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Restructure your portfolio

You can get better returns from your savings and investments with little changes and better organisation...

I am a 31-year old single mother, earning Rs 4.8 lakh annually. I bought an apartment on loan. I have to think about my retirement, my daughter’s education, and paying off the home loan. I have few insurance policies from LIC- Anmol Jeevan, LIC Single Premium plan, Jeevan Tarang and Bima Gold. I took Anmol Jeevan to cover the loan, but did not renew it. I also have some savings in NSC and EPF.

Considering your age and requirements you have invested in products that will not be able to meet your goals. We understand your aversion to risk and that you will not venture into equity funds immediately. However, you can still get better returns from your savings and investments with little tweaks and better organisation.

First of all, there's no mention of an emergency fund and health insurance. And even though you're only 31, this is something you must have immediately. You must have an emergency fund and a health plan for all health emergencies. The emergency fund should be equal to 3 months of your expenses. In case you lose your job, your family should be looked after for at least 3 months.

You have too many insurance policies. Anmol Jeevan is a term plan, but hasn't been renewed, which means in all likelihood it has lapsed. Get in touch with your insurance agent to revive the lapsed policy to protect your daughter from home loan liability. In case something were to happen to you, you want that home loan paid and your daughter to be looked after. However, this policy provides a constant and maximum sum assured of Rs 25 lakh and it cannot be surrendered. If possible, consider taking a home loan protection policy for the loan. Such policies reduce the sum assured as the home loan gets repaid, and you need not pay any extra premium for protection that is not required

When taking insurance you should make liberal estimate of your requirement, maybe 10 years annual income. Also, you should ensure that your daughter is a nominee of all your investments.

You should make complete use of the 80 C entitlement, i.e. get tax rebate on investment up to Rs 1 lakh. Besides insurance, you can invest in a tax saving fund like Quantum Tax Saving, Franklin Tax Shield or ICICI Prudential Tax Saver, to achieve this.

For regular investment, consider a balanced fund. Invest whatever you can save at the end of the month in an equity oriented balanced fund. These funds invest 65 per cent into equity and rest in fixed income, and are relatively safer than all-equity funds.

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