I am 30. My wife, 29, started systematic investment plans (SIPs) from September 2011 to save Rs 70 lakh in 22 years for the marriage of my daughter, now 2, and Rs 1 crore in 30 years for her retirement. The funds: Rs 1,600 each in Birla Sun Life Dynamic Bond, DSP BR Equity and HDFC Mid-Cap Opportunities; Rs 2,400 in ICICI Pru Focused Bluechip Equity; and Rs 800 in Reliance Gold Savings.

I want to start SIPs of Rs 7,100 a month for 16 years to get Rs 30 lakh for my daughter's education and another Rs 1 crore in 30 years for my retirement.

I have planned to invest Rs 2,400 a month in ICICI Pru Focused Bluechip Equity, Rs 2,000 in IDFC Premier Equity, Rs 1,700 in HDFC Prudence and Rs 1,000 in Canara Robeco InDiGo.

Are these investments enough? Have we made a good selection of funds or should we change any of them?

Jaspal Singh Khinda, Patiala

Both your goals can be achieved, provided the asset allocation is modified. Before we do so, we would like you to run a quick math to check if the Rs 1-crore-each target that you have set for retirement is sufficient.

Since retirement is 30 years away, your expenses, considering inflation, will be far higher. Just to give an example, if you spend Rs 40,000 a month now, you will require about Rs 3 lakh a month 30 years hence, if prices rise by 7 per cent annually.

A Rs 2-crore portfolio, if invested in safe debt schemes after retirement, will provide only Rs 1.3 lakh a month, assuming it earns an interest of 8 per cent a year.

Of course, you may scale down your lifestyle after retirement or your expenses can come down after your daughter is married. Nevertheless, it is important to consider the impact of inflation.

Since we are not sure whether you have factored this in, we will attempt to build portfolios that can generate over Rs 1 crore each.

Let us first take your wife's portfolio. She has 20 per cent in a debt fund and 10 per cent in a gold fund. That leaves a third of a portfolio in avenues that are likely to yield lower equities in the long term.

While gold has been an outperformer in recent years, there is no guarantee that this stellar show will continue. Hence it may be conservative to assume that both debt and gold will just about beat inflation.

Since your wife's first goal is to save for your daughter's marriage, she can retain gold and do away with the debt fund. Doing this will leave more balance in her hand for her retirement kitty. Otherwise, the marriage expenses will take away most of the savings.

She can continue her investments in ICICI Pru Focused Bluechip and DSP BR Equity and HDFC Mid-Cap Opportunities. She can exit Birla Sun Life Dynamic Bond and instead move to Quantum Long Term Equity.

If she is conservative and wants some debt exposure, HDFC Children's Gift Investment Plan is an option instead of Quantum. The gold SIP can also be continued. We assume that the mid-cap fund will deliver 18 per cent annually, the other equity funds 15 per cent and gold fund 8 per cent.

This portfolio can be planned for 20 years, after which the required corpus needs to be shifted to safe debt avenues such as bank deposits. When withdrawing funds she can sell her gold units first. She is likely to have about Rs 4.7 lakh if her gold savings fund expands at 8 per cent compounded annually.

The remaining Rs 65 lakh can be drawn from the equity funds: Quantum Long Term Equity or HDFC Children's Gift, DSP BR Equity and ICICI Pru Focused Bluechip, in that order. After such sale, she will have a balance of about Rs 18.5 lakh (if the funds return 15 per cent annually).

Let this be allowed to grow. She need not also disturb the mid-cap fund. After this, your wife can continue the SIPs with a small modification if she so wishes.

She can contribute Rs 1,600 a month in UTI Mahila Unit Scheme (provided she checks the performance record then) instead of Quantum Long Term Equity or HDFC Chidren's Gift.

UTI Mahila can be expected to deliver at least 10 per cent compounded annually. She can continue the other equity funds and the gold fund. Two years before retirement, we expect this portfolio to have grown to about Rs 1.7 crore. They can be moved to safe avenues such as bank and post office deposits or bonds.

Second portfolio

Your portfolio has some debt exposure from HDFC Prudence. You can skip the InDiGo fund and instead hold equities to improve returns.

Switch to Canara Robeco Equity Diversified. Also, since your wife already holds ICICI Pru Focused Bluechip, you can consider Franklin India Bluechip, another large-cap fund with a good record. Continue SIPs in mid-cap fund, IDFC Premier Equity and balanced fund HDFC Prudence.

Two years before your daughter's higher education begins (14 years from now), move Rs 30 lakh into safe debt avenues and continue the SIP. We hope you will have about Rs 1.8 crore after 28 years. Withdraw from the diversified equity funds and then tap the mid-cap fund for the balance.

Since we have not included any debt fund for you, consider investing any additional surplus every year in provident fund, bank deposits and other safe bond issues. That will help balance your overall portfolio. Your wife too can consider a similar strategy.

The recommendations made in this column address the readers’ query, based on their risk profile and requirement. They may not be applicable to all investors. Queries may be e-mailed to mf@thehindu.co.in , or sent by post to Business Line, 859-860, Anna Salai, Chennai 600002.

Related Topics