Financial Planning

I am 47 and work in a private sector company. My wife, 38, is a homemaker. We have a daughter, studying in class seven.

Since I don’t get adequate time to monitor my investments, I have not been investing in equity. Most of my savings are in debt instruments. I have a group medical cover for Rs 5 lakh.

Please suggest a suitable investment plan for my investable surplus so as to achieve my goals.

I contribute Rs 59,400 towards EPF and my employer contributes Rs 19,800.

I have four houses. I live in one and the rest are let out.

— Suresh

The assets and investments in your portfolio reflect your disciplined approach to savings. Even in the future, if you invest your entire monthly surplus only in debt instruments, you can reach most of your goals.

Besides the self-occupied house and the inherited property, you need not have invested in other flats. Had you bought plots instead, you may have been able to generate better returns.

To build a portfolio for the rest of your earning period, rework your asset allocation. Currently, 35 per cent of your income goes towards EPF, and in your overall investment portfolio it accounts for 64 per cent. Your investments in equity account for a paltry 9.4 per cent.

From here on, even if you allocate only the mandatory amount in EPF and an equal contribution is made by your employer, it will help you to build a corpus of Rs 1.16 crore.

Hence, divert the excess EPF voluntary contribution towards equity so that it accounts for 20 per cent of your overall portfolio.

For your daughter’s graduation, sell your underperforming PMS portfolio, which has delivered far lower returns than the BSE Sensex. You must also sell the real estate fund since you are already overweight on the sector.

If you invest the same in mutual funds and manage 12 per cent returns, you can meet the target.

For her post-graduation, invest a sum of Rs 11,490 every month for the next nine years and if the portfolio delivers 10 per cent returns (same figure used for all goals), you can reach the target.

For her marriage expenses, if you invest Rs 18,100 each month for the next 12 years, you can reach the target.

Assuming monthly expenses to be Rs 30,000 for the two of you , at retirement you need a sum of Rs 75,800, if inflation is 7 per cent. To receive such an income at retirement, you should have a corpus of Rs 1.78 crore and it should earn a return of one per cent over and above the inflation rate.

If your current EPF accumulation and future savings earn a return of 8.5 per cent, at retirement you will have accumulated Rs 2.75 crore, more than what may be required.

Since you will be left with a monthly surplus of Rs 30,000 after meeting all goals, invest the amount in mutual funds to meet any future goals.

(The author is CEO, myassetsconsolidation.com)

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