I am 34 years old, living in Chennai. My take home salary was 90K before 2years but I did upskilling and now my salary is 1.9Lakhs from 2022. I am paying 25K emi for my 36 lakhs home loan tenure 25Yrs. My current holding as below: Gold...

I am 34 years old, living in Chennai. My take home salary was 90K before 2years but I did upskilling and now my salary is 1.9Lakhs from 2022. I am paying 25K emi for my 36 lakhs home loan tenure 25Yrs. My current holding as below: Gold coin:250gram Mutual Fund:7 Lakhs Gold bees: 2lakhs PPF: 3lakhs PF:6Lakhs Emergency fund in FD: 6Lakhs Savings : 3Lakhs Car: 15lakhs (bought without loan paid full cash, saved for two years to get this). My savings allocation as below: MF: 54500/-(started from last October) PPF,SSA - 5000/- Chit - 12000 Home loan part payment -12000 I split my MF contribution to separate goals like retirement,child education I will always ensure minimum I save my 50% of income going into savings and investment. I will note my everyday spending and monitor my spent. And track %of my income sent below is my monthly average spent split. Savings -60% Living -20% EMI-10% On hand -10% Can you help me whether I am going on the right track or do I need to change anything here ?

Ans: Evaluating Your Financial Plan
Assessing your current financial strategy and future outlook:

Income and Expense Analysis
Your salary increased significantly post upskilling.
EMI for your home loan is 10% of your income, which is manageable.
Your savings rate of 60% reflects a strong commitment to financial security.
Asset Allocation
Gold holdings and mutual funds provide diversification.
Emergency fund and savings in FDs are adequate for short-term needs.
Car purchase without a loan shows disciplined savings.
Investment Strategy
MF investments split for various goals: retirement, child education.
Regular contributions to PPF and SSA for long-term savings.
Chit fund investment adds to your investment portfolio diversification.
Financial Health Check
Monitor daily expenses to track spending habits.
Regularly review income allocation and budget adjustments.
Ensure emergency fund covers 6 months of expenses.
Future Recommendations
Consider enhancing equity exposure for higher long-term growth.
Evaluate tax-saving options like ELSS funds for efficient tax planning.
Review insurance coverage periodically to align with current needs.
Final Insights
You're on a positive trajectory with a disciplined savings approach and diversified investments. Regular monitoring and adjustments will help achieve your financial goals effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: It's great that you and your wife are thinking ahead and planning for your future. Let's dive into your current investment strategy and how you can tweak it if you decide to take on a home loan. Your current investments are impressive, but there's always room for improvement.

Assessing Your Current Investment Strategy
Mutual Funds and SIPs
You invest Rs 1 lakh monthly in diversified funds via SIPs. This is a solid strategy as it allows you to invest regularly and benefit from rupee cost averaging. SIPs are great for disciplined investing and mitigating market volatility.

Mutual funds are excellent for growth and diversification. With Rs 50 lakhs already in mutual funds, you have a substantial portfolio. Diversification reduces risk and enhances returns. However, it's crucial to periodically review and rebalance your portfolio to align with your goals and market conditions.

Recurring Deposits (RDs)
Investing Rs 20k monthly in RDs is a good move for stability. RDs provide guaranteed returns and are a safe investment. However, the returns are relatively low compared to other options. You might want to consider reducing your RD investments and redirecting some funds into more growth-oriented investments.

Fixed Deposits (FDs)
You have Rs 25 lakhs in FDs. FDs are safe but offer lower returns compared to mutual funds. It's wise to have some amount in FDs for emergency liquidity, but having too much can limit your growth potential. Consider maintaining a balance between safety and growth.

National Pension System (NPS) and Provident Fund (PPF)
You contribute Rs 50k annually to NPS and Rs 1 lakh to PPF. Both are excellent for long-term retirement savings. NPS offers market-linked returns and PPF provides guaranteed returns with tax benefits. Your employer’s contribution to NPS and EPF adds to your retirement corpus, which is great.

Genuine Compliments
You're doing an impressive job with your investments. Investing regularly through SIPs and maintaining a diversified portfolio is commendable. Planning for retirement with NPS and PPF shows your foresight. Keep up the good work!

Suggested Changes in Current Strategy
Portfolio Review and Rebalancing
Regularly review your mutual fund portfolio. Assess the performance and make changes if needed. Focus on a mix of large-cap, mid-cap, and small-cap funds. Reduce the number of funds if you have too many, to avoid over-diversification.

Increasing Equity Exposure
Consider increasing your equity exposure for higher growth. Redirect some of your RD and FD investments to mutual funds. This will enhance your portfolio’s growth potential over the long term.

Emergency Fund
Ensure you have an emergency fund covering 6-12 months of expenses. This provides a safety net and prevents you from dipping into your investments during emergencies.

Preparing for a Home Loan
Impact on Monthly Investments
An EMI of Rs 80k will significantly impact your monthly cash flow. Here’s how you can adjust your investments:

Reducing SIP Amounts
You may need to reduce your SIP investments. Prioritize your essential SIPs and consider reducing contributions to less critical ones. This helps in managing your cash flow without stopping investments entirely.

Prioritizing High-Growth Investments
Focus on high-growth investments to maximize returns. Consider reducing contributions to RDs and FDs, as they offer lower returns. Redirect these funds to mutual funds with better growth potential.

Budgeting and Expense Management
Create a detailed budget to manage your expenses. Identify areas where you can cut back to free up funds for your EMI. This helps in maintaining a balance between investing and meeting your financial obligations.

Advantages of Mutual Funds
Professional Management
Mutual funds are managed by experts who make informed decisions. They analyze markets and select the best securities for the fund.

Diversification
Mutual funds offer diversification, reducing risk by investing in a variety of securities. This helps in balancing risk and return.

Liquidity
Mutual funds are relatively liquid. You can redeem your investment whenever needed, providing flexibility.

Systematic Investment Plan (SIP)
SIPs help in disciplined investing. They allow you to invest regularly, reducing the impact of market volatility.

Power of Compounding
Investing in mutual funds benefits from the power of compounding. Reinvesting returns helps your investment grow exponentially over time.

Disadvantages of Index Funds
Limited Flexibility
Index funds strictly follow the index, offering no flexibility. They can't adapt to market changes.

Average Returns
Index funds aim to match the index returns, which are average. Actively managed funds aim to outperform the index.

Benefits of Actively Managed Funds
Potential to Outperform
Actively managed funds aim to outperform the index. Fund managers make strategic decisions to maximize returns.

Flexibility
Fund managers can adapt to market conditions. They can select or avoid securities based on market trends.

Final Insights
You have a strong investment strategy and a clear vision for your future. With a few adjustments, you can enhance your returns and achieve your goals. Consider reviewing your mutual fund portfolio, increasing equity exposure, and maintaining an emergency fund.

If you decide to take on a home loan, adjust your investments to manage the EMI without compromising your financial goals. Prioritize high-growth investments and create a detailed budget to manage your expenses.

Keep up the disciplined investing approach and regularly review your portfolio. This ensures your investments are aligned with your goals and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in