I received terminal benefit of Rs 65 lakh on retirement. I have deposited Rs 25 lakh in the Senior Citizens’ Savings Scheme, Rs 5 lakh in ELSS funds, and Rs 34 lakh in bank fixed deposits. I am getting Rs 65,000 as pension. I have health insurance cover of Rs 20 lakh for me and my spouse. I live in my own flat and have no major health issues or commitments. I want to divest some amount from FD and invest in mutual funds to beat inflation. Please advise.
Prableen Bajpai, Founder, FinFix Research and Analytics:
Managing inflation after retirement is crucial. If we assume monthly expenses as constant after retirement, then with 6% inflation, the expenses will double in around 12 years. If your pension is from the central government, then dearness relief will take care of the loss in purchasing power to some extent. To prepare for the future, continue to have Rs 10 lakh in fixed deposits (or debt mutual fund), which will act as a buffer for any unforeseen requirements. The remaining Rs 24 lakh can be invested in a mix of active and passive mutual funds. Create a portfolio with a large-cap index fund (Nifty Equal Weight), a passive mid-cap fund (Nifty Midcap 150 index) and a multi-cap fund. Given the sources of income, the new tax regime will work better for you. While no further increments will be needed to avail of tax deductions, Rs 5 lakh in ELSS can be continued. Most tax-saving funds operate as flexi caps, with a largecap tilt. The corpus of `29 lakh in equity mutual funds has the potential to grow to Rs 90 lakh in 10 years. If investments are continued, around Rs 1.6 crore can be generated in 15 years assuming 12% portfolio returns in both scenarios.
I am 25 years old and single. I invest Rs 8,000 monthly in a mutual fund portfolio that is currently worth Rs 2.2 lakh. I also have Rs 1 lakh in fixed deposits, Rs 60,000 in sovereign gold bonds and Rs 50,000 in stocks. I want to retire at 40-45 with Rs 1 lakh per month.
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser: It is not clear if Rs 1 lakh expense is the present or future value. Assuming it’s the present value, adjusting it for inflation over the next 20 years, you need a corpus of about Rs 10-11 crore by 45 to maintain a lifestyle of Rs 1 lakh monthly (in today’s value) till the age of 85. For this, you need to invest about Rs 74,000 per month, and this needs to be increased by at least 10% every year. While you are investing Rs 8,000 monthly in equity funds, your investments in debt (EPF, PPF) are not known. Considering the time horizon of over 20 years, we shall assume that the portfolio’s average equity:debt allocation over this period will be 75:25. The actual allocation will have a higher equity component in initial years, followed by lower equity in later years, to de-risk the portfolio as you get closer to the goal. When the equity portion grows well, rebalance and shift a part of investment from equity to debt, to protect some gains. Your fixed deposit can act as an emergency fund and gradually be increased further. Also, you must consider getting yourself health and term life insurance.
I am 42 and a single mother of an eight-year-old child. I have two term plans worth Rs 4 crore. I also have Tata AIA NRI and Bajaj Allianz life plans for 20 years. I have recently invested Rs 25,000 in five mutual funds. How can I improve my investment portfolio? Which LIC policy will be good for me?
Prableen Bajpai, Founder FinFix® Research & Analytics:
As a single mother, first ensure adequate insurance via term and health plans. You already have two term plans worth Rs 4 crore, but still get a financial planner to check its adequacy. Get sufficient health insurance, if you don’t have a plan already. Build a contingency fund, which should be equivalent to 12 months worth of living expenses, including premiums, investments and EMIs. Next, list your financial goals. Decide on a figure for your child’s college and identify the target corpus needed after 10 years. If `25 lakh is today’s fee, then with 8% education inflation, the target corpus will be Rs 54 lakh. Assuming 11% return, a monthly SIP of Rs 25,000 in equity funds will suffice. For retirement, if your household expenses are Rs 40,000 a month, the sum needed will grow to Rs 1.15 lakh at 60 (with 6% inflation). Assuming 11% return till 60, and post-retirement return of 6%, you will need Rs 3.5 crore, for which an SIP of Rs 50,000 will be needed. Don’t mix insurance and investments. You can continue with the two nonterm insurance plans, but avoid any more of these. Use equity funds as a long-term investment tool.
I am 33 years old and have a net worth of Rs 1.5 crore, which is mostly in cash. I have a two-year-old daughter. I am planning to buy a flat in Bengaluru, which will cost Rs 1 crore. I’ll make an upfront payment of Rs 35 lakh and take a loan of Rs 65 lakh. I do not have any other financial liability. Please advise on how to invest and get better returns from my funds.
Naveen Kukreja, Co-founder and CEO, Paisabazaar:
Your financial plan should first ascertain that you are adequately insured. Make sure you have a pure term insurance policy with a cover of 10-15 times your annual income, and health insurance of at least Rs 1 crore, with a base health cover of Rs 5 lakh and a super top-up cover of Rs 95 lakh. You should also have an emergency fund large enough to meet your monthly expenses for 6-12 months. You can park these funds in fixed deposits of banks like Suryoday Bank, Unity Bank, Utkarsh Bank, Ujjivan Bank and AU Bank, offering yields of 8% and above, . As for your investment portfolio, you should start investing Rs 1.5 lakh per financial year in the PPF, which offers the highest form of capital and income protection available. Your PPF investment would act as a low-risk fixed income component of your portfolio, with tax benefits under Section 80C. You should try to create a corpus of at least Rs 2 crore for your daughter’s higher education. The course fees of some top B-schools in India are around Rs 30 lakh. Even a 10% inflation rate would increase the fees to Rs 2 crore in 20 years. Distribute your investible surplus equally across index funds, flexi-cap funds and aggressive hybrid funds through SIPs of 12-18 months. While your present investible surplus would be sufficient to create a corpus for your daughter’s higher education, make sure that you invest your incremental monthly surplus in equity funds (listed here) in the same proportion. This should create an adequate corpus for your post-retirement life and other crucial financial goals. You can consider the direct plans of PGIM India Flexi Cap Fund and Parag Parikh Flexi Cap Fund for the flexicap category; ICICI Prudential S&P BSE Sensex Index Fund and HDFC Index Fund S&P BSE Sensex Plan for the large-cap index category; and Kotak Equity Hybrid Fund and ICICI Prudential Equity and Debt Fund for the aggressive hybrid category. Route your SIPs through the savings accounts of above-mentioned banks to earn higher returns on your account balance.
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