My family income is 1.5 lacs per month. My age is 43 and wife age is 38.I am an entrepreneur and wife is also working. We are doing 62k per month sip. Current corpus is 60 lacs in mf. Equity Stock market corpus is 35 lacs. NPS is 12 lac and PPF is 22 lacs. Home loan remaining is 7.85 lacs. I want to creat 3 crore retirement corpus @ 58 age. What changes I have to do in current investment pattern.
Ans: Creating a retirement corpus of Rs 3 crore by the age of 58 is an achievable goal given your current financial situation. Your disciplined SIPs, diverse investment portfolio, and ongoing contributions show a strong commitment to securing your future. Let’s evaluate and optimize your investment strategy to ensure you reach your target.
Understanding Your Financial Landscape
You have a well-rounded investment portfolio. Your investments include mutual funds (Rs 60 lacs), equity stocks (Rs 35 lacs), NPS (Rs 12 lacs), and PPF (Rs 22 lacs). Additionally, you have a home loan balance of Rs 7.85 lacs. Your current SIP contributions are Rs 62,000 per month.
First, commendations on your structured and diversified investment approach. Balancing work as an entrepreneur and managing family finances is commendable. Your proactive steps towards retirement planning are praiseworthy.
Retirement Corpus Calculation
To achieve a retirement corpus of Rs 3 crore in 15 years, let's break down your current assets and expected growth:
Mutual Funds: Rs 60 lacs
Equity Stocks: Rs 35 lacs
NPS: Rs 12 lacs
PPF: Rs 22 lacs
Total Current Corpus: Rs 129 lacs
Assuming a conservative annual growth rate of 10% for mutual funds and equities, and a 7% growth rate for NPS and PPF, we will calculate the future value.
Mutual Funds and SIP Strategy
Continue your SIP of Rs 62,000 per month in mutual funds. Over 15 years, this regular investment will grow significantly due to the power of compounding.
Advantages of Actively Managed Funds
Actively managed funds can outperform index funds due to professional management. Fund managers make strategic decisions to maximize returns, adapting to market conditions.
Equity Investments
Equity investments can offer higher returns. Continue investing in high-quality stocks. Diversify across sectors to mitigate risk.
Regular Review
Regularly review your equity portfolio. Adjust holdings based on performance and market trends. This ensures alignment with your financial goals.
National Pension System (NPS)
Your NPS balance of Rs 12 lacs will continue to grow. NPS provides tax benefits and stable returns. Increase contributions if possible.
Tax Efficiency
NPS offers tax benefits under Section 80C and 80CCD. It’s a tax-efficient way to grow your retirement corpus.
Public Provident Fund (PPF)
PPF is a safe, tax-free investment. Your current PPF balance of Rs 22 lacs will grow at an average rate of 7-8% per annum. Continue contributing the maximum limit of Rs 1.5 lacs annually to benefit from tax-free compounding.
Home Loan Repayment
Consider prepaying your home loan. Reducing debt will free up funds for investment.
Interest Savings
Prepaying your home loan saves on interest costs. It also reduces financial stress and improves cash flow for investments.
Emergency Fund
Maintain an emergency fund. This ensures financial stability during unexpected events. It should cover at least 6-12 months of expenses.
Rebalancing Portfolio
Regularly rebalance your portfolio to maintain the desired asset allocation. Rebalancing involves selling overperforming assets and buying underperforming ones. This keeps your risk level in check.
Tax Planning
Optimize tax planning to increase net returns. Utilize deductions under Section 80C, 80D, and others. Efficient tax planning ensures more funds are available for investment.
Insurance
Ensure adequate life and health insurance. Insurance protects against unforeseen events, safeguarding your family's financial future.
Increasing SIP Amount
If possible, increase your SIP amount periodically. Even a small increase can significantly impact your corpus due to compounding.
Professional Guidance
Consulting a Certified Financial Planner (CFP) can provide personalized advice. CFPs help in optimizing investments, managing risks, and achieving financial goals.
Conclusion
Your current investment pattern is strong. With minor adjustments and regular reviews, you can achieve your Rs 3 crore retirement corpus. Stay disciplined and proactive in your investment approach.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
