adaptability to your portfolio.

Suggested Changes: Your portfolio has multiple flexi-cap funds, which can lead to overlapping investments. It may be beneficial to reduce your holdings to one high-performing flexi-cap fund for better portfolio efficiency.

Value-Oriented Fund’s Contribution
Role in Stability: The value fund in your portfolio targets undervalued stocks, which tend to be more resilient in market downturns. This can provide balance and act as a buffer against volatility.

Long-Term Benefits: A value-oriented fund adds stability, which is essential as your portfolio matures. The approach of investing in undervalued companies often pays off well over time.

Suggested Changes: Keep this fund as it provides a different investment strategy, enhancing overall diversification.

Importance of Actively Managed Funds Over Index Funds
Higher Potential Returns: Actively managed funds can outperform index funds by selecting high-potential stocks and avoiding weaker sectors.

Limitations of Index Funds: Index funds track the market and have limited potential for excess returns. They cannot adjust to economic shifts like active funds can.

Benefit of Advisor Guidance: Regular funds managed with the help of a Certified Financial Planner (CFP) add value. A CFP can guide you on fund selection and rebalancing, which index funds do not offer.

Advantages of Investing Through a Certified Financial Planner
Personalized Advice: A CFP can help you fine-tune your portfolio to better match your goals, risk profile, and timeline. Direct funds lack this support, making regular funds a better choice for most investors.

Portfolio Monitoring: Regular funds with CFP assistance offer ongoing review and monitoring. This is important for a long-term investment strategy.

Support for Future Adjustments: Market conditions and personal goals evolve over time. Having a CFP ensures you have guidance to adjust your investments accordingly.

Tax Implications on Your Equity Mutual Funds
Equity Mutual Fund Taxation: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.

Tax-Efficient Withdrawals: Consider planning your withdrawals in a tax-efficient way. For a long-term horizon, tax efficiency will contribute significantly to your net returns.

Impact of New Tax Rules: Understanding tax implications can help you plan more efficiently for your post-retirement withdrawals, minimising tax impact on your returns.

Recommendations for Portfolio Optimization
Reduce Fund Overlap: Your portfolio has multiple funds in similar categories. Streamlining these will make the portfolio easier to manage and reduce redundancies.

Consider Asset Rebalancing: Review your portfolio’s asset allocation every two to three years. As you near retirement, adding some low-risk debt or balanced funds could provide stability without sacrificing growth.

Explore the Benefits of Balanced Funds: Over time, a small allocation to balanced funds could help mitigate volatility as you approach retirement age. These funds offer a mix of debt and equity, which balances risk and growth.

Final Insights
Your disciplined approach to SIPs and fund selection shows a strong foundation for future growth. Simplifying your fund categories and reducing overlap can improve efficiency and returns. Working closely with a CFP will ensure that your portfolio remains aligned with your goals over time, providing you with the guidance needed for adjustments as markets evolve.

Best Regards,

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

...Read more

Ramalingam

Ramalingam Kalirajan  |6993 Answers  |Ask -

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

Money
Sir please review my mutual fund sip portfolio * Axis Mid Cap Fund - Direct Growth = 1000 * ICICI Prudential BHARAT 22 FOF - Direct Plan = 1000 * Mirae Asset Emerging Bluechip Fund - Direct Plan = 1000 * Parag Parikh Flexi Cap Fund - Direct Plan = 1000 * quant Small Cap Fund - Direct Plan Growth = 1000 * SBI Small Cap Fund Direct Growth = 2000 * SBI PSU direct plan growth = 1000 My age is 27 . Looking a long term investment with higher return. Shall I continue this portfolio or any changes required? Kindly give your valuable suggestions . Thank you
Ans: Your portfolio looks well-constructed, with a strong foundation in mid-cap, small-cap, and flexi-cap funds. Each fund you've chosen reflects a strategic approach for growth. Let's evaluate each category and make any necessary suggestions to ensure you achieve the best potential returns over the long term.

Overview of Your Current Portfolio
You’ve diversified well across categories, with each fund serving a unique role. Let’s analyze the strengths and potential improvements in each area of your portfolio.

Mid-Cap Funds
Mid-cap funds, like the one in your portfolio, focus on companies with substantial growth potential but higher risk compared to large-cap companies. Over the long term, these funds often outperform due to their growth-focused nature.

However, consider monitoring this fund periodically. Mid-cap stocks can face higher volatility, which may impact returns if held solely without re-evaluation.

Small-Cap Funds
Small-cap funds are growth-oriented, targeting smaller companies with significant room for expansion. You’ve allocated well to this category, focusing on funds with robust track records.

Due to their volatile nature, however, they can experience sharp swings. A Certified Financial Planner can offer guidance to rebalance if necessary, which could enhance returns and help you avoid undue risk over the long term.

Flexi-Cap Funds
Flexi-cap funds have the flexibility to invest across large, mid, and small-cap companies, making them versatile. This allocation ensures that you have exposure to high-growth stocks while benefiting from the stability of large-cap stocks.

This type of fund aligns well with your long-term goal as it can balance risk across market cycles. Continue with this allocation for stable yet high-growth potential.

Sectoral Funds (Public Sector & PSU Funds)
Sectoral funds focused on PSUs add a thematic angle to your portfolio, providing exposure to government-linked companies. Such funds may perform well during economic growth phases or government-led initiatives but might also experience phases of underperformance.

For long-term investors like you, relying heavily on sectoral funds can add cyclical risk. A diversified equity fund may offer higher long-term growth with less risk than sector-specific investments.

Evaluation of Direct Fund Plans
Sir, investing through direct plans saves on expense ratios, which may seem beneficial at first. However, there are significant drawbacks:

Lack of Advisory Support: Direct plans don't offer professional guidance. Over time, tracking and rebalancing become crucial, and a Certified Financial Planner (CFP) with an MFD (Mutual Fund Distributor) credential ensures optimal management.

Market Cycles and Rebalancing: Without expert oversight, you could miss critical adjustments during volatile market phases, affecting returns. A CFP helps in such rebalancing for better performance.

Tax Implications and Withdrawals: Selling or withdrawing from mutual funds, especially equity funds, incurs tax. Long-term capital gains (LTCG) on equity mutual funds are taxed at 12.5% for gains above Rs 1.25 lakh, while short-term gains (STCG) incur 20%. A regular plan with an MFD provides ongoing tax-efficient strategies.

Opting for regular plans via an MFD with a CFP credential will enable you to maximize returns while accessing insights that make a difference long term.

Suggested Modifications for Higher Returns and Stability
Focus on Balanced Funds Over Sectoral Exposure

To limit risks tied to sectoral funds, consider allocating a portion to balanced or diversified funds. These funds balance equity with stable instruments like debt, reducing volatility and sustaining growth.

Revisit Small and Mid-Cap Allocations

With multiple small-cap and mid-cap funds, consider focusing on one fund in each category. Over-diversification in these can dilute returns and increase tracking requirements. A strategic reallocation could yield more focused, consistent growth.

Consider SIP Step-Up for Long-Term Compounding

An annual SIP step-up, even a small amount, could enhance long-term wealth creation significantly. This adjustment boosts your corpus over time and aligns with your long-term goal of maximizing returns.

Seek Guidance from a Certified Financial Planner

Having a CFP manage your portfolio brings personalized insight into market trends, rebalancing, and tax-efficient strategies. A CFP ensures you capitalize on growth while maintaining balance and tax efficiency.

Key Benefits of Actively Managed Funds Over Index Funds
Sir, I noticed you are not invested in index funds, which is beneficial for your growth objective. Actively managed funds outperform index funds, especially in dynamic market conditions. Here’s why:

Higher Returns Potential: Actively managed funds provide the flexibility to capitalize on changing market opportunities, which index funds lack due to their passive structure.

Adaptive Strategy: Fund managers of actively managed funds adjust to market shifts, providing growth and safety in a fluctuating market.

Downside Protection: During bear markets, actively managed funds can adjust exposure, while index funds simply follow the market downturn. Active management can minimize losses, giving a steadier performance over time.

Final Insights
Sir, you have built a promising portfolio with well-selected funds across categories. A few modifications could ensure a more balanced, growth-oriented, and tax-efficient portfolio. The following adjustments will help you achieve higher returns with sustained stability:

Consider balanced or diversified funds for steadier growth.

Limit mid-cap and small-cap fund overlaps to reduce portfolio complexity.

Use the expertise of a CFP to handle rebalancing, tax efficiency, and market cycle adaptations.

Continue focusing on actively managed funds over index funds, as these provide better long-term value.

Through these steps, you can optimize your portfolio for maximum growth and stability, setting a strong foundation for your long-term investment goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Anu

Anu Krishna  |1287 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Nov 08, 2024

Asked by Anonymous - Nov 07, 2024Hindi
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Relationship
Hi Anu Mam Im 27 yrs old ( married) and 10 yrs old daughter. Im seperated from my husband since 2 yrs due to several reasons like he is drinking and Totally addicted to it. And he is totally dependent and now today also roaming on the roads of some streets of hyd. I belongs to an orthdox family. Now the question is one backward caste man who is married age : 33 he is interested in me and proposed me to a marriage after knowing all my past and saying that he accepts my child too. And the thing is he said a lie to me at first that he is unmarried and even though i had a good impression on him about the way he behaves with me he even treat me in a very polite manner. He says he loves me even though i too had a good impression but the things are the castes and can we both settle down with a marriage can we be happy or he is only trying to convince me to get him a wife to care care of him or only for his parents, he always talks about his own sister and also the office colleagues calls them sister and get emotional about them those who left the office. And he cries a lot which i dont trust on him and the face i see him that was not an real cry that looks like an act which i dont like in him. May he is acting ? Or really loving me, ge cares alot i feel like he is over reacting
Ans: Dear Anonymous,
If you are in doubt, then it's highly likely that he is putting on an act. Go with your intuition and hey hey, you said that he is married and so are you...You do realize that you just can't go ahead and marry while you are already to other people, right?
Focus on what's happening in your life; you obviously have to do something about it...Other relationships can wait!

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

...Read more

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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