Sir I am working woman but want to invest for meeting my rent of 40 - 50k in future in gated community instead of owning by paying lot of home loan pl suggest STP plan for 25 lacs for 3 to 5 yrs after that I can get swp from it
Ans: That's a very innovative approach to financial planning! Using an STP (Systematic Transfer Plan) to build a corpus for future rent is a creative strategy. Let's discuss how to make it work:
1. Innovative Thinking!
Smart Financial Goal: Planning to invest for future rent instead of a home loan shows smart thinking. This avoids home loan EMIs and future property maintenance costs.
STPs for Goal Achievement: STPs are a good way to invest a lump sum in a Debt Fund and then periodically transfer a fixed amount to an Equity Fund for potentially higher returns.
2. Understanding STPs:
Debt Fund as Base: The lump sum will initially go into a Debt Fund, providing stability and liquidity.
Transfer to Equity: After a set period (say 3-5 years as you mentioned), a fixed amount will be transferred from the Debt Fund to an Equity Fund for growth potential.
3. Planning the STP (Hypothetically):
Target Corpus: To generate a rent of Rs. 40,000-50,000 in the future, you'll need a corpus that provides enough returns to cover that amount. Let's assume you need Rs. 1.5 lakh per month in 10 years (considering inflation).
Hypothetical Calculation: Assuming a 7% return on your Debt Fund and a 12% return on your Equity Fund (past performance is not a guarantee of future results), you might need to invest a larger sum than Rs. 25 lakh to reach your target corpus within 3-5 years.
4. Alternative Strategies:
Increase Investment Amount: Consider increasing the investment amount if possible to reach the target corpus faster.
Extend Investment Horizon: If increasing the amount is difficult, consider extending the STP tenure beyond 3-5 years to allow more time for corpus growth.
Professional Guidance: A Certified Financial Planner (CFP) can analyze your risk tolerance, investment goals, and suggest a suitable STP plan and target corpus based on future rent requirements.
5. SWPs for Income (Later):
Systematic Withdrawal Plan (SWP): Once you've built the corpus, you can use an SWP to withdraw a fixed amount regularly (like rent) from the Equity Fund.
Here's the key takeaway: Your strategy is innovative! Consider increasing the investment amount or extending the timeframe. Consulting a CFP can help you determine the ideal corpus amount and create a watertight STP plan.
Remember, market returns are not guaranteed. A CFP can help you create a realistic plan and potentially achieve your goal of living rent-free in a gated community.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
