Hi,
I have invested over 75 lakhs current value in mutual funds in my wife, father, mother name. Have FD over 12lakhs. Invested in 2 home 1 mumbai, 1 Rajasthan (approx 1cr each). Have 25L gold Sovereignty bonds. Invested in 1 shop in suburbs 30L, recvng rent around home 3.5% and shop 5% rent respectively. Have bought shares of 7L (mostly ipo allotments). Loaned to others 52L thru my CA to others @ 13%. No outstanding loan. Being a business owner no steady income. Approx 12L per annum i save after deducting household and my SIP and other expenses. Have around asset - Liabilities cash flow surplus of 10L (including stock). . I have Mediclaim 15L. Insurance term 25L. Mother and wife house owners, Father retired and helping me in business a lot. Kids 11 and 7 yrs. Approx future expense 1 cr each in studies and marriage per kids. Avg turnover is 1.25 cr. Need to create a 1cr annual passive income from my investment by 50 years as of i am 37. Sip is around 30k monthly and invest 10k monthly whenevr i market falls 2% in a day. 55 in small cap 25 in midcap 20 in bluechip large cap elss
1. Need to create 2 cr (1cr each for kids)
2. Medical expenses of parents 65yrs (15L ) each as no mediclaim covers them.
3. Need a passive income of 1cr by the age of 50.
4. Looking for 2 cr loan for new home in south mumbai dream home.
In which instruments, i should invest to achieve my goals and how should i plan it.
Ans: Your diversified investments and clear goals provide a solid foundation for future planning. Let's structure your financial plan to achieve your objectives:
Current Financial Position Assessment
You are 37 years old and managing a diversified portfolio spread across mutual funds, fixed deposits, gold bonds, equities, real estate, and private loans.
Your total mutual fund investments stand at around Rs. 75 lakhs in your family members' names, which reflects a strong equity exposure.
You have Rs. 12 lakhs in fixed deposits, Rs. 25 lakhs in gold sovereign bonds, and Rs. 7 lakhs in shares mainly from IPO allotments.
Real estate holdings include two residential properties (approx Rs. 1 crore each) and a commercial shop valued at Rs. 30 lakhs, yielding modest rental returns.
You have extended Rs. 52 lakhs as loans at 13% interest via your CA, which is a significant part of your income stream but carries credit risk.
No outstanding loans indicate a clean balance sheet.
Your business turnover is approximately Rs. 1.25 crore annually, but your savings after expenses and SIPs are about Rs. 12 lakhs per annum.
Insurance coverage is moderate with Rs. 15 lakhs medical cover and Rs. 25 lakhs term insurance.
Your family comprises your wife, parents (both 65 years), and two children aged 11 and 7.
You seek to generate Rs. 1 crore annual passive income by age 50 and plan to take a Rs. 2 crore home loan for a new property in South Mumbai.
Key Financial Goals Clarification
Children's Future: Education and marriage costs, Rs. 1 crore per child, totaling Rs. 2 crores.
Medical Expenses for Parents: Rs. 15 lakhs each for possible future medical needs.
Passive Income Target: Rs. 1 crore per annum by age 50 (13 years from now).
Home Loan: Rs. 2 crore planned for South Mumbai house.
Investment Strategy to Meet Your Goals
1. Children's Education and Marriage Corpus (Rs. 2 Crores)
Your timeline of 7 to 14 years fits a moderately aggressive investment approach.
Increase your SIP amount consistently, ensuring inflation adjustments are factored in.
Focus on actively managed diversified equity mutual funds across large and mid-cap segments. This reduces risk compared to concentrated small-cap exposure.
Avoid pure small-cap heavy portfolios for this goal, as volatility can be higher, risking shortfall in funds when required.
Consider blending equity funds with a portion in dynamic debt funds to balance risk and improve portfolio stability closer to goal timelines.
Systematic investment with periodic reviews helps adapt to market changes and personal finance dynamics.
Allocate investments in your name or a trust structure that suits your estate and tax planning.
2. Medical Expenses for Parents (Rs. 30 Lakhs)
Since this is a near to mid-term requirement and involves healthcare emergencies, safety and liquidity are key.
Use low-risk, liquid or ultra-short-term debt mutual funds for these funds.
Avoid locking these funds in equity or long-term debt funds.
If you have any insurance gaps for your parents, consider separate top-up or senior citizen health policies to reduce the burden on savings.
Maintain this corpus in highly liquid instruments that can be accessed quickly without penalties.
3. Generating Rs. 1 Crore Annual Passive Income by Age 50
This is a significant objective requiring disciplined investing and compounding.
Your current investment allocation shows heavy small-cap (55%), mid-cap (25%), and large-cap (20%) exposure with some ELSS.
Small-cap heavy portfolios, while offering high returns potential, carry high volatility and risk. Consider rebalancing gradually to reduce small-cap proportion and increase large-cap and mid-cap exposure.
Actively managed funds are preferable over index funds for such goals. They offer flexibility to adapt to market cycles and can reduce downside risks.
Avoid index funds for your core equity investments, as index funds have limited ability to protect capital during downturns.
Continue your disciplined SIP approach, and consider lump sum investments when market corrections happen.
Allocate a portion of the portfolio to hybrid or balanced funds to provide regular dividend or capital gains-based cash flows.
As you near 50 years, gradually shift part of your equity corpus to high-quality debt funds or conservative hybrid funds to protect capital.
Use SWP (Systematic Withdrawal Plans) from debt or hybrid funds to generate monthly or quarterly income.
Reinvest dividends or capital gains during accumulation years to boost corpus growth.
4. Rs. 2 Crore Home Loan for New Property
While you have a strong net worth, taking on a home loan requires careful cash flow and risk management.
Ensure the EMI fits comfortably within your business income and household expenses.
Maintain an emergency fund of at least 6 months of household and EMI expenses separately.
Avoid diverting your investments meant for long-term goals to prepay or invest solely for loan repayment.
Instead, focus on a well-diversified portfolio that generates steady returns and passive income, which can support loan repayment.
Monitor interest rates and choose a home loan with the best possible terms and tax benefits.
Additional Considerations and Risk Management
Loan to Others (Rs. 52 Lakhs): This is a large exposure and carries credit risk. Regularly review borrower repayments and consider diversifying your credit risk.
Insurance Coverage: Your term insurance sum assured (Rs. 25 lakhs) appears low considering your financial responsibilities. Consider increasing this amount to adequately protect your family.
Medical insurance for your parents is lacking. They are 65, so consider dedicated senior citizen health policies to cover potential health risks.
Business income can be variable. Maintain liquidity buffers and avoid over-concentration in business assets to reduce cash flow shocks.
Avoid over-reliance on rental income from real estate for cash flows, as yields are low and capital appreciation is uncertain.
Keep reviewing your portfolio at least once a year to rebalance as per changing risk tolerance and goals.
Tax Efficiency and Investment Structure
Invest through regular mutual fund plans with certified financial planner guidance rather than direct plans alone. This helps with goal-based planning, rebalancing, and behavioral coaching.
Manage capital gains taxes by planning redemptions in tranches and considering long-term capital gains benefits where applicable.
Use appropriate investment accounts or trusts to optimize estate planning and asset transfer to children.
Cash Flow and Savings Optimization
You save Rs. 12 lakhs annually post expenses, which is positive.
Continue disciplined SIP of Rs. 30,000 monthly and increase opportunistic investments during market dips (as you do).
Avoid concentration risk in equity shares or IPOs; diversify to reduce volatility.
Consider increasing your emergency fund beyond Rs. 3 lakhs to cover at least 6 months of total expenses.
Portfolio Allocation Recommendation (Indicative)
Equity Mutual Funds: 60% (Large + Midcap dominant, lower Smallcap allocation than current)
Debt Mutual Funds: 20% (Liquid, ultra-short term, dynamic bond funds)
Gold Sovereign Bonds and other Gold: 10% (Maintain for portfolio diversification and inflation hedge)
Fixed Deposits and Cash: 5%
Loans to Others: 5% (Monitor closely)
This balanced approach helps manage volatility, generate growth, and provide income.
Steps for Execution
Conduct a detailed risk assessment with a certified financial planner.
Develop a financial plan tailored to your cash flow, risk appetite, and goals.
Set up SIPs in carefully selected actively managed mutual funds with regular reviews.
Diversify loans and reduce concentrated credit risk.
Enhance insurance coverage, especially term and health.
Plan the home loan EMI in your budget and cash flows.
Track progress annually and revise plans for any life changes or market conditions.
Final Insights
You have a solid asset base with good savings discipline.
Focus on rebalancing your portfolio to reduce risk and align with goals.
Actively managed mutual funds will help navigate market cycles better than index funds.
Maintain adequate insurance to protect your family and assets.
Avoid depending heavily on real estate for income generation.
Prioritize liquidity for near-term goals and emergencies.
Use professional guidance regularly for portfolio review and planning.
Your goal of Rs. 1 crore annual passive income by age 50 is ambitious but achievable with disciplined investing.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Hitesh on Feb 23, 2023Hindi
