I am 40 years old. I have monthly income of 2 lakhs. I have one daughter. She is 9 years old. I have savings of 42 lakhs in mutual fund. 65 lakhs in provident fund at intrest rate of 8.15 percentage. 15 lakhs in ppf and sukanya samridhi yojana. Monthly contribution in provident fund is 36000 and in mutual fund I am having total sip of 93500 out of which 65000 in axis small cap, 25000 in sbi small cap, 2500 in mirrae large and mid cap, 1000 in sbi midcap. I don't have any loan. I want to retire at 55. And want to save for my daughter's future. Kindly guide me.
Ans: You have a sound financial base, and you are working diligently towards your goals. This is commendable. Your savings and investments reflect careful planning. Now, let us refine your strategy to align with your retirement and your daughter’s future needs.
Evaluating Your Current Financial Position
Your current monthly income is Rs 2 lakhs. This provides a stable base for your family's needs and future investments.
You have a diversified portfolio with Rs 42 lakhs in mutual funds, Rs 65 lakhs in provident fund (PF), and Rs 15 lakhs in PPF and Sukanya Samriddhi Yojana (SSY).
Your regular contributions include Rs 36,000 monthly to the PF and Rs 93,500 in SIPs. This disciplined saving habit is a significant advantage.
Planning for Retirement at 55
You aim to retire at 55, giving you 15 years to build your retirement corpus.
Considering the rising inflation, it is crucial to ensure your investments grow at a rate higher than inflation. You have Rs 42 lakhs in mutual funds. Small-cap funds, while high-risk, can offer significant growth. However, too much exposure to small-cap funds can be risky, especially as you near retirement.
Balancing Your Mutual Fund Portfolio
Your current SIPs include Rs 65,000 in Axis Small Cap, Rs 25,000 in SBI Small Cap, Rs 2,500 in Mirae Large and Mid Cap, and Rs 1,000 in SBI Midcap.
While small-cap funds can offer high returns, they are also volatile. As you approach retirement, consider balancing your portfolio with more stable, diversified funds. Actively managed funds could be a good option here. They are managed by professionals who can make strategic decisions to navigate market volatility, potentially offering better risk-adjusted returns.
Assessing Direct Funds vs Regular Funds
Investing through direct funds means you handle all transactions and decisions. This can be cost-effective but may lack professional guidance.
Regular funds, managed by a Certified Financial Planner (CFP), offer expert advice and strategic planning. This can be particularly beneficial as you near retirement and need to manage risk carefully.
Provident Fund and PPF Contributions
Your provident fund contributions and its interest rate of 8.15% are solid. The PPF and Sukanya Samriddhi Yojana also offer good returns with tax benefits. These instruments provide stability and security, which are essential as you approach retirement.
Saving for Your Daughter's Future
Your daughter is nine years old. Planning for her education and future expenses is a priority. The Sukanya Samriddhi Yojana is a good start, offering a secure and high-interest savings avenue.
Consider dedicated investments for her higher education, such as child education plans or a diversified mutual fund portfolio. These should be aligned with her education timeline to ensure funds are available when needed.
Diversification and Risk Management
Diversification is crucial to managing risk. While your mutual funds are heavily invested in small-cap funds, consider adding more large-cap or multi-cap funds to your portfolio. These funds are less volatile and can provide stability.
Actively managed funds can offer strategic adjustments based on market conditions, helping mitigate risks associated with market volatility.
Emergency Fund
An emergency fund is essential for financial security. Ensure you have 6-12 months' worth of expenses in a liquid, easily accessible account. This provides a safety net in case of unexpected events.
Monitoring and Reviewing Investments
Regularly reviewing your investments is crucial. Monitor their performance and rebalance your portfolio as needed. This ensures your investments remain aligned with your goals and risk tolerance.
Conclusion
Your disciplined saving and diversified investments are commendable. To optimize your strategy:
Balance your mutual fund portfolio with less volatile, actively managed funds.
Consider the benefits of regular funds managed by a CFP.
Ensure you have an adequate emergency fund.
Regularly review and adjust your investments.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
