Invest abroad to hedge inflation and currency risks in overseas education:: Business Line

I am 38 years old and my dependents are my wife and two sons aged 11 and 5. I have a life cover from my employer for Rs 1.1 crore and unlimited medical cover.

My current savings are Rs 2.4 crore, of which 65 per cent is in equity, including overseas investments. I have invested Rs 1 lakh in gold. I have not invested in real estate, because I may live abroad till retirement. My income in India is taxed at 10 per cent. My monthly surplus for the next four years will be Rs 3 lakh.

My goals are: buying a house in 2016 for Rs 1.5 crore; retirement in 2030 with Rs 5 crore. Is it possible for me to retire before 55? For elder son’s higher education, I would need $50,000 per year during 2019 to 2025 at today’s cost.

I would also need to provide for my second son’s education during 2025 to 2031. I would need Rs 20 lakh for my elder son’s wedding in 2027 and Rs 25 lakh for younger son’s wedding in 2032.

— Rakesh

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Since you wish to settle down in India post-retirement, you should have started investing in plots here.

If you construct an aggressive portfolio with 15 per cent returns, you can reach most of your goals, including retiring at 55.

If you construct a moderately risky portfolio with 12 per cent returns, you need to save an amount monthly to reach your goals. The only concern that needs to be addressed is your low job security.

Since you have employment contract for the next four years, you need to control your expenses and save as much as possible.

Education

You need to factor in inflation as well ascurrency risk. Invest a portion of your future savings in US stocks and it must generate returns of 6.5 per cent. Although risky, another strategy is to buy education stocks.

You need Rs 1.62 crore per child. If you consider a moderate portfolio with 12 per cent returns, a lump-sum investment of Rs 45 lakh or a monthly saving of Rs 1.24 lakh for next 84 months will help you meet the first child’s education needs.

For the younger son, invest a lump-sum of Rs 30 lakh or Rs 43,500 for the next 156 months.

House

Invest Rs 1 crore in balanced fund and it should earn a return of 9 per cent.

Retirement

You have to invest a lump-sum of Rs 72.5 lakh and it should earn a return of 12 per cent. Alternately, if you wish to save on a monthly mode, you ought to save Rs 75,600 for the next 204 months.