Do you have an Emergency Fund?

Emergency-FundEmergencies—from a broken bone to a layoff—are a fact of life. When you’re faced with life’s unexpected events, you should be ready.

An emergency fund is an account used to set aside funds needed to cover the financial surprises life throws your way such as a job loss, accident, temporary health issues, flooding due to heavy rains resulting in damage to property or vehicle or any other natural disaster etc. These unexpected events can be stressful and costly. It is better to be prepared.

How much money is needed as Emergency Fund?

Atleast 4 – 6 months expenses.

What will happen if one doesn’t have emergency fund?

You will be forced to liquidate your long-term investments to meet expenses during emergencies. This will only affect your long-term financial goals for which you are investing.

Hence, it is always prudent to maintain an emergency fund separately.

Where emergency fund money can be invested?

There are few options:

  1. Savings Account (Bank)
  2. Liquid Fund (Mutual Fund)

Savings Account offers 4% interest rate.

Liquid Fund offers interest rate equal to or slightly better than prevalent FD rate.

In view of the liquidity & better rate of return, it is better to choose Liquid Fund for investing Emergency Fund money.

How to invest in Liquid Fund?

Investment can be done online in 2 minutes & redemption (selling) also can be done online in same time. Upon redemption, money will be credited to your Bank account directly.

It might be difficult to accumulate 6 months expenses at once. Instead, you can keep accumulating some amount every month in liquid fund and top it up whenever you have surplus. It is important to accumulate Emergency fund ASAP.

Please feel free to contact me if you have any queries.

Thanks & Regards
Vinay Kumar Laxman

Certified Financial Planner &
AMFI Certified Mutual Fund Advisor

Ph: 91-9538539049

Email: laxman.vinay77@gmail.com

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Do you have an Emergency Fund?

Emergency-FundEmergencies—from a broken bone to a layoff—are a fact of life. When you’re faced with life’s unexpected events, you should be ready.

An emergency fund is an account used to set aside funds needed to cover the financial surprises life throws your way such as a job loss, accident, temporary health issues, flooding due to heavy rains resulting in damage to property or vehicle or any other natural disaster etc. These unexpected events can be stressful and costly. It is better to be prepared.

How much money is needed as Emergency Fund?

Atleast 4 – 6 months expenses.

What will happen if one doesn’t have emergency fund?

You will be forced to liquidate your long-term investments to meet expenses during emergencies. This will only affect your long-term financial goals for which you are investing.

Hence, it is always prudent to maintain an emergency fund separately.

Where emergency fund money can be invested?

There are few options:

  1. Savings Account (Bank)
  2. Liquid Fund (Mutual Fund)

Savings Account offers 4% interest rate.

Liquid Fund offers interest rate equal to or slightly better than prevalent FD rate.

In view of the liquidity & better rate of return, it is better to choose Liquid Fund for investing Emergency Fund money.

How to invest in Liquid Fund?

Investment can be done online in 2 minutes & redemption (selling) also can be done online in same time. Upon redemption, money will be credited to your Bank account directly.

It might be difficult to accumulate 6 months expenses at once. Instead, you can keep accumulating some amount every month in liquid fund and top it up whenever you have surplus. It is important to accumulate Emergency fund ASAP.

Please feel free to contact me if you have any queries.

Thanks & Regards
Vinay Kumar Laxman

Certified Financial Planner &
AMFI Certified Mutual Fund Advisor

Ph: 91-9538539049

Email: laxman.vinay77@gmail.com

 

How much money do I need to Retire?

retirement4

We all retire one day. It is said post-retirement years are the golden period in everyone’s life. But yes, only if you plan properly for it.

Have you ever wondered “how much money you need as Retirement corpus to survive post-retirement period?”

Just an illustration below

Current Monthly expenses 35000 35000 35000 35000 35000
Current annual expenses 420000 420000 420000 420000 420000
Current age 30 35 40 45 50
Retirement age 60 60 60 60 60
No. of yrs to retirement 30 25 20 15 10
Inflation 8.50% 8.50% 8.50% 8.50% 8.50%
Annual expenese @ retirement Rs. 48,54,466 Rs. 32,28,440 Rs. 21,47,059 Rs. 14,27,892 Rs. 9,49,613
Rate of return post-retirement 9% 9% 9% 9% 9%
Real rate of return post-retirement 0.46% 0.46% 0.46% 0.46% 0.46%
Life expectancy 80 80 80 80 80
No. of yrs post-retirement 20 20 20 20 20
Retirement corpus required to fund post-retirement expenses Rs. 9,29,72,569 Rs. 6,18,30,981 Rs. 4,11,20,411 Rs. 2,73,46,941 Rs. 1,81,86,958

It is never too late to save for retirement. I want to change this and say –It is never too early to save for retirement“.

The earlier you achieve the retirement corpus, the earlier you can retire. Retirement doesn’t mean you will stop working – but you can stop working for MONEY. May be you can work on something you are passionate about and could not pursue due to hectic corporate life.

 

Vinay Kumar Laxman

Certified Financial Planner

91-9538539049

Laxman.vinay77@gmail.com

How much money do I need to Retire?

We all retire one day. It is said post-retirement years are the golden period in everyone’s life. But yes, only if you plan properly for it.

Have you ever wondered “how much money you need as Retirement corpus to survive post-retirement period?”

Just an illustration below

Current Monthly expenses 35000 35000 35000 35000 35000
Current annual expenses 420000 420000 420000 420000 420000
Current age 30 35 40 45 50
Retirement age 60 60 60 60 60
No. of yrs to retirement 30 25 20 15 10
Inflation 8.50% 8.50% 8.50% 8.50% 8.50%
Annual expenese @ retirement Rs. 48,54,466 Rs. 32,28,440 Rs. 21,47,059 Rs. 14,27,892 Rs. 9,49,613
Rate of return post-retirement 9% 9% 9% 9% 9%
Real rate of return post-retirement 0.46% 0.46% 0.46% 0.46% 0.46%
Life expectancy 80 80 80 80 80
No. of yrs post-retirement 20 20 20 20 20
Retirement corpus required to fund post-retirement expenses Rs. 9,29,72,569 Rs. 6,18,30,981 Rs. 4,11,20,411 Rs. 2,73,46,941 Rs. 1,81,86,958

It is never too late to save for retirement. I want to change this and say –It is never too early to save for retirement“.

The earlier you achieve the retirement corpus, the earlier you can retire. Retirement doesn’t mean you will stop working – but you can stop working for MONEY. May be you can work on something you are passionate about and could not pursue due to hectic corporate life.

 

Vinay Kumar Laxman

Certified Financial Planner

91-9538539049

Laxman.vinay77@gmail.com

How much money do I need to Retire?

We all retire one day. It is said post-retirement years are the golden period in everyone’s life. But yes, only if you plan properly for it.

Have you ever wondered “how much money you need as Retirement corpus to survive post-retirement period?”

Just an illustration below.

Current Monthly expenses

35000

Current annual expenses 420000
Current age 30
Retirement age 60
No. of yrs to retirement 30
Inflation 8.50%
Annual expenese @ retirement Rs. 48,54,466
Rate of return post-retirement 9%
Real rate of return post-retirement 0.46%
Life expectancy 80
No. of yrs post-retirement 20
Retirement corpus required to fund post-retirement expenses Rs. 9,29,72,569

It is never too late to save for retirement. I want to change this and say – “It is never too early to save for retirement“.

The earlier you achieve the retirement corpus, the earlier you can retire. Retirement doesn’t mean you will stop working – but you can stop working for MONEY. May be you can work on something you are passionate about and could not pursue due to hectic corporate life.

 

Vinay Kumar Laxman

Certified Financial Planner

91-9538539049

Laxman.vinay77@gmail.com

Can NRIs invest in Indian Mutual Funds & should they?

nri_1

NRIs are generally known to invest in Real estate in India.

Now, after Real estate Bill, demonetisation of high value currency notes, Govt’s fight on Black money, IT department’s raid on many realtors, going forward Real estate might not deliver returns like in the past.

Personally I believe that land is for agriculture and for living but not for investment purpose. We buy land, land, land and only land and pump up land prices like hell and now for a middle class person to buy land / flat, he/she has to pay EMIs throughout their life. Its not a good situation. Agricultural lands are being converted to residential plots and being sold as investment. It is increasing land prices beyond limit and since agricultural lands are reducing, prices of food articles are also increasing. Double impact, both bad. I don’t want to talk about black money component in real estate transactions, which everyone is aware of.

In this backdrop, I would like to present an interesting & attractive investment option – Mutual funds. Mutual Funds have given good returns consistently in the past 22 years and the returns are not taxable, which is another advantage.

Returns delivered by some Mutual Fund schemes:

Scheme name

Average return p.a in last 3 years

Average return p.a in last 5 years

Average return p.a in last 10 years

Average return p.a since launch of scheme

ICICI Prudential Value Discovery Fund

31%

24% 17%

23% (Aug-04)

Invesco India Mid N Small Cap fund

33%

24%

17.5% (Mar-08)

Birla Sun Life MNC Fund

33%

24% 18%

18% (Apr-94)

UTI Midcap Fund

40%

25% 16%

20% (Apr-04)

Birla Sun Life Equity Fund

30%

21% 14%

25% (Aug-98)

One can observe from above table that mutual fund schemes have delivered very good returns over long-term and also the returns are completely tax-free.

The investment procedure for NRIs is very simple and is almost similar to that of Resident Indians.

Following documents would be required:

  1. 1 Passport size photo
  2. PAN copy self-attested
  3. Passport copy self-attested
  4. Overseas address proof (any utility bill)
  5. NRE / NRO bank account cheques
  6. Tax identification no. or functional equivalent in the country of Tax residency

 What are Mutual Funds?

Mutual Funds are called Asset Management Companies. They collect money from retail investors and invest in a set of 40 to 50 Stocks (Shares of companies), which are selected through thorough research by Fund manager and research team based on various fundamental parameters such as Profit margin, profit growth, revenue growth, Return on Equity, Return on Capital Employed, Management’s credibility, future growth prospects, future prospects for the sector etc. and the list will go on. They continuously monitor the companies’ performance and will be on continuous search for new companies with good fundamentals and future prospects to invest. They invest with long-term horizon and are business focussed.

In mutual funds, investment can be done in 2 ways:

  • Lumpsum / One-time investment
  • SIP: SIP stands for Systematic Investment Plan. Through SIP, one can invest fixed amount of money every month in different mutual fund schemes.

Advantages of SIP:

  1. SIP inculcates discipline in investing. We get income every month, we spend every month; through SIP we can also invest every month
  2. With small investments in SIP mode, huge wealth can be created in long-term

I will be glad to assist NRIs who are interested in investing in mutual funds. Please share this article/mail with your friends/relatives/colleagues who are NRIs, if you think it would be useful to them.

Email: laxman.vinay77@gmail.com

Mobile: 91-9538539049

Efficient Solution for Regular Income post-retirement

retirement2

This article is important for persons who have retired or would be retiring soon. Please share this article with your friends/colleagues/relatives, if you think this article is relevant to any of them.

Post-retirement years are believed to be the golden period in life.

Everyone retires some day and has to live post-retirement life in peace pursuing one’s hobbies, passions, playing with grand children, meeting old friends etc.

Post-retirement we don’t get salary. We need to convert our assets to financial assets, which can generate regular income.

Various options to get regular income post-retirement are:

  1. Buying pension plans
  2. Depositing money in Fixed deposit and using the interest for monthly expenses
  3. Buying a property and using the rent from the property for monthly expenses
  4. Investing in a Balanced Mutual Fund and withdrawing fixed amount every month through SWP option

I will explain the 4th option in this mail and will explain why it is more efficient than other options.

SWP stands for Systematic Withdrawal Plan. Through this plan, you can invest a lumpsum amount in a mutual fund scheme and withdraw fixed amount (which is decided by you as per your requirement) every month.

Lumpsum amount can be invested in a Balanced Mutual Fund scheme as these schemes are less volatile than equity mutual funds and gives better returns than Fixed deposits or pension plans or rental yield (Rent p.a is approx. 3 – 4% of property value). These schemes are not taxable, which is another big advantage.

Lets consider an example with ICICI Prudential Balanced Advantage Fund.

This scheme has delivered the following returns in the past.

Scheme name Average return p.a in

last 3 years

Average return p.a in

last 5 years

ICICI Prudential Balanced Advantage Fund 18% 16.85%

I will assume that the expected rate of return from the above scheme is 12% p.a conservatively.

Now, let us look at different scenarios by investing different lumpsum amounts and withdrawing different amounts p.m.

  1. Initial investment: Rs. 50 Lakh; SWP amount: Rs. 30000 (withdrawal amount p.m)
Initial investment Rs. 50,00,000
Expected rate of return p.a 12%
Amount withdrawn p.m for expenses Rs. 30,000
No. of yrs 20
Value of initial investment after 20 yrs Rs. 2,44,88,331
Total amount withdrawn in 20 yrs Rs. 72,00,000

2. Initial investment: Rs. 40 Lakh; SWP amount: Rs. 25000 (withdrawal amount p.m)

Initial investment Rs. 40,00,000
Expected rate of return p.a 12%
Amount withdrawn p.m for expenses Rs. 25,000
No. of yrs 20
Value of initial investment after 20 yrs Rs. 1,85,91,517
Total amount withdrawn in 20 yrs Rs. 60,00,000

   3. Initial investment: Rs. 30 Lakh; SWP amount: Rs. 20000 (withdrawal amount p.m)

Initial investment Rs. 30,00,000
Expected rate of return p.a 12%
Amount withdrawn p.m for expenses Rs. 20,000
No. of yrs 20
Value of initial investment after 20 yrs Rs. 1,26,94,703
Total amount withdrawn in 20 yrs Rs. 48,00,000

    4. Initial investment: Rs. 25 Lakh; SWP amount: Rs. 20000 (withdrawal amount p.m)

Initial investment Rs. 25,00,000
Expected rate of return p.a 12%
Amount withdrawn p.m for expenses Rs. 20,000
No. of yrs 20
Value of initial investment after 20 yrs Rs. 72,48,426
Total amount withdrawn in 20 yrs Rs. 48,00,000

By investing in Balanced Mutual Fund and starting SWP, one can get regular income as well as appreciation in the invested amount as Balanced mutual funds deliver 4 – 5% more than an FD with less volatility than an Equity Mutual Fund. Interest on FD is taxable whereas profit / appreciation made in Balanced mutual fund is not taxable. Hence, dual advantage of more returns + NO TAX