Dear Mr. Kalirajan,
My name is Emir, a 20-year-old BCA student in India. I'm fortunate to have discovered a passion for a new field in IT, and thanks to God over the past 10 months, I've begun earning a steady income. In fact, I've managed to save approximately ?40 lakhs in the last 10 months, with a goal of reaching ?55-60 lakhs by December 2024.
As I have minimal expenses and a supportive family, I'm eager to explore investment opportunities to grow my savings. I recently spoke with my bank manager, who suggested investing in HDFC Balanced Advanced Fund and SBI Magnum Low Duration Fund.
While I've invested a total of ?12 lakhs in these funds and set up a SIP for SBI Small, Mid, Large Combination Fund, I recognize my knowledge gap in the investment landscape. Although trading seems enticing for faster growth, I lack the time to dedicate to it effectively.
Having come across your impressive experience in financial planning, I'm reaching out for your guidance. I'm particularly interested in building a portfolio of mutual funds or other suitable options that can generate a passive income of at least ?1 lakh per month as soon as possible. Since I have no immediate need for this money, I'm comfortable with a short term as well as long-term investment horizon (5-10 years or more) and am willing to take calculated risks to achieve my goals.
I understand the importance of a personalized approach to financial planning, and I'm eager to learn from your expertise. Could you please recommend suitable investment strategies?
Thank you for your time and consideration.
Sincerely,
Emir
Ans: Emir, your proactive approach to financial planning at such a young age is commendable. Congratulations on your substantial savings and your commitment to reaching your financial goals. Let's chart a course to help you achieve your aspirations.
Understanding Your Goals:
Your goal of generating a passive income of at least ?1 lakh per month is ambitious yet achievable given your sizable savings and willingness to take calculated risks.
Crafting a Diversified Portfolio:
While the funds suggested by your bank manager are reputable, it's essential to diversify your portfolio further to spread risk and optimize returns. Considering your long-term horizon and income objectives, a blend of equity, debt, and hybrid funds might be suitable.
Embracing Equity for Growth:
Equity funds have the potential to deliver significant growth over the long term. Since you're comfortable with a longer investment horizon, allocating a portion of your portfolio (around 60-70%) to diversified equity funds can help capitalize on market opportunities.
Exploring Debt for Stability:
Debt funds offer stability and consistent returns, making them ideal for balancing the risk in your portfolio. Considering your income goals and risk tolerance, allocating around 20-30% of your portfolio to high-quality debt funds like short-term or dynamic bond funds can provide stability.
Emphasizing Hybrid Funds for Flexibility:
Hybrid funds combine the best of both worlds by blending equity and debt instruments. These funds can offer stability while still participating in equity market growth. Allocating 10-20% of your portfolio to balanced or aggressive hybrid funds can enhance diversification and mitigate risk.
Navigating SIPs for Consistent Growth:
Continuing your SIP in SBI Small, Mid, Large Combination Fund is a prudent move, providing you with a disciplined approach to investing and benefiting from rupee cost averaging over time.
Considering Future Opportunities:
As you accumulate additional savings, periodically reassess your portfolio and explore opportunities in real estate investment trusts (REITs), international funds, or thematic funds to further diversify and optimize returns.
Staying the Course with Patience:
While trading may seem tempting for quick gains, it often requires significant time and expertise. By sticking to a well-thought-out investment plan and staying invested for the long term, you can harness the power of compounding and achieve your financial objectives.
In Conclusion:
Emir, by following a strategic investment plan tailored to your goals and risk profile, you're on track to realize your aspirations. Remember, financial planning is a journey, and I'll be here to provide guidance and support every step of the way.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
