Personal Finance

Invest in plots for better returns

SURESH PARTHASARATHY | Updated on July 28, 2012

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I am a government employee but will have no pension benefits. I will be retiring in June.

My wife is a home maker. At retirement, I may get Rs 45 lakh as benefits.

I have a daughter who is working and is yet to be married. I stay in a rented house.

Of the retirement benefits, I plan to set aside Rs 10 lakh for her marriage. I have investments of Rs 6 lakh in mutual funds. My monthly contribution in MF SIPs is Rs 13,000. My direct equity exposure is Rs 1 lakh.

My monthly expenses are Rs 20,000. I want to continue investing in SIPs for another 10 years to the tune of Rs 10,000 a month.

Where should I invest the retirement money to receive a monthly income of Rs 30,000? I want safety and also wish to hedge my corpus against inflation.

We have a health insurance policy for Rs 2,00,000 each and my daughter is covered by her employer.

Post retirement, I will continue to get health cover from my company. I have two plots worth Rs 50 lakh. What should I do to increase my wealth at a rate of 8-10 per cent a year? Our life expectancy is 85 years.

Ravikumar

Your retirement benefits of Rs 35 lakh after factoring Rs 10 lakh for your daughter’s marriage are sufficient till you turn 85.

This will happen provided you manage your investments well.

For a retiree to earn a return of 10 per cent will be challenging.

If you invest Rs 35 lakh at 9.25 per cent, your annual income will be Rs 3.23 lakh. After availing tax benefits for the rent paid, your post tax income will be Rs 3.18 lakh.

After consuming monthly household needs of Rs 20,000, invest the surplus in equity fund schemes for the first five years.

You may encounter income and expenses mismatch due to inflation only after five years.

If your SIP investments (and the lump sum of Rs 6 lakh) grow at 10 per cent, at 65, your corpus will be Rs 13.75 lakh. If you withdraw to the extent of your monthly shortfall, your investment will support you till you turn 78.

This is provided your investment earns a return of 8 per cent.

Sell your plots to meet any unforeseen large needs.

Portfolio



Stick to large-cap funds such as ICICI Pru Focused and Quantum Long term Equity. Sell the other funds during any heavy market rally. Discontinue your SIPs in other schemes immediately.

I am 26 and single. My monthly income is Rs 30,000 while expenses are Rs 15,000. My mother is dependent on me. I plan to buy a flat for Rs 15 lakh in a few years. Kindly give me an investment strategy. My current EPF balance is Rs 70,000.

— Vinay



Your EMI should not be beyond 35 per cent in the early part of your working life.

Plots are becoming attractive investments in tier 3 cities, thanks to their appreciation potential.

Instead of buying a house consider investing in plots. After 5-10 years sell the plots and buy a house, by which time your income too would have risen.

(The author is CEO, SPP Wealth and Financial Planners. He can be reached at >suresh@myassetsconsolidation.com)

Published on July 28, 2012

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