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Nikunj

Nikunj Saraf  |308 Answers  |Ask -

Mutual Funds Expert - Answered on Mar 01, 2023

Nikunj Saraf has more than five years of experience in financial markets and offers advice about mutual funds. He is vice president at Choice Wealth, a financial institution that offers broking, insurance, loans and government advisory services. Saraf, who is a member of the Institute Of Chartered Accountants of India, has a strong base in financial markets and wealth management.... more
Vaihayasi Question by Vaihayasi on Jan 06, 2023Hindi
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Hi Mihir. My daughter is a law student and an intern at a law firm and gets a small nominal internship salary. She's desperate to save it and grow it. Any tips for youngsters on what they can do?

Ans: Hello Vaihayasi. Your daughter can start investing in Mutual Fund with nominal amount of Rs.100. Nowadays many AMC offers sip with Rs. 100. Since she is beginner and a young investor, she can invest in large cap category with low risk appetite. In the future, I would advise her to diversify her investments.
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  |8475 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Asked by Anonymous - Jun 20, 2024Hindi
Money
My daughter has just started career at ground staff security into aviation industry,her current in hand salary is 15k ,what is the best option for her to start saving and built wealth in coming 20 years.,
Ans: First off, congratulations to your daughter on starting her career in the aviation industry! It's fantastic that she’s thinking about saving and building wealth early on. This forward-thinking approach will pay off significantly over time. Let’s explore how she can make the most of her earnings and set herself up for a bright financial future.

Setting Clear Financial Goals
Before diving into specific investment options, it’s crucial to outline clear financial goals. What does your daughter aim to achieve in the next 5, 10, and 20 years? Goals could include building an emergency fund, saving for higher education, buying a home, or creating a retirement corpus. Having well-defined goals will help in selecting the right investment options.

Establishing an Emergency Fund
The first step is to establish an emergency fund. This should cover at least 3 to 6 months of her monthly expenses. Given her current salary of Rs 15,000, she should aim to save Rs 45,000 to Rs 90,000 in a liquid fund. Liquid funds are low-risk and provide quick access to money, making them ideal for emergencies.

Starting with SIPs in Mutual Funds
Systematic Investment Plans (SIPs) are a great way to start investing with a small amount of money regularly. They allow investors to put in a fixed sum of money at regular intervals, usually monthly, into mutual funds. This approach is beneficial for young investors like your daughter for several reasons:

Benefits of SIPs
Rupee Cost Averaging: Investing a fixed amount regularly reduces the average cost per unit over time.
Disciplined Saving: SIPs instill a disciplined approach to saving and investing.
Compounding: Regular investments can grow significantly over time due to the power of compounding.
Categories of Mutual Funds for Her
Given her 20-year investment horizon, a mix of equity funds would be ideal. Equity funds offer higher returns over the long term compared to other investment options. Here’s a suggested allocation:

Large Cap Funds: These invest in large, well-established companies. They provide stability and steady growth.
Mid Cap Funds: These invest in medium-sized companies, offering higher growth potential with moderate risk.
Small Cap Funds: These focus on small companies with high growth potential but come with higher risk.
Flexi Cap Funds: These invest across market capitalizations, providing a balanced approach to investing in large, mid, and small-cap stocks.
Avoiding Index Funds and Direct Funds
While index funds and direct funds might seem attractive due to lower costs, they might not be the best fit for her. Index funds simply mimic a market index and lack the potential for higher returns that actively managed funds offer.

Actively managed funds, on the other hand, have fund managers who actively select stocks to outperform the market. This expertise can lead to better returns over the long term, despite higher costs.

Similarly, investing through regular funds via a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential provides expert advice and personalized strategies. This guidance is especially valuable for young investors navigating the complexities of financial markets.

Exploring PPF for Safe, Long-term Investment
The Public Provident Fund (PPF) is a government-backed savings scheme offering attractive interest rates and tax benefits. It has a 15-year lock-in period, making it suitable for long-term goals. Investing in PPF can provide stability and assured returns, complementing the higher-risk equity investments.

Understanding the Power of Compounding
One of the most powerful concepts in investing is compounding. By reinvesting earnings, she can earn returns on both her initial investment and the returns generated. This snowball effect can lead to substantial growth over time. The earlier she starts investing, the more she can benefit from compounding.

Diversifying Investments
Diversification is key to managing risk. By spreading investments across different asset classes and funds, she can reduce the impact of any one investment performing poorly. A balanced portfolio might include:

Equity Mutual Funds: For long-term growth.
Debt Mutual Funds: For stability and lower risk.
PPF: For assured returns and tax benefits.
Regular Monitoring and Rebalancing
Investing is not a set-and-forget activity. Regularly monitoring and rebalancing her portfolio ensures it stays aligned with her goals. Market conditions change, and so should her investment strategy. A Certified Financial Planner can help with this ongoing process.

Tax Planning
Efficient tax planning is crucial to maximize returns. She should be aware of tax-saving instruments like Equity Linked Savings Schemes (ELSS) and PPF. These not only provide good returns but also offer tax benefits under Section 80C of the Income Tax Act.

Building Financial Discipline
Encourage her to develop good financial habits. This includes budgeting, tracking expenses, and avoiding unnecessary debt. Financial discipline is the foundation of a secure financial future.

Health and Term Insurance
Insurance is an important aspect of financial planning. She should consider getting health insurance to cover medical expenses and term insurance to secure her dependents’ future. This protection ensures that her savings are not eroded by unforeseen events.

Leveraging Employee Benefits
Many employers offer benefits like Provident Fund (PF) and Employee Pension Scheme (EPS). She should take full advantage of these benefits as they provide long-term financial security. Additionally, some companies offer stock options, which can be a good investment opportunity.

Investing in Skills and Education
While financial investments are important, investing in her skills and education can lead to higher earning potential. Continuous learning and upgrading skills can open up better job opportunities and career growth, leading to higher savings and investments.

Staying Informed and Updated
The financial world is dynamic, with constant changes and new opportunities. Encourage her to stay informed about financial markets, new investment options, and economic trends. This knowledge will help her make informed decisions and adapt her strategy as needed.

Final Insights
Starting early with a well-thought-out investment plan can significantly impact her financial future. A mix of mutual funds, PPF, and disciplined saving habits will set her on the right path. Regular monitoring, tax planning, and leveraging employee benefits will further enhance her financial security. With the right guidance and a proactive approach, she can build substantial wealth over the next 20 years.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8475 Answers  |Ask -

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

Asked by Anonymous - Nov 20, 2024Hindi
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I’m a 20yr old student , currently doing internship and getting stipend of 30k, going to get package of 10LPA in 6 months. I want to save money and also get atleast minimal returns. I’ve very less idea about share market also. How can I save money and create a plan for me to save max and also get maximum returns.
Ans: You are at an ideal stage to start building wealth. Your internship stipend and future salary provide a strong foundation. With structured planning, you can save and earn better returns while managing risks. Let’s create a simple, actionable strategy for you.

Setting Clear Financial Goals
Short-Term Goals (1–3 Years):
Emergency fund, higher studies, or any immediate personal goals.

Medium-Term Goals (3–5 Years):
Buying a vehicle, planning vacations, or career enhancement expenses.

Long-Term Goals (5+ Years):
Buying a home, retirement savings, or wealth creation.

Creating an Emergency Fund
Importance of Emergency Fund:
Build a fund equal to 6 months' expenses. It provides financial stability during unexpected situations.

Where to Invest:
Use a mix of liquid mutual funds and high-interest savings accounts for easy access.

Budgeting Your Income
Stipend Allocation Plan:
Save at least 40–50% of your Rs 30,000 stipend. The rest can cover expenses and small indulgences.

Future Salary Planning:
After getting the Rs 10 LPA package, aim to save 30–40% monthly.

Investing in Mutual Funds for Returns
Equity Mutual Funds for Growth:
Equity funds are ideal for long-term wealth creation. Actively managed funds offer better growth than index funds due to expert management.

Systematic Investment Plan (SIP):
Start SIPs to invest consistently. Begin with Rs 5,000–10,000 based on affordability.

Avoid Direct Funds:
Regular plans with a Certified Financial Planner provide better guidance and monitoring.

Tax-Saving Investments
Utilise Section 80C:
Invest up to Rs 1.5 lakh annually in tax-saving instruments like ELSS mutual funds.

Consider NPS for Retirement:
NPS offers tax benefits under Section 80CCD. It also builds retirement wealth gradually.

Staying Cautious with Stocks
Learn Before Investing in Shares:
Direct stock market investing requires knowledge. Avoid risky investments until you gain expertise.

Start Small with Blue-Chip Companies:
If you wish to explore stocks, invest small amounts in reliable, large-cap companies.

Exploring Debt Instruments
Invest in Debt Mutual Funds:
Debt funds offer stability and are tax-efficient for your income bracket.

Avoid Over-Reliance on Fixed Deposits:
Fixed deposits provide safety but offer lower returns compared to mutual funds.

Managing Risks
Insurance for Protection:
Get health insurance for yourself. It ensures financial stability during medical emergencies.

Avoid ULIPs or Endowment Policies:
These provide low returns compared to mutual funds. Focus on term insurance when needed.

Tax Planning with New Income
Understand Tax Slabs:
With a Rs 10 LPA salary, you will fall in the 20–30% tax bracket.

Plan for Deductions:
Use Section 80C, 80D (health insurance), and other exemptions to minimise taxable income.

Steps to Monitor and Adjust
Review Portfolio Regularly:
Evaluate your investments every 6 months. Adjust as per market conditions and goals.

Increase SIP Amount Gradually:
As your income grows, increase your SIP contributions to grow wealth faster.

Final Insights
Starting early gives you a significant advantage in wealth creation. Focus on disciplined saving and investing with a mix of equity and debt funds. Avoid unnecessary risks and prioritise financial security through insurance and emergency funds. Monitor and adjust your portfolio regularly to stay aligned with your 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  |8475 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 19, 2025

Money
I am 31 earning 99K per month with monthly SIP of 7k +insurance premium 2.5k i am sole earner in my family and family of 3 .Car loan EMI of 18 k 6 years left .savings in gold is 10 lakhs Mutual fund is of 5 lakh kindly guide how much additional SIP should i have to do as i think i am not going in right direction . My goal is to purchase a house worth rs. 1cr. Maximum but next year and want to close my CAR loan ASAP too
Ans: You have done well in building some savings and SIPs. Let’s now look at your goals and finances closely.

As a Certified Financial Planner, I will now guide you step-by-step. The goal is to show you a clear path.

This plan will help you buy your house, repay your car loan, and build strong financial health.

Understanding Your Present Situation
You are 31 years old. That is a good age to start disciplined planning.

You earn Rs. 99,000 per month. That is a decent monthly income.

You have a family of 3. You are the only earning member.

Your car EMI is Rs. 18,000. You have 6 more years to pay.

You invest Rs. 7,000 monthly in SIP. That is a good beginning.

Your insurance premium is Rs. 2,500 per month. That is acceptable if it is for pure term life cover.

You have Rs. 10 lakhs in gold. That is high exposure for gold.

You have Rs. 5 lakhs in mutual funds. That is a good step.

You want to buy a house worth Rs. 1 crore next year. That is a very big goal in short time.

You also want to close the car loan early. That is a good mindset.

Key Issues That Need Attention
Your EMIs are high compared to your income.

You are saving less monthly. Your total monthly savings is just Rs. 9,500.

You want to make a big purchase (house) very soon. But not enough cash flow is available.

Gold savings are not liquid and returns are not consistent.

You have pressure of responsibilities as the sole earner. Hence, emergency backup is very important.

First Focus: Emergency Fund
You should have at least 6 months of your expenses saved.

For you, Rs. 3.5 to 4 lakhs should be kept aside as emergency fund.

Do not keep this in gold. Keep this in liquid funds or sweep-in fixed deposits.

This amount should not be used for any other goal.

Review Insurance Coverage
Check if your Rs. 2,500 per month insurance is for pure term plan.

If it is not term plan, then it is not serving your goal.

If it is ULIP or endowment or money back, surrender and reinvest in mutual funds.

You need Rs. 50 lakhs to Rs. 75 lakhs term cover. This is minimum for your current life stage.

Buying the House – Think Twice Before You Rush
You are planning to buy a Rs. 1 crore house in 1 year.

Right now, your cash flow does not support this safely.

Even if you take 80% home loan (Rs. 80 lakhs), EMI will be around Rs. 60,000.

Add your current car EMI (Rs. 18,000). Total EMI = Rs. 78,000 per month.

Your income is Rs. 99,000. So, after EMIs, you will be left with Rs. 21,000 only.

You still have to manage family expenses, SIPs, insurance, lifestyle from this.

This is not practical. It will create financial stress and imbalance.

You should delay house purchase by 2–3 years.

First, build higher down payment and reduce EMI burden.

Till then, increase SIP and build a house fund.

You should target to build at least Rs. 20 lakhs in mutual funds before house purchase.

Car Loan – Plan for Early Closure in a Balanced Way
Your car EMI is Rs. 18,000 per month.

Loan has 6 years left. So, this is a long commitment.

Closing this early will improve your cash flow.

But don't use all savings at once to close this.

Instead, create a parallel SIP or RD of Rs. 10,000 monthly for 12–18 months.

After that, use this amount to close part or full car loan.

This will be a smart and stress-free approach.

Do not break mutual fund or gold savings for car loan.

Your Monthly Budget – How to Optimise
Income: Rs. 99,000

Car EMI: Rs. 18,000

Insurance Premium: Rs. 2,500

SIP: Rs. 7,000

Remaining: Rs. 71,500

Family Expenses: Estimate Rs. 50,000 to 55,000

Balance available: Rs. 15,000 to 20,000

You can add Rs. 10,000 more to SIP from this amount.

You can use Rs. 5,000 to Rs. 10,000 for car loan closure fund.

This will bring total SIP to Rs. 17,000.

This is more aligned to your income level.

Ideal SIP Target Based on Income
You should aim to save 30% of your monthly income.

For you, that is around Rs. 30,000 monthly.

Right now, you are at Rs. 7,000 SIP.

After adjustment, increase this to Rs. 17,000 for now.

Over the next 12 months, try to reach Rs. 25,000 monthly SIP.

Use step-up SIP option to increase SIP every year by 10–15%.

This method works well over 5–7 years.

Your goal of house purchase in 2–3 years and financial strength both will benefit.

Gold Savings – Restructure It Properly
You have Rs. 10 lakhs in gold. This is too high.

Ideally, gold should be only 5–10% of your total portfolio.

It is not productive for house purchase or emergencies.

Start switching gold slowly into mutual fund SIPs.

Do not sell all at once. Sell in small amounts over 6–12 months.

This will also help in tax efficiency.

Mutual Fund Portfolio – Keep It Focused
You already have Rs. 5 lakh in mutual funds.

Continue these investments. Monitor growth and performance once in 6 months.

Choose actively managed funds for your SIP.

Avoid index funds. They copy index and lack flexibility in correction periods.

Actively managed funds have better human research and decision making.

Avoid direct plans if not experienced.

Regular plans through Mutual Fund Distributor with CFP credential offer guidance.

This support is helpful when markets are volatile or when rebalancing is needed.

Tax-Saving and Goal Linkage
If you invest more in mutual funds, also use ELSS category.

These will give you 80C benefit and long-term wealth building.

Use short-term funds or liquid funds only for emergency fund and car loan targets.

For house goal (2–3 years away), use hybrid aggressive funds or short duration funds.

Equity mutual funds are suitable only for goals 5 years or more away.

Short term capital gains on equity mutual funds is taxed at 20%.

Long term capital gains above Rs. 1.25 lakhs is taxed at 12.5%.

For debt funds, all gains are taxed as per your tax slab.

Family Protection – Essential Planning
As sole earner, your family depends on you completely.

You must have a valid term life insurance policy.

Add personal accident cover also. Premium is low. Coverage is important.

Add family floater health insurance for Rs. 5 to 10 lakhs.

This keeps savings safe in medical emergencies.

Do not depend only on employer health cover.

Long-Term Wealth Building – Have a 10-Year View
You are still young. You have time to build strong wealth.

Start focusing on Rs. 25,000 to Rs. 30,000 monthly SIP over next 2 years.

Build Rs. 40 to 50 lakh wealth in 10 years through disciplined SIP.

Avoid big purchases like house if they break this flow.

Let your goals be realistic. Let your money work for you.

Mistakes to Avoid
Rushing into home loan without strong cash flow.

Keeping too much in gold and not enough in financial assets.

Not having proper term and health insurance.

Underestimating emergency fund importance.

Following random investment tips without personalised plan.

Finally
You are doing some things right already. Appreciate your efforts so far.

Now you need a sharper and more balanced plan.

Delay house purchase till your cash flow improves.

Close car loan smartly with separate fund.

Increase SIP steadily. Use mutual funds with active management.

Build protection with right insurance and emergency fund.

This 360-degree view will help you become financially stronger and stress-free.

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

...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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