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Family finance: Why this Bengaluru-based couple needs to invest more in equity

The couple's goals include saving for future child’s education and wedding, buying a house and a car, taking a foreign vacation, and retirement.

, ET Bureau|
Dec 31, 2018, 06.30 AM IST
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The Bengaluru-based couple will need to raise equity exposure and align investment with their goals.
Harish V, 32, is a financial analyst and lives with his homemaker wife in Bengaluru. He gets a monthly salary of Rs 1 lakh, and along with the rent of Rs 5,000, his total income comes to Rs 1.05 lakh. Harish has bought a house worth Rs 60 lakh, for which the outstanding loan is Rs 20 lakh, and he is paying an EMI of Rs 19,500.

Harish’s portfolio comprises equity worth Rs 1.5 lakh in the form of mutual funds; debt in the form of EPF (Rs 3 lakh), PPF (Rs 95,000), fixed deposit (Rs 1.8 lakh) and recurring deposit (Rs 80,000); and cash of Rs 1 lakh. After considering household expenses, insurance premium, loan EMI and investments, Harish is left with a surplus of Rs 8,730.

His goals include building an emergency corpus, saving for future child’s education and wedding, buying a house and a car, taking a foreign vacation, and retirement. According to Financial Planner Pankaaj Maalde, lack of investible surplus means he will have to put off the goals of house and vacation.

Portfolio
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Cash flow
harish-cashflow

Harish can start by building the emergency fund of Rs 4.2 lakh by allocating his cash, fixed deposit, recurring deposit, and insurance value. This should be invested in a liquid or short-duration debt fund. For his future child’s education corpus of Rs 34 lakh in 18 years, he can start an SIP of Rs 5,000 in a diversified equity fund.

For the kid’s education, Harish will need Rs 54 lakh in 25 years and can start an SIP of Rs 2,500 in a diversified equity fund and Rs 1,000 in the gold bond scheme. For retirement, Harish will need Rs 6.4 crore in 28 years and can assign his stocks, and EPF and PPF corpuses.

How to invest for goals
goals-investing

He will also need to start an SIP of Rs 20,000 in a diversified equity fund, and continue to invest Rs 500 a year in the PPF. As for the goal of buying a car worth Rs 12 lakh in five years, Maalde suggests he allocate his chit fund corpus of Rs 5 lakh in an equity savings fund and start a monthly SIP of Rs 7,000 in the same fund.

For life insurance, Harish has two traditional plans of Rs 13 lakh. Maalde suggests he surrender both the plans and buy a term plan of Rs 2 crore, which will come for a premium of Rs 2,000 a month.

Insurance portfolio
insurance-portfolio

For health insurance, Harish has a Rs 2.5 lakh cover from his employer and has bought a Rs 2 lakh plan for his parents. Maalde suggests he buy a family floater plan of Rs 10 lakh, which will cost Rs 1,000 in monthly premium. In addition, he should pick a Rs 50 lakh accident disability plan, which will come for a monthly premium of Rs 583.

Financial plan by Pankaaj Maalde Certified Financial Planner

Write to us for expert advice
Looking for a professional to analyse your investment portfolio? Write to us at etwealth@timesgroup.com with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals.
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