I am 26 and am working in a public sector bank for the past four years. I generally invest in mutual funds. My only dependent is my wife, who has no income. My gross monthly income is around Rs 35,000. My monthly household expenses are around Rs 20,000.
My employer is providing full medical reimbursement for me and 75 per cent to my dependant. They are also offering Rs 7.50 lakh of life insurance cover to me. I am eligible for pension under public sector bank rules after retirement. I cannot withdraw the funds from the PF up to 10 years of my service, which is another six years to go. I have also taken a term plan worth Rs 25 lakh and pay an annual premium of Rs 6,500. My only goal is to live a good life and have good savings for unexpected down time. Please suggest what I should do.
- Santosh
You have over 30 years to go for retirement. Your job at the public sector bank ensures you will be eligible for pension and continue to enjoy full medical care.
ANALYSIS
Based on your information, you are doing well with insurance. With just a single dependent at the moment, you are adequately self-insured with the Rs 25 lakh term cover. It is priced well and your selection is laudable.
Along with the insurance offered by your employer, it amounts to monthly expenses at current levels worth 7.5 years. However, you should consider taking a life insurance policy for your wife, despite her housewife status. Start with a small sum of Rs 2-3 lakh and review it at different life-stage events (Read: Life stage events).
Same goes for medical insurance. It will be wise if you take a standard health insurance plan of Rs 1 lakh to augment the cover your employer offers her. This should be Rs 1,200-1,500 from any of the leading health insurers.
You are currently investing Rs 6,000 across four Systematic Investment Plans (SIPs) of Rs 1,500 each. After reviewing your income and monthly expense, we feel you can afford to save more than what you are doing presently. You should maintain a cash-flow statement and check your actual expenses and savings to figure how much more you can save and how to deploy that fund.
Your portfolio is made of good funds. On your total investment of Rs 103,500, you have a notional gain of Rs 44,057. This should give you the necessary confidence.
Your mutual fund portfolio has a 65 per cent equity exposure and has 133 different stocks these funds have collectively invested in. Your fund investment has a mid-cap and small-cap bias, accounting for almost half of the equity exposure. You need not be afraid, as age is on your side .
SUGGESTIONS
After a good start, you need to focus on your investments. It would be worthwhile to have small financial goals. Start with a goal for, say, down payment of a house in five years. Setting goals helps in two ways; you track your investment and you feel satisfied on achieving them.
Your current selection of MFs is good, but it has to be made better. For instance, it is good to have a core and satellite approach to your fund portfolio. At your age, you can consider about 30 per cent of your investments in large caps funds to form the core.
You can allocate the remainder into funds that will act as satellites and place bets in funds with mid- and small-cap exposure or even sector funds that can get you relatively higher returns.
Make it a habit to review your fund holdings at least once a year. This way, you will know how your fund selection is faring and make a course correction in your mutual fund schemes, if required. All the best.
| LIFE STAGE EVENTS |
| FIRST JOB: Should become financially responsible to get into the discipline of saving, investing and protection |
| MARRIAGE: This increases responsibilities; buy adequate insurance, have reserve savings and investments for long-term financial goals. |
| CHILDREN: More dependents for the next 18-20 years, at least. Review your financial well-being and add additional life and health cover. |
| INCREMENTS: An incremental disposable income that should go towards additional savings and investments |
| LIABILITY: Assets such as a home or a car increase liabilities. If these are bought on loan, make sure you are adequately covered for the financial liability. |
| PRE-RETIREMENT: Make sure you have adequate savings and investment that will help you lead a financially sound retired life. |
