I have about 1 crore in retirement funds and will get a pension of about 55k per month. i have term insurance of 75 lakhs. I believe actual inflation for me is around 12-15% per annum and want to beat that so my capital is not eroded. Is it possible to get around 24% per annum (34% of this is grabbed by IT) to get an effective yield of appr 15-18% with very low risk.
Ans: It's impressive that you've accumulated a substantial retirement fund and secured term insurance for your family's protection. Your concern about inflation eroding your capital demonstrates a prudent approach to financial planning.
As a Certified Financial Planner, I understand the importance of preserving and growing your wealth to combat inflation effectively. However, achieving a consistent return of 24% per annum with very low risk is unrealistic.
While it's essential to aim for returns that outpace inflation, it's equally crucial to manage expectations and assess risk appropriately. Pursuing excessively high returns often entails taking on higher risk, which may not align with your risk tolerance or financial goals.
Instead of chasing unrealistic returns, consider the following strategies to protect and grow your wealth:
• Diversified Portfolio: Allocate your retirement funds across a diversified portfolio of assets, including equity, debt, and alternative investments. Diversification helps mitigate risk and optimize returns over the long term.
• Regular Reviews: Periodically review your investment portfolio to ensure it remains aligned with your financial goals and risk tolerance. Make adjustments as needed based on changes in market conditions and your personal circumstances.
• Consult with a Certified Financial Planner: Work with a CFP to develop a comprehensive financial plan tailored to your specific needs and objectives. A CFP can help you navigate investment options and create a strategy that balances risk and return effectively.
• Manage Tax Implications: Consider tax-efficient investment strategies to minimize the impact of taxes on your returns. Utilize tax-saving instruments like Equity Linked Savings Schemes (ELSS) and explore other tax-efficient investment avenues.
By adopting a disciplined approach to investment and seeking professional guidance, you can strive to achieve meaningful returns while managing risk effectively.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
