Streamline plan with goal-linked investing
Aligning the existing equity investments
with goals will ease Kolhapur-based Kulkarnis' journey.
Having a high savings ratio of 54% and investing in
equity for long term goals are good financial moves. Equally important is to
link investments with goals to ensure that you are on the right track. While
Kolhapur-based Balkrishna Kulkarni has done the former, he will require
guidance in achieving the latter. His current equity investment of `35,000 via
SIPs in mutual funds needs to be assigned to specific goals to ensure he has
sufficient funds when he needs them. Financial planner Pankaaj Maalde will help
Kulkarni do this by preparing a financial blueprint.
Existing
financial status
Kulkarni is 34 years old and works as an engineer in
Kolhapur, Maharashtra. He lives in his own house with his homemaker wife,
Dhanashree, 31, and five-year-old son, Aditya. His monthly income is `65,000,
of which he spends nearly `15,500 on household expenses and `5,000 on his son's
education. Another `9,083 goes towards insurance premium and `35,000 is
invested in six mutual fund schemes. This leaves him with a surplus of `417,
which, along with his investment and existing resources, needs to be allocated
to achieve his goals. These include building an emergency corpus, saving for
Aditya's education and wedding, building a house in his hometown and planning
his retirement.
As for his portfolio, the debt component includes an
EPF corpus of `5 lakh, fixed deposit of `2.5 lakh, postal schemes worth
`60,000, debt funds worth `56,000 and and gold investment of `3 lakh. His
equity holding includes `3.05 lakh mutual fund corpus. Before Maalde helps him
achieve his goals, he will analyse his insurance portfolio and make
recommendations.
Insurance
portfolio
Kulkarni has one traditional plan and two group term
plans, which provide him with a life cover of `78 lakh. He is paying an annual premium
of `91,000 for these policies and Maalde suggests that he retain these as a
debt component of his portfolio since the returns are likely to beat inflation
in the long term. As per need based theory, Kulkarni is adequately covered for
life so he does not require additional insurance.
As for health insurance, his family, including
parents, are covered for `9 lakh by his employer. Maalde advises him to
continue with this and port it to an individual plan at least one month before
quitting his job or retirement. Kulkarni is advised to continue with his
accident disability insurance policy of `50 lakh and buy critical illness
insurance policy worth `25 lakh, which will cost him `8,000 per annum.
Road
map for the future
Having taken care of the insurance requirement,
Kulkarni can start planning for his financial goals. The first is to set aside
six months worth of expenses as a contingency corpus, and this will amount to
`1.8 lakh.For this, Maalde has allocated the cash holding `65,000, postal
schemes worth `60,000 and debt mutual funds of `56,000.This amount should be
invested in an ultrashort term fund.
Kulkarni wants to construct a house in five years, for
which he will require `24 lakh. To achieve this, Maalde has allocated `10 lakh
of maturity proceeds from the insurance policy, `2.5 lakh of fixed deposit and
`1.5 lakh worth of gold. He advises investing the fixed deposit and gold
holding in an equity fund. He should also reinvest the insurance maturity value
in an arbitrage fund for two years. Additionally, Kulkarni should start a fresh
monthly SIP of `7,500 in a balanced fund to accumulate the desired corpus for
this goal.
Next, Kulkarni wants to save nearly `68 lakh for his
son's education expenses in 13 years. For this, Maalde has allocated his equity
mutual fund investments and recommends continuing with the monthly SIP of
`15,000.
As for his son's wedding expenses in 20 years, he
wants to save nearly `46.5 lakh.For this, Maalde has aligned one of his mutual
fund schemes and gold worth `1.5 lakh with the goal. He is advised to continue
with the `4,000 SIP in the scheme. This will help accumulate the desired corpus
for the goal.
Finally, for his retirement, Kulkarni has estimated a
need of `3.2 crore in 26 years.To achieve this goal, Maalde has aligned the
investment in one of the mutual fund schemes as well as the EPF corpus. These
will yield nearly `1.12 crore by the time he retires. Maalde advises continuing
with the monthly investment of `8,000 in the equity scheme. At an annual rate
of return of 13% for equity investments, this will help build the desired
corpus for Kulkarni's retirement goal.
