Savvy planning,skewed investment
By tweaking the skewed real estate and insurance portfolios,the Pandyas can easily achieve all their goals. AMIT KUMAR The Pandyas tick most of the boxes when it comes to financial planningthey invest in equity and gold funds,have two properties and a sizeable amount in the debt portfolio.Though they have faltered when it comes to picking insurance (traditional,expensive plans),it can be taken care of if they act now.More importantly,they are on course to achieving all their goals in the stipulated time. Vaibhav Pandya,32,works with a mutual fund company and lives with his wife Harita,a 27-year-old homemaker,and their 4-year-old daughter Diya,in Mumbai.Their monthly income is 1.38 lakh,and after accounting for household expenses,SIPs,insurance premium,and EMI,they are left with a handsome surplus of 37,075.This amount,along with their existing investments in mutual funds and other debt instruments,will help them achieve most of their long-term goals.These include saving for their daughters education and marriage,and building a healthy retirement corpus.To ensure all these goals,they must make an important decision regarding their real estate investment. The Pandyas have invested heavily in real estate,forming almost 70% of their asset allocation.While this allocation includes only the property they have bought as an investment,they also own another house valued at 90 lakh and in which they currently live.The former,bought for 14 lakh and currently valued at 60 lakh,has been rented out for 12,000 a month and has an outstanding loan of 27.92 lakh.They also shell out 1,200 per month as maintenance charges.This brings down the annualised returns to just 2.16%,which is extremely low.Pankaaj Maalde suggests selling this Mumbai property as it will provide them with the much-needed funds to save for their retirement.If they do this,their investible surplus will rise to 61,333 (this includes the 5,958 they will save on premium by surrendering their expensive insurance plans).Even after paying the loan,brokerage and long-term capital gains tax,they will be left with nearly 29 lakh.This can take care of their short-term goals,which include planning a vacation for 5 lakh and buying a car worth 6 lakh.They must also keep aside 2 lakh as a contingency fund. The Pandyas want to build a corpus of 4.86 crore in the next 14 years for their retirement.For this,their EPF contribution of 15,200 per month and LIC Jeevan Anand policy will contribute nearly 94.5 lakh.To make up for the balance corpus,the Pandyas need to allocate 16 lakh from the sale of the house,along with the deposit against home loan of 10 lakh,fixed deposit of 8 lakh,surrender values of their health insurance Ulip and traditional life insurance plan of about 4.5 lakh,as well as equity and current mutual fund investment of around 3.5 lakh.These will amount to nearly 42 lakh and should be invested in balanced fund through a monthly SIP of 2 lakh.The balanced fund has been recommended after analysing their risk profile and asset allocation.This will give them a corpus of about 2 crore, says Maalde.For the shortfall of 1.91 crore,he must start a fresh SIP of 44,200 in balanced funds for 14 years.The total of all this will give them the desired retirement corpus at retirement. The Pandyas have been meticulous planners as far as their daughters financial needs are concerned.They want to save for her college and post-graduate studies and build a corpus of 44 lakh in 14 years.For this,they must direct 8,000 out of their existing investments in diversified equity mutual fund towards this goal.They must also add 500 to the remaining 9,500 of their existing SIP investments to build a corpus of 74 lakh in 17 years for her post graduation.For her marriage,they want to save 93 lakh in the next 20 years.For this,they must start an SIP of 15,000 in similar funds. The one area that they need to focus is insurance.Though they have an online term plan of 70 lakh and an LIC Jeevan Anand policy of 7 lakh,they are not adequately covered for life insurance.Maalde suggests that Vaibhav add another term plan of 31 lakh,which will cost him about 500 more per month.Also,Jeevan Saral and the endowment plans that they have bought are too expensive and give them a low cover.These are traditional plans,which are not flexible and unlikely to beat inflation.Therefore,Maalde advises them to surrender the plans and use the proceeds for retirement. For health insurance,they have a cover of 3 lakh each from LICs Health Plus plan.This is a Ulip,not a pure mediclaim plan.So,Maalde suggests they buy an individual mediclaim plan of 3 lakh each and a top-up individual plan of 5 lakh for all.This will cost them about 1,500 per month.Vaibhav should also buy a 50 lakh critical illness and 50 lakh disability accident cover for himself.This will cost them about 16,000 annually.If they follow this advice,it will not only reduce their life insurance cost and add to health premium,but will also create a surplus of 5,958,which can be allocated to other financial goals. RECOMMENDATIONS EQUITY FUNDS HDFC Long Term Advantage Growth,HDFC Tax Saver Growth,HDFC Midcap Opportunities Growth,HDFC Equity,HDFC Prudence,Reliance Gold Savings,ICICI Pru Focused Bluechip Equity,HDFC Top 200,IDFC Premier Equity,Kotak Gold,SBI Magnum Emerging Businesses. Advice: The portfolio is scattered and difficult to manage.Pandyas must concentrate on a smaller portfolio of 4-5 strong funds,which can include Franklin India Bluechip,IDFC Premier Equity and ICICI Pru Discovery.They should quit gold funds. BALANCED FUNDS HDFC Prudence,Reliance Regular Saving (Balanced) and Birla Sun Life 95. Rationale: Considering Pandyas risk profile,they should opt for balanced funds.All the suggested funds have good performance track records. PANDYAS GOOD MOVES ... Buying real estate
Investing in mutual funds through SIPs and lump sum.
Maintaining a healthy savings rate. Having an adequate contingency fund. AND THE BAD ONES Not buying adequate life and health insurance. Buying expensive,traditional insurance policies. Financial plan by Pankaaj Maalde, Head Financial Planning,apnapaisa.com |
