On track to meet goals
Aggressive savings and high surplus will translate
into a simple investment strategy to reach goals.
Anirudh Nayak is an engineer working
in the UAE, where he stays with his wife and four-year-old child. He earns a
monthly salary of 3.8 lakh. His portfolio, worth 1.99 crore, comprises 1.1
crore of real estate (house and a plot), 9 lakh cash, equity worth 16 lakh, and
debt worth 70.8 lakh in the form of fixed deposit (34.5 lakh), PPF (27.3 lakh)
and Sukanya Samriddhi scheme (9 lakh). His goals include building an emergency
corpus, buying a house, saving for the child’s education and wedding, and retirement.
Financial Planner Pankaaj Maalde
suggests Nayak first get rid of his credit card debt of 6.6 lakh from his fixed
deposit. He should then build the emergency corpus of 7.7 lakh, which is equal
to three months’ expenses, by allocating his cash holding. This should be
invested in an ultra-short duration fund. To buy a house worth 1.8 crore in
three years, he will have to allocate his plot of land and fixed deposit. For
the remaining amount of 92 lakh, he will have to take a home loan. At a rate of
9% for 20 years, the EMI will come to 82,700, which can be sourced from the
surplus.
For the higher education of his child
in 14 years, he needs 1.9 crore. He can build this by allocating the Sukanya
Samriddhi scheme and starting an SIP of 45,000 in a hybrid fund. He should also
put in 500 a year in the Sukanya scheme. As for the child’s wedding in 21
years, he will need 2 crore. He will have to start an SIP of 16,000 in a
diversified equity fund and 2,500 in the gold bond scheme or gold ETF. No existing
resource is being allocated for this goal. For retirement, he will need 11
crore in 23 years, and can assign his PPF corpus, stocks and mutual funds.
Besides, he will have to start an SIP of 53,000 in a diversified equity fund
and 500 a year in the PPF.
For life insurance, Nayak has two
term plans and four traditional plans. Maalde suggests he surrender three
traditional plans, and continue with one as a debt portion of his portfolio. He
should also hold the term plans, but his life cover is inadequate and he should
buy an additional 4 crore term plan at a cost of 4,167 a month. As for health
insurance, he has a 3 lakh cover by his employer. Maalde suggests he buy an
independent family floater plan of 10 lakh, which will cost 1,250 a month. He
should also buy a 50 lakh critical illness plan and 1 crore accident disability
plan at 2,500 a month.
