Greetings to the panel. I have been investing since 2017 and I am planning to restructure my investments this year. I am someone who is a free lancer and does not have a fixed monthly income. I have invested 11 Lakhs in direct equity current valued at 40 Lakhs plus. I also have invested 19 Lakhs in mutual funds currently valued 35 Lakhs. My idea was to redeem the above investments and create a corpus of 75 Lakhs. Invest the same into a place which gives me fixed monthly returns which will act like a salary for me taking care of all my monthly expenses. This will give me the freedom to use my earned money to invest more aggressively or for personal recreation etc. I wanted your guidance to understand if I m thinking on correct line and is this a good idea? If so please suggest where could I park my money to get a monthly interest payout with the least risk of depleting the capital of 75 Lakhs. Thank You

Ans: You’ve done an impressive job building your wealth. At 35, you have substantial investments. Let's see how you can retire by 42 and still maintain a steady income.

Current Investments
You have a diverse portfolio:

Mutual Funds: Rs 7,50,00,000
Debt/Liquid Funds: Rs 3,00,00,000
Fixed Deposits (FD): Rs 15,00,00,000
Real Estate Development: Rs 4,00,00,000
Corporate Savings: Rs 30,00,00,000
Current Expenses
Your expenses are significant:

Car Loan EMI: Rs 40,000/month
Business Expenses: Rs 2,00,00,000/year
Personal/Family Expenses: Rs 1,00,00,000/year
Retirement Goals
You want to retire by 42 and work on what you love, not for money. You aim for substantial monthly and annual returns, targeting a 15-20% ROI year over year.

Re-aligning Your Investments
Yes, re-aligning your investments is a smart move. It’s essential to match your investments with your goals, risk tolerance, and time horizon.

Moving Funds to Mutual Funds
You’re considering moving 80% of your debt and FD investments to mutual funds. Let's evaluate this.

Short-term Needs
You want 50% of the mutual fund investments for short-term needs (12-24 months). This is achievable but requires careful selection of funds.

Evaluating Current Investment Portfolio
Mutual Funds
Advantages: Higher potential returns, diversification, professional management.
Risks: Market volatility, requires a long-term horizon for optimal growth.
Power of Compounding: Mutual funds benefit significantly from compounding, especially over long periods.
Debt/Liquid Funds
Advantages: Lower risk, stable returns, high liquidity.
Risks: Lower returns compared to equities.
Recommendation: Maintain a portion here for emergency funds and short-term needs.
Fixed Deposits (FD)
Advantages: Safe, guaranteed returns.
Risks: Lower returns, inflation risk.
Recommendation: Consider reducing allocation due to lower returns.
Real Estate Development
Advantages: Potential for significant appreciation.
Risks: High entry/exit costs, illiquidity, market risks.
Recommendation: Avoid increasing exposure to real estate.
Corporate Savings
Advantages: Liquidity, safety.
Risks: Low returns.
Recommendation: Ensure optimal use of these funds for immediate needs and emergencies.
Moving to Mutual Funds: Pros and Cons
Pros
Higher Potential Returns: Equities typically offer higher returns.
Diversification: Spread risk across various sectors.
Professional Management: Managed by experts.
Cons
Market Volatility: Can fluctuate in the short term.
Requires Monitoring: Needs regular review and adjustments.
Actively Managed Funds vs Index Funds
Disadvantages of Index Funds
Passive Management: No active adjustments to market conditions.
Market Tracking: Merely mirrors the index, potentially missing opportunities for higher returns.
Benefits of Actively Managed Funds
Flexibility: Fund managers can adapt to market changes.
Potential for Higher Returns: Managers aim to outperform the index.
Risk Management: Active decisions to mitigate risks.
Financial Strategy for Early Retirement
Creating a Balanced Portfolio
Equity Mutual Funds: Allocate a significant portion here for long-term growth.
Debt Mutual Funds: Allocate for stability and income generation.
Liquid Funds: Maintain for emergency and short-term needs.
Corporate Savings: Use strategically for business and personal liquidity.
Targeting 15-20% ROI
Focus on Growth Funds: Look for funds with a strong track record.
Diversification: Across sectors and geographies to manage risk.
Regular Review: Adjust based on performance and market conditions.
Managing Expenses Post-Retirement
Maintaining Current Lifestyle
Your current expenses total Rs 3,00,00,000 annually. Post-retirement, ensure your investments generate sufficient income to cover this.

Income from Investments: Focus on generating monthly/annual returns.
Emergency Fund: Maintain for unforeseen expenses.
Health Insurance: Ensure comprehensive coverage for your family.
Long-term Investment Strategy
Equity Exposure: Increase gradually for higher growth.
Regular Rebalancing: Adjust portfolio annually.
Professional Advice: Consult a Certified Financial Planner regularly.
Genuine Compliments and Empathy
Your foresight and proactive planning at 35 are commendable. Your dedication to securing a comfortable future for your family is truly inspiring. Balancing high returns with safety is challenging, and your approach shows great maturity and understanding.

Final Insights
Re-aligning your investments to focus on mutual funds can help achieve your retirement goals. Diversify within mutual funds to balance growth and stability. Regularly review your portfolio to ensure it aligns with your changing needs and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in