I’m 45 and work for the private sector. My wife, 40, is a home maker. Our sons are in class 11 and 5, respectively. I am keen to start business with my friends at 50. Besides employer insurance, I have no other personal health policy. My EPF contribution is ₹5,000. My gratuity at retirement will be ₹ 8 lakh. Suggest an investment strategy to meet my goals and advise me on my business proposal.

Sundaram

Starting business at 50 needs a lot of planning. For a business corpus of ₹25 lakh, you need to invest ₹30,600 every month for the next five years. Allocate 60 per cent to equity and the balance to debt. Your portfolio has limited financial assets, so set aside sufficient corpus to take care of your family’s needs for at least five years from the time you start business.

Assuming 7 per cent inflation over the next five years, the annual cost of living will be ₹4.2 lakh. At retirement, you will need ₹1.08 crore, which should earn one per cent more than inflation to sustain you till 80. Earmark your current MF assets after adjusting for your elder son’s education, in addition to EPF, gratuity and traditional insurance plan proceeds so that you have ₹45 lakh in your retirement kitty.

Invest your monthly surplus of ₹10,000 in an aggressive portfolio to earn 15 per cent return, to accumulate ₹8.85 lakh. This should meet your monthly needs, including home loan EMI for the first five years after starting business. As business income increases, add it to your retirement kitty. Earmark a portion of your equity MF assets for your elder son’s education (₹6 lakh). To save ₹20 lakh by 2021, for your younger son’s education, you must invest ₹24,500 monthly for the next five years, assuming 12 per cent annual return. Have a separate health policy for ₹5 lakh and increase your term insurance by ₹50 lakh.

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