Raise equity exposure
With a high realty
skew, Pune-based Iyers will now need to invest in equity to reach their goals.
Deepak Iyer is an IT professional and
stays in his own house in Pune with his wife and son. He brings in a monthly
salary of 1.14 lakh, and combined with the rental income of 7,500 a month, the
total comes to 1.21 lakh. Besides the self-occupied house, he has three other
properties, two of which are in his name. He is getting a monthly rent of 7,500,
6,500 and 6,500, but the amount from the latter two goes to his parents. He is
also repaying three home loans worth 42.9 lakh, with EMIs of 56,281. Financial
Planner Pankaaj Maalde advises Iyer to completely repay one of the loans and
prepay a part of another from his cash holding to reduce the EMI to 11,300 from
the existing 20,900. As for Iyer’s portfolio, it includes property worth 1.13
crore, cash of 12 lakh, and debt in the form of EPF (10 lakh) and PPF (1.5
lakh). Iyer’s goals include saving for emergencies, child’s education and
wedding, and retirement.
Maalde suggests Iyer first build an
emergency corpus of 5.52 lakh, which is equal to six months’ expenses. He can
do so by assigning a part of his cash, 6 lakh, to the goal and investing it in
an ultra short-term fund. As for the child’s goals, Iyer wants to save 55 lakh
for education in 15 years, and 88.5 lakh for the wedding in 22 years. Since he
will retire in 18 years, he will also have to invest for the wedding goal for
18 years. For education, he will have to start an SIP of 11,000 in a
diversified equity fund. For wedding, he should start an SIP of 7,000 in a
diversified equity fund and 1,500 in the gold bond scheme.
For retirement, Iyer will require 3.35
crore in 18 years, and will have to allocate his properties worth 58 lakh, as
well as the PPF and EPF corpuses. These are likely to yield 2.7 crore for the
goal. For the shortfall, he will have to start an SIP of 8,000 in a diversified
equity fund, continue to invest 500 a year in the PPF, and contribute to the
EPF till he is 60.
As for life insurance, Iyer does not
have a term plan, and Maalde suggests he buy a 1.2 crore cover, which will cost
him 1,750 a month. As for health insurance, Iyer has a medical cover of 4 lakh
provided by his employer, but has no independent medical cover. Maalde advises
him to buy a 10 lakh family floater plan, which will cost 1,500 a month. Iyer
should also purchase a critical illness plan of 25 lakh and an accident
disability cover of 50 lakh, both of which will cost 1,792 a month.
