i am 37 yrs old married with 5 yrs boy.i earned around 70 k per month.i hv ppf of 30 lac,epf 40 lac.i hv 6 lac fd.lic 24k and 29 k premium paid per year,postal life insurance 36 k per year premium paid .
lump sum 50 k investment in icici preduantial small cap 2 yrs ago(still holding),lumpsum 70 k in axis bluechipfund 2 yrs ago(still holding),lumpsum 50k sbi balance advance fund(still holding),3.69 lac in sbi blue chip fund from 2014 which is now 5 lac my present sips are on 1) 1000 sbi bluechipfund(running from 1.5 yrs) 2)2000 sbi contra fund(fresh adding) 3)2500 sbi kotak small cap(running from 2 yrs) 4)2500 parag parekh flexicap(running from 2 yrs) 5)2500 nippon small cap(fresh adding) 6)2500 axis quant fund(fresh adding) should i stop lic..and invest more in sips ?i want some 50 lac in 7-8 yrs in returns which mutual fund would be better pls suggest me?
Ans: Financial Overview and Current Investments
You have a solid financial foundation with multiple investments. Your earnings are Rs 70,000 per month, and you have substantial savings and investments.
You have Rs 30 lakhs in PPF, Rs 40 lakhs in EPF, and Rs 6 lakhs in fixed deposits.
Your insurance premiums include Rs 24,000 and Rs 29,000 for LIC and Rs 36,000 for Postal Life Insurance.
You have invested Rs 50,000 in ICICI Prudential Small Cap, Rs 70,000 in Axis Bluechip Fund, and Rs 50,000 in SBI Balance Advantage Fund.
Your investment in SBI Bluechip Fund from 2014 has grown from Rs 3.69 lakhs to Rs 5 lakhs.
Your current SIPs are:
Rs 1,000 in SBI Bluechip Fund (running for 1.5 years)
Rs 2,000 in SBI Contra Fund (freshly added)
Rs 2,500 in Kotak Small Cap Fund (running for 2 years)
Rs 2,500 in Parag Parikh Flexi Cap Fund (running for 2 years)
Rs 2,500 in Nippon Small Cap Fund (freshly added)
Rs 2,500 in Axis Quant Fund (freshly added)
Evaluating Insurance vs. SIP Investments
Your LIC policies require a significant annual premium. Considering your goal of achieving Rs 50 lakhs in 7-8 years, it might be more efficient to reallocate these funds.
Insurance policies often offer lower returns compared to mutual funds. Thus, shifting your premiums to SIPs could potentially yield higher returns.
Advantages of SIPs in Mutual Funds
SIPs provide disciplined investing and benefit from rupee cost averaging. They also offer higher potential returns compared to traditional insurance policies.
You are already investing in a diverse range of funds, which is commendable. Diversification reduces risk and increases potential returns.
Assessing Your Current Mutual Fund Portfolio
Your mutual fund investments are well-diversified across large-cap, small-cap, and flexi-cap funds. This diversification balances risk and growth potential.
However, consider reviewing the performance of your funds periodically. Some funds may underperform, and it is wise to switch to better-performing ones if needed.
Achieving Your Goal of Rs 50 Lakhs
To achieve Rs 50 lakhs in 7-8 years, you need to focus on high-growth investments. SIPs in well-performing mutual funds are a great choice.
Based on historical performance, equity mutual funds have delivered substantial returns over the long term. Continue your SIPs and consider increasing the investment amount if possible.
Reallocating Your Investments
Consider stopping your LIC premiums and reallocating these funds to your SIPs. This reallocation can enhance your returns significantly.
For example, if you reallocate the Rs 53,000 (Rs 24,000 + Rs 29,000) annual premium to your SIPs, it could result in higher returns over time.
Reviewing Your Financial Plan Regularly
Regularly review and adjust your financial plan. The market conditions and fund performances change, and your plan should adapt accordingly.
A Certified Financial Planner can help you with these reviews and adjustments, ensuring your investments align with your goals.
Benefits of Actively Managed Funds
Actively managed funds can outperform the market, unlike index funds which merely track the market. These funds have the potential for higher returns due to expert management.
Your current mutual funds are actively managed, which is beneficial for achieving higher growth.
Disadvantages of Index Funds
Index funds only replicate the market index and lack the potential to outperform it. They are passive and do not adapt to market changes actively.
In contrast, actively managed funds are monitored by fund managers who can make strategic decisions to optimize returns.
Importance of Regular Fund Investments
Regular funds, invested through a mutual fund distributor with a CFP credential, offer professional guidance and expertise. This ensures your investments are well-managed and aligned with your financial goals.
Direct funds, although cheaper, lack professional guidance, which can impact the effectiveness of your investment strategy.
Conclusion
You have a strong financial base and a well-diversified investment portfolio. To achieve your goal of Rs 50 lakhs in 7-8 years, focus on reallocating your LIC premiums to SIPs.
Continue investing in your SIPs, review their performance regularly, and make adjustments as needed. Actively managed funds offer higher potential returns compared to index funds.
For optimal results, consider seeking advice from a Certified Financial Planner who can provide professional guidance and ensure your investments align with your goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
