Increase equity exposure
The high surplus means that Delhi-based Dutts will
achieve their goals without much difficulty.
Pankaj and Priya Dutt stay in Delhi
with their six-month old son. Both are employed and get a combined monthly
salary of 2 lakh. After considering all their expenses and investment, the
couple is left with a surplus of 70,332. Their portfolio includes ₹5 lakh in cash, 16 lakh in debt in the form of EPF
and PPF, and 6.5 lakh in equity in the form of mutual funds. Their goals
include building a contingency corpus, buying a car, saving for their child’s
higher education and wedding, and their own retirement.
Financial Planner Pankaaj Maalde
suggests that Dutts start by repaying their expensive car loan of 1.5 lakh with
their cash holding. This will free 9,000 for their goals. Next, they can build
the emergency corpus of 4.1 lakh, equal to six months’ expenses, by allocating
their remaining cash. The shortfall can be made up by assigning the surplus to
this goal for about four months. This should be invested in an ultra short
duration fund.
To buy a car worth 20 lakh in five
years, the couple will have to start an SIP of 35,000 in an equity savings fund
for four years. For the education of their child in 18 years, the couple has
estimated a need of 82 lakh. For this, they will have to start an SIP of 12,000
in a diversified equity fund. For the child’s higher education at 21, they want
1 crore and can amass it by starting an SIP of 10,000 in a diversified equity
fund. As for the kid’s wedding in 25 years, the couple wants 1.3 crore. They
will have to start an SIP of 8,000 in a diversified equity fund and 2,000 in
the gold bond scheme. Finally, for retirement, the couple needs 10 crore in 28
years and will have to allocate their EPF, PPF and equity fund corpuses for
this goal. They will also have to invest 25,000 a month in the PPF and continue
with the SIP of 25,000 in a diversified equity fund.
For life insurance, the couple has
two traditional plans and should continue with these as a debt component of
their portfolio. Pankaj should buy a term plan of 1.5 crore, and Priya of 1
crore, which will cost them 2,500 a month in premium. For health insurance, the
couple has a 3 lakh cover by the employer and an independent 5 lakh plan for
Pankaj. They should buy a 5 lakh family floater plan and a 15 lakh top-up plan
with a 5 lakh deductible, which will cost 1,667 a month. Both should also buy
accident disability plans of 25 lakh each for 667 a month.
