Hi, i am 28yr old software engineer in Bangalore with 1.5lac/month inhand. I have ULIP of Rs 15000/month for 10yrs, it was started on 2021. 20k in SIP (1 largecap mf, 1hybrid mf, 2 small cap mf) with 5% stepup each year. I have edu loan of 5.5 lac @6%, 4.2lac left till date. Car loan emi 13000pm for 5yrs.
I want to create corpus of 5cr in upcoming 5-10 yrs.
Please suggest the way for this goal.
Ans: Assessing Your Financial Situation
You are a 28-year-old software engineer in Bangalore. Your current financial details are:
Monthly Salary: Rs. 1.5 lakhs (in hand)
ULIP: Rs. 15,000 per month for 10 years, started in 2021
SIPs: Rs. 20,000 per month in mutual funds with a 5% annual step-up
Education Loan: Rs. 4.2 lakhs remaining (6% interest rate)
Car Loan: Rs. 13,000 EMI per month for 5 years
Your goal is to create a corpus of Rs. 5 crores in the next 5-10 years.
Loan Management
First, manage your loans effectively. Paying off debts will free up funds for investments.
Education Loan: Pay off the remaining Rs. 4.2 lakhs as soon as possible. The interest rate is low, but eliminating debt increases your investment capacity.
Car Loan: Continue paying the Rs. 13,000 EMI. If possible, consider prepaying to reduce interest outgo.
Investment Strategy
To achieve your Rs. 5 crores goal, a disciplined and diversified investment approach is crucial.
Review and Optimize ULIP
ULIP: Assess the performance of your ULIP. If it is underperforming, consider surrendering it and reallocating funds to mutual funds. ULIPs often have high charges and lower returns compared to mutual funds.
Increase SIP Investments
SIPs: Continue and increase your SIPs. Currently, you invest Rs. 20,000 per month. With a 5% annual step-up, this amount will grow over time. Consider increasing the step-up percentage if possible.
Diversify Your Portfolio
A balanced portfolio is essential for achieving high returns with manageable risk.
Large-Cap Funds: These funds are stable and provide consistent returns.
Hybrid Funds: These offer a balance of equity and debt.
Small-Cap Funds: These have higher growth potential but are riskier.
Additional Investments
Equity Mutual Funds: Invest more in equity mutual funds for long-term growth.
Direct Equity: Since you are learning about blue-chip stocks, consider investing directly in them.
Asset Allocation and Diversification
A well-diversified portfolio reduces risk and enhances returns. Here’s a suggested allocation:
Equity (Mutual Funds and Stocks): 70%
Debt (FDs and Debt Funds): 20%
ULIP: 10% (if you choose to continue)
Active Management vs. Direct Funds
Actively Managed Funds
Benefits: Professional fund managers aim to outperform the market. They adjust the portfolio based on market conditions.
Direct Funds
Disadvantages: Direct funds may have lower expense ratios, but they require constant monitoring. Investing through a Certified Financial Planner (CFP) offers personalized advice and regular monitoring.
Regular Review and Adjustments
Regularly review your investment portfolio. Adjust based on market conditions and performance.
Annual Review: Check the performance of your funds and make necessary adjustments.
Rebalancing: Ensure your portfolio maintains the desired asset allocation.
Final Insights
Achieving a corpus of Rs. 5 crores in 5-10 years is ambitious but feasible. Focus on managing your loans first. Optimize your ULIP investment. Increase your SIP contributions and diversify your portfolio. Consider additional investments in equity mutual funds and direct equity. Regularly review and adjust your investments with the help of a Certified Financial Planner. With disciplined investing and regular monitoring, you can achieve your financial goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
