I am a 25-year-old married man. I fall under 20 per cent tax bracket. I have started investing for two major goals, namely, buying a house and accumulating money for the higher studies of my child. At present, I save ₹14,000 on a monthly basis and invest it in Axis Long Term Equity, Franklin India Prima Plus, Franklin India High Growth Companies, SBI Magnum Midcap and Franklin India Smaller Companies. Apart from mutual-fund SIPs, I invest in the EPF and the PPF. I have a term life insurance worth ₹1 crore from HDFC Standard Life. I also have a family-floater health insurance of ₹3 lakh. I have kept ₹1.7 lakh aside for emergency. My parents are not financially dependent on me.
Kindly review my investments with respect to my goals and suggest changes to my portfolio, if any. I have no plans to invest directly in the stock market.
- Pankaj Kishnani
Pankaj, a young professional in the 20 per cent tax bracket, has recently started investing. He is married. He has no kids, but he has started planning for his child's higher education.
What he has (Cash Flow)
- Income (undisclosed). He is in the 20 per cent tax bracket.
What he wants (Goals)
- Purchase a home
- Higher education for his child
What he should do
Emergency fund: Pankaj has already kept ₹1.70 lakh in his savings account for any emergency. We are unable to calculate the suitable sum due to lack of information about his monthly expenditure. But, as a general rule, till the time he does not have a kid, he may do with three months' expenses as the emergency fund. After the birth of a child, he must raise his emergency kitty to at least six-month expense. We recommend opting for the sweep-in facility offered by banks to earn higher returns.
Health insurance: Pankaj's family-floater health cover also seems sufficient. He may opt for a super top-up policy if he needs higher cover in the future. A super top-up policy is an add-on cover. It will come into action once the claim exceeds a deductible limit, which is usually kept equal to the basic health cover.
Life insurance: Pankaj understands the importance of a life cover. He has bought online life insurance worth ₹1 crore at this young age.
Investments: Pankaj has a long time to fulfil his goals. Starting early will let him realise his goals with ease. He has listed two major goals: buying a house and child education. We understand the importance of these goals. However, saving for retirement from the first day of job is as much important as saving for other goals. We have calculated his retirement kitty, assuming his present expense to be ₹30,000 per month. Further assuming his life expectancy to be 80 years and present expenses growing at 8 per cent per annum, he will require ₹10.64 crore to live his golden years with the same standard of living. As the desired monthly expense to fulfil all goals is based on many assumptions, he may modify his allocation or change his goal amounts.
All his funds are superior-rated funds. He has more than 50 per cent of his monthly allocation going into Franklin Templeton AMC. Diversification across AMCs is needed. Since he is investing in two multi-cap funds from Franklin Templeton, he may discontinue one of them. He can continue with one with a longer history. He may thus continue with Franklin India Prima Plus and stop investing in Franklin India High Growth Companies. He may also continue investing in the PPF.