Have greater exposure to safer investments if income fluctuates:: Business Line

I am 37 years old and my wife is 35. We have daughters aged 9 and 6. I am a full-time equity trader and my monthly income is Rs 75,000, but there could be deviations to the extent of Rs 25,000. My monthly expenses including rent are Rs 35,000.

Since I don’t go for investments in real estate, I have put my money in other assets. I have a medical floater policy for Rs 4 lakh. I have taken term insurance for Rs 90 lakh.

Investment details:

My direct equity investment in large-cap stocks is Rs 5.5 lakh. In mutual funds, I have invested in diversified schemes and its value is Rs 11.5 lakh.

For some buffer in light of my fluctuating income, I have invested Rs 11 lakh in fixed deposits. I have gold ETF units worth Rs 9.8 lakh. In PPF, I have invested Rs 1.5 lakh.

My goals are:

For my elder daughter’s marriage in 2027, I would need Rs 75 lakh and for my younger one, I may require Rs 1 crore in 2030.

For my retirement I need Rs 2.5 crore by 2037. How much should I invest for each of these goals in different SIPs?

— Purusottam Mantri

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Asset allocation should not only be based on investment surplus, risk appetite, but should also be based on the source of income.

In your case, the equity markets are the source of your core income. Hence, you should take great care in having good diversification.

When your incomes are uncertain, your portfolio should have higher exposure to safer investments.

Construct a portfolio with 50:30:10:10 in debt, equity (including mutual funds), gold and real estate for all your fresh investments.

With such a portfolio you can reach all your goals. Do continue your existing investment as such for your retirement goal.

Marriage

Considering your current income, spending Rs 75 lakh for marriage appears to be on the higher side. To get an idea, if you discount the same at 7 per cent, the present value will be Rs 29.5 lakh.

However, if you save a sum of Rs 14,000 for the next 168 months and if you can earn a return of 9 per cent (same return assumed for all goals) you can reach the target of Rs 47 lakh.

For the balance, earmark your fixed deposits and it should earn post-tax return of 7 per cent.

For your younger daughter, earmark the gold ETFs that you own and it will take care of 33 per cent of the requirement, provided it earns 8 per cent return. For the balance, save a sum of Rs 13,900 for next the 204 months to reach the target.

Retirement

If your current investment in equity and mutual funds delivers 12 per cent and 10 per cent you can reach a target of Rs 2.18 crore. For the remaining amount, save Rs 2,900 every month till retirement. After meeting all the goals, you may be left with a surplus. Set aside that amount for your children’s higher education needs and to meet your health insurance premium.

Increase your term insurance cover by Rs 25 lakh.