A portfolio makeover

Rajat (33) works in the financial-services industry. He has recently tied the knot. His parents, who are financially independent, live with him. His wife, Vibha (33), is also employed. Rajat's take-home salary is Rs 52,000 per month. He is also entitled to an annual variable, which is usually around Rs 4 lakh. Rajat has managed to create a portfolio of around Rs 24 lakh using his savings and some amount gifted by his grandfather. This also includes the EPF, PPF, mutual funds and stocks. He wants to go abroad on a vacation every second year, buy a new house, and save for his retirement and future kids' education. Emergency fund A good financial plan starts with provisioning for emergencies. Rajat should create an emergency corpus equivalent to six months' expenses. Since his monthly expenditure is Rs 20,000, he should create an emergency corpus of Rs1.2 lakh. He can keep this corpus in a mix of sweep-in fixed deposits and liquid funds. Doing so will help him earn a higher return on this amount while also maintaining liquidity. Rajat can find the top-rated debt funds on the Value Research website. Action: Create an emergency corpus of Rs 1.2 lakh. Keep it in a mix of sweep-in fixed deposits and liquid funds. Life insurance Rajat has a pure term-insurance plan of Rs 1 crore, which is more than sufficient for now. He doesn't have any financial dependants. Neither does he have a financial liability to pay off. However, he is planning to buy a house with a home loan, which will add to his liabilities. He may continue to maintain the existing cover and re-analyse his insurance need once he buys the house. Rajat and V

This article was originally published on June 30, 2021.