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Importance Of Protection

Buy health & life insurance to strengthen the base of your financial plan…

I am 30 and would like to start an SIP of Rs 20,000 per month. Kindly suggest a good portfolio to achieve a retirement kitty of Rs 2.5 crore and insurance schemes as I am a financial illiterate and will also need health cover.
Aazad Vijayan

At 30, you are not too late to realize that you lack financial literacy. You are on the right track to seek assistance. Investing in systematic plans of mutual funds puts you on the right track towards long-term wealth creation.

If you continue to invest Rs 20,000 a month into a portfolio that earns an annualized return of 12 per cent, you can achieve a corpus of Rs 7.05 crore in 30 years. If you invest the same for 20 years you can achieve a corpus of Rs 1.99 crore. The key is to invest regularly with discipline and for long tenures to achieve a sizeable corpus.

Value Research: Growth Portfolio
Schemes  Category  Rating  3-yrs ret (%)  Suggested Allocation
BNP Paribas Bond Debt: Income ***** NA 20
Fidelity Equity Large & Mid Cap **** 10.16 20
HDFC Top 200 Large & Mid Cap ***** 13.30 20
ICICI Pru Dynamic Multi Cap **** 10.23 20
Reliance Equity Opp Multi Cap **** 14.61 20
Returns as on May 16, 2011 Ratings as on April 30, 2011

At the base of a successful financial plan rests protection; your decision to buy life and health insurance will help you achieve this. However, how much life cover you will need depends on not just your age but also your income and financial dependents among other things. You should go for a term insurance plan, which is a low-cost pure risk cover, over a long tenure. Likewise, go for a standard health insurance cover for at least Rs 2 lakh to get adequate health insurance.

Invest equally across the five funds in the suggested portfolio to achieve your long-term financial goals. This is a portfolio with an 80 per cent equity exposure across funds that are highly rated and have a proven track record. Do make it a point to check the performance of your portfolio at least once a year and the progress it makes towards your long-term financial goal.

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