I am 72 years old and my wife is 62. We have sons who are independent. We live in our own house and our monthly expenses are Rs 45,000.
Our medical expenses are borne by my ex-employer.
Our investments are as follows: Fixed deposits worth Rs 65 lakh and we receive interest income of Rs 6 lakh. I have invested Rs 15 lakh in blue chip shares and my wife’s investments are worth Rs 10 lakh.
We receive dividend payout of Rs 1 lakh a year. We have invested Rs 8 lakh in 16 mutual fund schemes and have taken the dividend option.
Besides these, I have parked Rs 3 lakh in a monthly income plan. Every year we invest up to the permissible limit in PPF to avail tax benefits. I anticipate the market to rally and so am planning not to invest in tax saving instruments. Instead, I plan to put that money in direct equity.
Do we need to churn our portfolio for it to sustain till our life expectancy? Both of us are healthy and may live till 80.
— Ashok Kulkarni
Your portfolio indicates that age is no bar to investing in equity. When your expenses are close to your fixed income, it’s always better to have equity exposure to help you bridge any future income gaps.
Your annual living cost of Rs 5.4 lakh will be Rs 9.8 lakh if inflation is at 7 per cent for the next eight years.
With interest rates expected to moderate in the near future and since most of your deposits are maturing in 2014, you have reinvestment risk.
That is why it is prudent to construct a debt portfolio to mature over the years of your lifetime to avoid reinvestment risk.
On your equity investment, the only concern is that since your wife is 10 years younger, she may out live you.
You will need to ascertain if your wife can manage direct equity, while considering further investments.
Given your age and the inherent volatility in the markets, we suggest you dilute your equity investment in favour of mutual fund schemes.
While investing in mutual funds, instead of opting for dividend payout, take the trigger facility with 15 per cent returns on your investments.
This will help you book profits at regular intervals, even though you may not fully participate in the rally.
Since your PPF account has a longer lock-in period, it would be better to route tax saving investments through equity-linked savings schemes.
Regarding your mutual fund investments, most of your schemes have significant overlap.
Restrict investments to a few large- and mid-cap funds as well as dividend yield schemes, all three not totalling to more than seven or eight.
While investing it is prudent to maintain an appropriate asset allocation pattern.
In anticipation of a rally, if you start moving more towards equity, you may end up being overweight on that asset class which may be beyond your risk tolerance.
No comments:
Post a Comment