Sankar and his wife Aparna wanted to plan for their goals. Sankar is 43, Aparna 40.

Both were interested in long-term saving and investing. Past returns of the market, coupled with lower interest rates on fixed deposits, kindled their interest in equity related investments. Though they appeared keen to invest in equity oriented products, they lacked exposure to market volatility.

We analysed their risk profile and observed that they had a disciplined savings culture. They had exposure to products such as Public Provident Fund, Unit linked insurance plans and mutual funds. But, there was a lack of purpose in their choices.

They were tuned to looking at product features and popular choices. We advised them to think in terms of their own goals and time horizon, for each goal. The benefits of staying invested across market cycles was highlighted with data. They were enthused to put this concept into practice. They were also encouraged to think in terms of the time available for a goal — which helped them to avoid a few products and add new baskets!

We suggested that they invest not more than 50 per cent of their yearly savings in equity in the first three years. to be reviewed at the end of this period. We suggested four baskets of investments for them.

Emergency kitty

Both Sankar and Aparna are employed. Their expenses were found to be relatively low compared to others with similar income. They had more fixed income investments with some flexibility to rely upon. Hence, we advised them to reserve three months’ of expenses in fixed deposits.

Short-term – 1-2 years

They anticipated some planned expenses related to travel and gifts. They also wanted to change their car within the next two years. The total amount needed for this was found to be ₹5 lakh.

We advised them to invest in liquid funds and FDs, and to save around ₹25,000 per month towards this goal.

Medium-term – 3-6 years

The couple’s son’s college education, a family function and house construction were all falling due in that time period. They already had some savings but these were not enough. This had to be funded by way of regular investments. The goal target was around ₹15 lakh.

We suggested that they invest in a combination of debt MFs, asset allocation funds and large-cap MFs towards this basket. They needed to invest ₹24,000 per month. Expected return would be around 8 per cent CAGR and the withdrawal may happen after four years, in tranches.

Long-term basket

Though they were saving towards their retirement in Provident Fund and other fixed income products, it was recommended that they add equity MFs. They were advised to invest ₹50,000 per month in large and mid-cap equity MFs for 10 per cent post tax returns over a period of 10 years. This will help them reach a ₹1-crore corpus.

It is important to map your savings and investments to consumption needs or wealth needs. It is ‘beginning with the end in mind’ that matters a lot.

The writer, Co-founder of Chamomile Investment Consultants in Chennai, is an investment advisor registered with SEBI

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