Hi Sreekanth,
I am 37 years old working in IT. I would need some advice on financial planning. Till date, all my savings have been in standard FDs, PPF and very recently SSA scheme for my daughter. I would like to move to Mutual Funds to take care of 2 main long term goals -
1) My daughter's education - In 10 years ( I plan around 40-50 lakhs for this)
2) Retirement - In 22 years ( Retirement Corpus as per your calculator is 3.5 cr).
I also have a short term goal of a house in next 2 years which would require approximately 40 lakhs.
I have a FD and Bank savings amount of 30 Lakhs with me and my current monthly savings is INR 25,000.
I would like to retain 10 lakhs as emergency fund and use the remaing 20 lakhs to invest on my goals.
Pls suggest the best ways to go about it and what kind of MFs I should invest.
For example, I am inclined to invest lump sum in MFs but then would SIP be better and I can use the lump sum for my home?
Pls note I expect a rent of 20,000 pm from my home after 2 years which can be used to pay off my EMIs.
I plan to continue to invest 50,000 each in PPF and SSA every year which should also contribute to my long term goals . Current balance is 10 lakhs in these 2 schemes.
Thanks,
Priyansh
12 Answers
Dear Priyansh,
- May I know if you have adequate Life & Health Insurance coverage?
- Do you have personal accident cover?
- If you are planning to buy a property then you can expect better (low) home loan lending rates in the next 12 months or so. As your time-frame is around 2 years, advisable not to consider Equity oriented funds. You may consider investing in one Arbitrage fund (you can expect returns of around 8%, but these are tax free after 12 months) + in one aggressive MIP fund if you can afford to take a little bit of risk. What is the expected Down payment?
- SIPs in Equity oriented funds can be considered for your long term goals.
Thanks Sreekanth. I shall go through the links you shared in sometime and would get back if I have any further questions. For now, two clarifications:
- I have life and health cover from my company and personal accident cover from my vehicle insurance.
- Can't I use the lump sum ( say 10 lakhs ) in Mutual Funds if I want to stay committed for at least 10 years? Do you suggest only SIP for Equity Oriented Mutual Funds?
Dear Priyansh,
1 - Kindly do not depend entirely on the insurance covers provided by the employer. Suggest you to buy stand-alone life/health/PA covers.
Kindly read:
http://www.relakhs.com/best-online-term-insurance-plans-india/
http://www.relakhs.com/best-health-insurance-comparison-websites-portals/
http://www.relakhs.com/best-personal-accident-insurance-policies-in-india-details-comparison/
2 - You can consider Lump sum installments or STP (systematic transfer plan) from a debt fund to equity fund for say next 6 to 12 months.
Hi Srikanth,
Reaching out to you after 6 months. I plan to start investing in mutual funds now and I am a beginner. I would like to invest my lumpsum in a debt fund and then do a STP to a equity for a long term? I also read your blogs around direct plans and regular plans and developed a fair understanding. As I am a beginner and would prefer only online investments, need your suggestion on below
1) Could you please suggest who do I start with for investing? I hold a demat account but I guess they would charge distribution amount. Also, who would help me set up this STP from debt funds?
2) What debt funds do you suggest if I want to start with a lump sum of 5 lakhs?
Thanks,
Priyansh
Dear Priyansh,
1 - If you are planning to invest in Direct plans of MF schemes, you may invest through respective Fund house websites, or industry sponsored platform like MF Utility or other online platforms like Invezta / mymoneysage.in etc., (MFU is free of charges, other service providers may charge you some subscription fee).
STP can be set-up online, you can find this feature in almost all the online platforms.
2 - You may pick Liquid funds (STP to) Equity funds.
May I know your investment time-frame?
Kindly read :
https://www.relakhs.com/debt-funds-types-benefits-risk-vs-return/
https://www.relakhs.com/best-debt-mutual-funds-india-top-debt-funds/
https://www.relakhs.com/mutual-fund-direct-plans-vs-regular-plans/
Hi Srikanth,
My investment time frame is long term only ( 8+ years). I thought doing regular SIP would mean not much return on my lumpsum , so thought of doing an STP from debt funds. Can you please elaborate what you meant by " You may pick Liquid funds (STP to) Equity funds."
Thanks,
Preetam
Hi,
Liquid fund is a type of debt fund.
If you do not like to invest lump sum amount in one shot, you may first invest lump sum amount in Liquid funds and then set up Systematic transfer plan wherein you can transfer a fixed sum periodically (say monthly) to equity oriented funds.
https://www.relakhs.com/debt-funds-types-benefits-risk-vs-return/
Hi Sreekanth,
Went through the above link but I am confused with the following statement "If you want to park your surplus cash for very short-periods say 1 to 3 months, opt for these funds." The surplus cash that I have is certainly going to stay for more than 3 months as the STP would be about 10K-20K/month. Then is it not as good as keeping it in my savings bank account? Also, there would be tax implications on the gains from liquid funds right? Please advise.
Thanks,
Priyansh
Hi,
Yes, on redemption of debt fund units, capital gains (if any) are chargeable to tax. But thats who STP works.
Kindly read :
https://www.relakhs.com/mutual-funds-taxation-rules-capital-gains-tax-rates-on-mfs-fy-201516/
Hi Sreekanth,
Planning to invest a lump sum ( ~2L) in one of the debt oriented aggressive MIPs. I dont need regular income , so planning to go for MIP growth. Also, my investment horizon would be 3-5 years. Can you pls advise if this would be a wise thing to do? How do you compare this investment vis-a-vis a FD for the same period?
Thanks,
Priyansh
Dear Priyiansh,
If you are ok to accept some amount of risk, you may go ahead with your investment plan.
Interest rates on FDs are in downward trend. But they are fixed and guaranteed. However, the gains on MIPs can be better compared to tax adjusted returns on FDs.
However, the returns from MIPs are not fixed.
Kindly read :
https://www.relakhs.com/best-monthly-income-plans-india-mutual-funds/
https://www.relakhs.com/debt-funds-types-benefits-risk-vs-return/
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