On the right track
with a balanced portfolio
|
RIJU DAVE
|
High
surplus, aggressive investments and long-term goals translate into a secure
financial future for the Nandis. Channelising the savings and linking them to
goals will help achieve them easily.
Balance
in life almost always leads to stability. The same holds true for financial
planning. A well balanced portfolio, steady investments, sufficient risk
coverage and a timely start are bound to stand in good stead for the
Mumbai-based Nandis. Their portfolio includes 48% allocation to debt in the
form of the PPF, EPF, fixed deposits and debt funds, 23% to equity in the form
of mutual funds and stocks, and 29% to real estate. However, they need a little
shove in the right direction to enable proper alignment of investments with
goals. To help them do so, financial planner Pankaaj Maalde will prepare a plan
that enables them to achieve all their goals without impacting their lifestyle
or stretching their finances.
Existing financial status
Samrat
Nandi is 36 years old and stays in Mumbai with his wife, Keya, 33, and
threeyear-old son, Om. While Samrat is in banking, Keya is an IT professional.
Together they bring in a monthly income of `1.55 lakh. This is supplemented by
`5,000 a month that Samrat earns through lecturership, bringing the total
income to `1.6 lakh.
Of this,
nearly `50,000 goes in household expenses, and another `20,000 is paid to
dependants in the family. The couple also spends `2,000 on their child's
education and `4,363 as insurance premium. They are paying EMIs of `30,000 for
two home loans of `36 lakh that they have taken for two properties worth `90
lakh and `12.5 lakh.While one has been taken from the bank, the other has been
taken from Samrat's employer. The Nandis are also making investments worth
`22,334 every month, including those in mutual funds via SIPs, the PPF and
NPS.After accounting for this outgo, they are left with a surplus of `31,304,
which they want to invest for their goals.
The
family's goals include setting up an emergency fund, taking a vacation, saving
for their child's education and wedding, and for their own retirement. Before
proposing the course of action, Maalde looks at Nandis' insurance portfolio.
Insurance portfolio
The
family has been very astute in assessing their insurance needs and taking
action.While Samrat has a life cover of `1.3 crore, Keya is insured for `75
lakh. According to Maalde, the couple is adequately insured and should not buy
any more cover. They also have a traditional cover and are advised to continue
with all the plans.
As for
health insurance, the Nandis have bought a family floater health plan worth `5
lakh and Maalde suggests that they raise this amount to `10,000. In terms of
premium it will cost them `20,000 per annum.He also recommends the purchase of
accident disability insurance and critical illness plan worth `50 lakh each for
Samrat, and `25 lakh each for Keya. These will combinedly cost `28,000 a year.
This increases their total insurance premium liability by `2,970 a month and
can be sourced from their surplus.
Road map for the future
Before
the Nandis start planning for their goals, they should reschedule their loan
portfolio to increase their investible surplus. They are currently paying an
interest rate of 8% on the loan from the employer and 11.5% for the one from
the bank. They are advised to sell the property worth `12.5 lakh and repay the
entire home loan from the bank. This will reduce their EMI by `10,000, which
can be added to the investible surplus.
Now, the
Nandis can plan for their goals, starting with the building of a contingency
corpus that is equal to their six months' expenses. This amounts to `6 lakh and
can be sourced from their fixed deposit of `5 lakh and `1 lakh from their cash
holding in bank.
The next
goal for the family is taking a vacation that will cost them `7.35 lakh in five
years' time. To achieve this, they will have to start an SIP of `12,500 in an
equity income fund for four years and withdraw the amount after five years.
The next
goal is saving for Om's education in two tranches. This includes a corpus for
his education when he is 18, and for his higher education when he is 21 years
old.For the former, they have estimated a need of `32 lakh in 15 years, and for
the latter, they will require `80 lakh in 18 years. To achieve the first goal,
the Nandis will have to start an SIP of `6,000 in an equity fund for the
specified period, while for the second one, they will have to invest `9,500 in
a similar fund. No existing resource has been allocated to these goals.
For the
goal of their child's wedding, the family wants to have a corpus of `81.5 lakh
in 22 years. To meet this, the couple will have to start investing a sum of
`7,000 through SIPs. Of this amount, they should put `5,000 in an equity fund
and the rest in a gold fund.
Finally,
for their retirement, the family will need a kitty of `8.5 crore in 24
years.For this, Maalde recommends allocating their EPF and PPF savings of `8.5
lakh. They should continue to invest `1,000 in the PPF annually. Besides this,
the stock holding worth `4 lakh and mutual fund savings of `11 lakh are
assigned to this goal. They should also continue to put in `9,000 in the NPS
account that they have started recently till the time they retire. All these
investments will yield `5.2 crore in the given time period. To make up for the
shortfall, the couple should start an SIP of `16,500 in an equity fund to build
the required corpus.
