My wife and I have a combined monthly take-home pay of Rs 72,000. Our monthly savings are Rs 50,000. We live in our own apartment with no outstanding loan. I managed to repay the home loan in four years instead of the 15-year tenure that it was taken out for. We are both in our late twenties and have a 3-year old son. My parents are dependent on me. Give us your view on our investments. — Parag Rijwani
Parag and Bhumika have got a great start. They are earning well, are not spendthrifts and are not in debt. Looking at their systematic investing, there is also financial discipline in place. Even their well articulated goals speak of clarity.
Being academicians, they expect their income to increase by a modest 3 per cent each year. Parag is working towards a doctorate which could probably increase his future income substantially.
They have direct equity investments, which are currently lower than their acquisition cost. Going forward, they should focus on mutual funds.
They have one month’s household expenses in a liquid fund and Parag’s one month’s salary always rests in a bank account. They could consider increasing the buffer in the liquid fund or alternatively in a fixed-deposit linked savings account, which will earn them better returns than a savings bank deposit.
This family has started investing at a very early age, something that will pay off in the long run. Surprisingly, they have no investments in National Savings Certificate (NSC) or Public Provident Fund (PPF).
Since both are employees, they each have an Employees Provident Fund (EPF) where monthly contributions are made.
They have also invested in infrastructure bonds and the National Pension Scheme (NPS).
A good move has been their investments in equity. The couple has monthly systematic investments in equity mutual funds and even own a couple of stocks. Since they have started early, their goals are a long way off and they have no liabilities, a bulk of their investments must go into equity.
However, under the Direct Tax Code (DTC) that will come into effect next year, they will no longer have the option of investing in equity linked savings schemes (ELSS). They must consider opening a PPF account.