I am 41 years old and my annual business income is Rs 6.5 lakh. I also receive interest income of Rs 2.49 lakh annually from my deposits.

My monthly expenses are Rs 20,000 and my son’s school fee is Rs 1 lakh a year. I manage a monthly surplus of Rs 10,000 per month.

Current investments:

  From the interest income, I invest in two mutual fund SIPs of Rs 10,000 each in Reliance Equity Opportunities and ICICI Focused Bluechip.  Is this a good strategy?

 I have taken two endowment policies with sum insured of Rs 15 lakh. My annual premium outgo is Rs 47,000.

I need to pay premiums till 2020.

To protect my family’s health, I have taken a floater policy for Rs 10 lakh.

Since 2010, I contribute Rs 70,000 in PPF every year.

My requirements are:

I will require Rs 65 lakh in 2023 for my son’s overseas education. I wish to retire in 2026 and at that time I need a corpus of Rs 2 crore to take care of my needs till I turn 80. I wish to buy a car for Rs 8 lakh soon. I have invested Rs 30 lakh in FDs at 9.25 per cent for regular income. All the FDs will mature in 2021.

Should I break the FDs and invest in MFs? I can be aggressive with my investments for the next seven years. I have not invested in gold because I feel it is overpriced.

Ram

If your concern is your variable monthly income, have a contingency fund ready for sudden liquidity requirements. Since you have an aggressive risk appetite, for next seven years, invest in a combination of (70:30) in equity and debt. You also need to have gold to the tune of five per cent of your portfolio for diversification.

Add UTI opportunities to your portfolio which already has two good funds.

Child’s education

Invest Rs 18 lakh in equity schemes. Invest in large-cap funds such as Franklin India Bluechip and ICICI Focused Bluechip.

From the Multi-cap space consider UTI Opportunities and Reliance Equity Opportunities. As a balancing act , invest in HDFC Prudence.

With such a portfolio, if you earn 12 per cent returns, your corpus at 2023 will be Rs 62.6 lakh.

Retirement

We presume that you will not receive any income, post retirement. It would then be challenging to retire in 2026.

You will end up with a corpus of Rs 33.5 lakh, if you continue to invest Rs 70,000 for the next 14 years, at 8.6 per cent interest.

If you invest Rs 12 lakh in an instrument that yields 10 per cent, by 2026, it will grow to Rs 35.2 lakh.

Still you will have a shortfall of Rs 1.31 crore.

To meet the target, you should save a sum of Rs 30,300 each for the next 168 months to reach the target. However, your current monthly surplus is only Rs 10,000.

So, if you wish to retire at 60, you can reach the target if the maturity proceeds of insurance policies are also taken into account.

Buying a car

Take a loan in your company’s account. You can adjust interest and also claim depreciation.

Term Insurance

Take a term cover for Rs 90 lakh.

(This article was published in the Business Line print edition dated September 2, 2012)
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