I am 34 years self employed professional, married and have a 2 year old daughter. We have a monthly income of ₹1,50,000 and spend ₹70,000 on household expenses which leaves us with a surplus of ₹80,000 for investments. Currently, I have investments in PPF, mutual funds and bank deposits. I also have a term cover of 1.5 crore and a health insurance cover of ₹5 lakh. I want to save for my daughter's education and marriage as well as want to build a corpus for my retirement. Please review my portfolio and suggest an investment plan to achieve my financial goals in the future.
- Sameer Shah
Your current portfolio is already well-suited to the tasks you have set yourself. We are not recommending any changes to your investments, or to the SIPs that are continuing. If you follow a systematic investment approach and you will meet your goals with ease. You have enough time as all your goals are long term in nature. You have thoughtfully insured yourself which is laudable.
However, it is early days yet, and there will surely be changes in some circumstances that will make you reevaluate your investment plans. One such area is already visible. While your calculation for your daughter's higher education and marriage seems fine, you have undervalued your retirement requirement.
From what you have said, you believe that ₹4 crore will be enough of an accumulation for your retirement. However, going by your current standard of living, this appears to be too low. Unless you plan to cut down your monthly expenses by 75 per cent, you will not be able to manage your household with this much money. We have recalculated an appropriate amount assuming your post-retirement expenses to be 50 per cent of current expenditure, which is more typical. You would need a corpus of ₹6.20 crores to lead a comfortable life. We have taken life expectancy to be 80 years. Your annual contribution to PPF will amount to ₹2.15 crores in 26 years assuming 8.5 per cent interest per annum. So, you need to accumulate another ₹4.05 crores via mutual funds. Of course, these figures are not set in stone. Long-range projections should be taken only as loose estimates because a lot can change.
- Increase your emergency fund by another one lakh rupees as you have a kid at home. While actual need might differ, we usually recommend 3 to 6 month expenses to be kept as contingency fund.
- Continue with your term and health insurance.
- You mutual funds selection is fine. Do not increase number of funds anymore. Your strategy of investing in a disciplined manner is correct. Keep following the same.
- Switch to debt in gradual manner as you near your goal.
- Review your portfolio atleast once a year to make any changes if required.
- You are still left with a monthly surplus after expenses and investing for major goals. Utilize the amount for trips and travel or increasing investment towards the mentioned goals at your own discretion.
- All your goals are long term. Do not invest into debt funds at present. You are already contributing to PPF and have bank fixed deposits and recurring deposits which contribute to debt in your overall portfolio.