I'm a married man, 34, with a son (1.5 years old). These are the details of my income and expenses, as well as my current investments:
I have planned to invest the surplus amount in the following mutual funds via SIPs mentioned in the above goal table:
1. HDFC Top 200
2. DSPBR Top 100
3. IDFC Premier Equity
4. Forties Flexi Debt
5. JM Money Manger Super
6. Canara Robeco Equity Taxsaver
I have medical insurance covered by my company that also covers my wife and my parents (Rs 2 lakh). I recently took a home loan of Rs 38 lakh. Now that I plan to take term insurance, shall I discontinue my current LIC policies?
I am expecting additional income of Rs 10,000 per month from house rent in the future. Should I use this amount (Rs 1.2 lakh per year) for prepayment of my home loan to reduce the burden or should I invest elsewhere for better returns?
Considering 10 per cent increment in salary every year, can I achieve my goals with the above investments?
ASSETS ALLOCATION
A look at your current investment portfolio makes it evident that it is high on debt, around 53 percent, mostly by way of NSC and EPF contributions. Pay attention to the fact that your debt investments are all in locked-in instruments. Any withdrawal required in an emergency would, therefore, be a concern.
Since time is on your side, equity must be the preferred investment option. Ideally, you should have 80 per cent allocated to equity mutual funds and 20 per cent to debt.
Currently, your equity exposure includes 87 percent investment in shares and the rest in mutual funds. Invest in shares only if you have sufficient knowledge and expertise of managing and researching various worthy companies.
Further, your investment in Tata Infrastructure Fund seems risky. It is a thematic fund and these should not form the core of your portfolio.
Also, investments in gold should be viewed just as an additional diversification. So, try to limit it to around five per cent.
GOALS
Assuming inflation at 6.50 per cent, Rs 30,000 will be equivalent to Rs 1.36 lakh by the time you retire. Accumulating a corpus of Rs 2.94 crore will help you derive the required monthly income.
To achieve all your goals comfortably, you will have to invest around Rs 6,300 per month, while increasing this at a rate of 10 percent every year. For calculation, we are assuming compounded annual rate of return of 10 per cent.
FUTURE INVESTMENTS
You have rightly chosen good star-rated funds. But, choose only four to five funds. You should, however, first decide your debt to equity ratio and then decide the funds.
As you have a long-term horizon, it is essential to review your portfolio at least once a year.
LIFE INSURANCE
For your existing LIC Policy, the coverage amount of Rs 6 lakh seems insufficient. You may go ahead with your plan to take a term plan with an insurance coverage of Rs 1 crore. This would cover your need for your future goals, including home loan insurance.
If you have just taken the policy and have the option of surrendering it right now, without incurring huge costs, go ahead. Else, you shall hold it till maturity.
HOME LOAN PREPAYMENT
You may use the expected income in the form of house rent to prepay your home loan if the bank does not charge any major penalty cost for it.
MEDICAL INSURANCE
Your health insurance is currently taken care of by your employer. Get a medical insurance on your own, since any switch between jobs would leave you uninsured.
