Raise equity exposure
Bengaluru-based
Kumar will need to invest in equity to be able to reach his milestones.
Ravi Kumar is a 32-year-old software
engineer, who stays with his homemaker wife and oneyear-old child, in
Bengaluru. He has his own house worth 60 lakh, for which he has taken a loan of
17.1 lakh and is paying an EMI of 50,253. His investments include a post office
scheme, EPF and mutual funds. Kumar’s goals are simple and he wants to save for
emergencies, his child’s education and wedding, and his own retirement.
Financial Planner Pankaaj Maalde suggests that Kumar first reschedule his home
loan to reduce the EMI by increasing the tenure. This will free up 35,500 a
month to be invested for his goals.
Kumar can start by building an
emergency corpus of 3 lakh, which is equal to six months’ expenses. This can be
done by using his cash holding (20,000), liquid fund corpus (39,000) and the
post office scheme corpus (1 lakh), and investing the amount in an ultra
short-term fund. For the remaining amount, he can save 13,000 for a year to
reach the goal.
Next, he wants to save 1.5 crore for
his child’s education in 17 years. To reach this goal, he will have to start an
SIP of 25,000 in an equity fund. For the child’s wedding in 24 years, he has
estimated a need of 1.2 crore. He can reach this goal by starting an SIP of 8,000
in an equity fund and 2,000 in the gold bond scheme.
Finally, for retirement, he will need
a sum of 5.6 crore in 28 years. To meet this goal, he can assign his equity
fund and EPF corpuses. Besides these, he will have to start an SIP of 15,000 in
a diversified equity mutual fund for the specified period.
For life insurance, Kumar has five
traditional plans worth 17.5 lakh, and for which he is paying a monthly premium
of 9,167. Maalde suggests he surrender three of these plans and retain two, and
also buy a term plan worth 1.5 crore for 30 years. This will cost him about 1,333
a month.
He has also bought a health plan of 10
lakh for his parents. Maalde suggests he retain this and purchase a 10 lakh
family floater plan for himself, his wife and daughter at a cost of 1,970 a month.
Kumar is also advised to buy a 25 lakh critical illness plan as well as a 25
lakh accident disability plan for himself at a premium of 1,000 a month.
