I am 36 years old and my monthly income is Rs 85,000 and annual bonus is Rs 2.4 lakh.
I stay with my parents in their house. My wife, aged 32, is pursuing her PhD. We have a 5-year-old daughter. We are expecting our second kid this year. My father, 67, receives a pension of Rs 15,000 and my mother is 62. Our monthly expenses are Rs 55,000, of which I contribute Rs 40,000. I am investing Rs 44,000 in SIPs. I am planning to take a housing loan to pay off my plot balance.
My goals (all in present value) are:
For my daughter’s graduation and post-graduation, I need Rs 10 lakh and Rs 18 lakh, respectively. For the second child I need similar amounts. For my daughter’s marriage, I may need Rs 20 lakh in 2032.
I want to buy a car for Rs 8 lakh after five years. I also wish to buy a house for Rs 50 lakh by 2035. I am planning to accumulate Rs 2 crore for my retirement.
My questions are:
Is my current MF portfolio sufficient to meet my goals? Although I am investing in SIPs for the last eight years, the returns have not been impressive.
My investments are:
I have a plot each in Delhi and Bangalore worth Rs 27 lakh. My balance payment for the plots is Rs 18 lakh. My current PF balance is Rs 5.5 lakh and direct equity, worth Rs 1.7 lakh, is down 35 per cent. My mutual fund portfolio value is Rs 17.5 lakh. I have a term insurance policy for Rs 2.5 crore. My employer and I contribute Rs 4,000 each towards EPF. I have an FD for Rs 2 lakh.
I have adequate health cover for my family.
— Sanjeev
If you become a little prudent, it’s possible to reach all your goals.
For construction, save only for the building cost, because you already hold plots which can act as a hedge against your dream house. If current construction cost of Rs 1,500 a sq ft is inflated at 9 per cent, after 20 years it will be Rs 8,400. For a construction of 1,500 sq ft, you need Rs 1.26 crore. If you save monthly, a sum of Rs 12,800, you can reach the goal. Utilise your annual bonus for new loan’s EMIs.
Education
For your daughter’s graduation Rs 10 lakh will be Rs 24 lakh, if inflated at 7 per cent (same rate considered for all education needs) over the next 13 years. You ought to save Rs 6,500 monthly. For her PG, to reach a target of Rs 56 lakh, you need to save Rs 8,600 a month for the next 17 years. We assume a return of 12 per cent (same considered for all goals).
For the other child’s graduation, you may need Rs 33 lakh for which you have to save Rs 4,500 a month. For the child’s PG, your costs may be Rs 80 lakh. To reach the target you need to save Rs 6,250 monthly for the next 22 years.
Retirement
Earmark all your current investment in mutual fund and direct equity. Current balance and future contribution in EPF will help you reach the goal.
BETTER OPTION
While investing in mutual funds, you should not compare the returns with direct equity. If you have the time and energy you can construct your portfolio. But investing through mutual funds will be a better option for you.
Some of the schemes that you hold have given a compounded annual return of 20 per cent, which is quite reasonable. Rather than holding too many schemes, reduce your exposure to infrastructure schemes. The FMCG sector has had a good run for the past few years; valuations are high there and hence stop future SIPs. Concentrate on diversified schemes and move out of ELSS schemes once the lock-in period is over.
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