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Investing Rs 20 lakh for 15-20 years

You can invest the money in a staggered manner in two to four diversified equity funds to achieve your long-term financial goals

I am a 40-year-old professional with a family of two daughters (aged four and six years). Here is a list of my investments and assets.

  1. Bought a home which is loan free.
  2. Endowment plan from Max New York Life insurance: ₹5 lakh cover, annual premium ₹11,000.
  3. Invested in ICICI Elite Wealth with ₹5 lakh premium, which is a blunder
  4. ICICI Value Discovery Fund: ₹2 lakh lumpsum
  5. Fixed deposit: ₹50 lakh

Now I want to invest ₹20 lakh to reach my three future financial goals: Children's education, marriage and my retirement. I want to build ₹2 crore in 15-20 years. I have only these three goals and I would like to complete it with a wise investment. Kindly advise.
- Rajeev

To begin with a few quick observations about your financial status. You have very little life insurance cover. Buy a term insurance plan to secure an adequate life insurance cover. The insurance cover should be big enough to generate enough money to take care of the needs of your financial dependents if something happens to you. Also, buy a health insurance cover for your entire family. Set aside six month's living expense in a bank account as a contingency fund. These three steps will ensure that a financial or medical emergency would not upset your investment plans.

You have so much money lying in your fixed deposit. Find out how much money you would require in the next three years or so. Keep that much amount in the bank account, and consider shifting the rest to better investment avenues that will offer you superior post-tax returns. Consider investing in equity mutual funds if you don't need the money for five to seven years. You can take the help of debt mutual funds if you are investing for periods of less than five years.

You can invest the money in a staggered manner in two to four diversified equity funds to take care of your long term financial goals. If your investment grows at 12 per cent per annum, you will meet your target in 20 years. If you are investing more money as suggested by us, you may reach your target earlier.

Here is a list of best diversified equity schemes.

Once you reach your target, please shift the money to a safer avenue like bank deposits or liquid schemes at least a year or two before you actually need the money. This is to make sure that a sudden change in the stock market does not upset your plans.

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