I am 34 years old and have a 5-year old son and wife as financial dependents. My monthly income is Rs 80,000 and six months ago I cleared my home loan liability with all my savings and am now debt free. I have investments in PPF, NSC and fixed deposits with my bank. I have made a one-time investment in SBI tax saving mutual fund and Kotak 50, another mutual fund. I know I am quite late in investing in mutual funds and want to start investing right away. My goal is to save for my child's education and marriage and my own retirement. I have a life insurance policy for Rs 1 lakh and my wife has one for Rs 60,000. I also plan to take a family vacation every four years. Please assess my portfolio and suggest changes to achieve my goals.
Dependents: Wife, 5-year old son
Annual Income: Rs 9.60 lakh (Rs 80,000/month x 12)
Annual estimated expenses: Rs 3.84 lakh (Rs 32,000/month x 12)
Annual life insurance premium: Rs 22,000
Annual savings: Rs 5.54 lakh (Rs 46,000/month)
* You will have to set aside either Rs 22,888/month
or Rs 15,455/month as monthly investments to achieve your goals.
* We have only considered the first vacation because you can keep replacing it when you have achieved your goal.
* Jeevan Surabhi is a money back endowment plan which is tilted towards savings and not pure insurance.
* Money Plus is an investment linked insurance plan and not a pure insurance cover.
You really are on a very strong footing. You are still young. You have absolutely no liabilities. You are in your early thirties you even own your very own home. Your earnings will ensure that you achieve your goals. In fact, you have more than what you need to save. An extremely fortunate situation - a surplus is what most people would kill for. Moreover your earnings are only going to rise.
So you should consider increasing your savings because that will help you realise your goal even faster. On the other hand, do so after you get yourself a term insurance plan and a medical cover. Even if your company provides for medical coverage, get your own. As for term insurance, it is the cheapest and purest form of life insurance. Should anything happen to you, your family will have that money to fall back on. Please ensure that you do not compromise on this.
It is surprising that you barely have any exposure to equity, directly or via mutual funds. That must change soon. Like most Indians, you are into Public Provident Fund (PPF) and National Savings Certificate (NSC) and bank fixed deposits. Chances are you would also have money in your Employees Provident Fund (EPF). It is time to have some reasonable equity exposure.
Things to do
* Considering your age and the fact that you have no liabilities, we suggest that you opt for the Value Research Aggressive Portfolio.
* Invest regularly in the funds mentioned in the portfolio.
* Track the performance of the funds at least once a year to ascertain the progress made by them to initiate any change in investments if necessary.
* Get a health insurance cover for you and your family. Explore a family floater plan and ensure that it is at least Rs 5 lakh cover per annum.
* Get a term plan to cover your family. This cover must be huge enough to ensure that all their financial goals will be met should you no longer be around to provide for them. You may get it cheaper if you buy it online.
* Have a contingency fund. You could keep around two to three month's expenses in a fixed deposit linked to your savings account or in a liquid fund.
* As your income rises, increase your savings.