Link goals with investment
Hyderabad-based Prabhakaran will have to stagger
his primary goals to achieve them with ease.
Pradeep Prabhakaran is a software
engineer who stays with his homemaker wife and a six-month-old child in a
rented house in Hyderabad. He brings in a monthly income of 74,000 and after
considering expenses and investment, is left with a surplus of 8,709. His
portfolio of 28 lakh includes equity worth 12.69 lakh in the form of stocks and
mutual funds, debt of 12.69 lakh in the form of EPF, fixed deposit and debt
funds, and cash of 2.65 lakh. His goals include building an emergency corpus,
buying a house, saving for the child’s education and wedding, and his own
retirement.
Maalde suggests that Prabhakaran
first build a contingency corpus of 3.54 lakh, which is equal to six months’
expenses, by allocating 2.3 lakh of cash. For the remaining amount, he should
save the surplus amount before buying property. This should be invested in a
liquid or an ultra short term fund. To buy a house worth 35 lakh in a year, he
wants to make a down payment of 7 lakh. This can be funded by allocating his
fixed deposit, debt fund and remaining cash. For the remaining 28 lakh, he can
take a loan, which at 8% for 30 years, will result in an EMI of 20,545. For the
child’s education goal in 18 years, he needs 69 lakh and can build the amount
by allocating his stocks worth 9.6 lakh. For the child’s wedding in 25 years,
he wants to amass 54 lakh and will have to start an SIP of 3,000 in a
diversified equity fund. Since he doesn’t have enough surplus currently, he can
do so after a rise in income. Finally, for retirement, he needs 5.5 crore in 27
years. For this, he will have to assign his EPF and equity fund. Besides this,
he will have to start an SIP of 15,000 in a diversified equity fund. This can
be sourced from the surplus since he will save on rent after buying property.
For life insurance, he has a Ulip
worth 25 lakh for which he has paid a single premium. Maalde suggests he stop
paying the premium for the plan, and instead buy a 1 crore term plan, which
will cost him 1,000 a month. As for health insurance, Prabhakaran has a 4 lakh
family floater plan provided by his employer and has taken another 4 lakh plan,
for which he is paying 458 a month. Maalde suggests he buy an independent 10
lakh family floater plan, which will cost 1,250 a month. He should also buy a 25
lakh accident disability plan for himself, which will come for a monthly
premium of 333.
