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I need Rs 25 lakh for daughter’s college & Rs 5 crore for retirement. Can I do it with Rs 50,000 SIP?
I am 42, earning Rs 22 lakh annually, and will need Rs 25 lakh for my daughter’s college in six years and Rs 5 crore retirement corpus by 60. My current investments include Rs 12 lakh in MFs (70:30 equity-debt), Rs 5 lakh PPF, Rs 3 lakh FD. I have home loan outstanding Rs 38 lakh (Rs 35,000 EMI). I can invest Rs 50,000 monthly. How can I meet my goals?
Prableen Bajpai Founder, FinFix Research and Analytics: You can achieve your goal of accumulating Rs 25 lakh over the next six years, by allocating your existing mutual fund corpus of Rs 12 lakh, assuming 12% returns. To optimise returns and improve tax efficiency without significantly increasing risk, consider switching your debt fund holdings into hybrid funds, such as balanced advantage or multi-asset allocation funds. You must check the downside protection during market falls for the schemes shortlisted from these categories before investing. For your retirement goal of building a Rs 5 crore corpus by age 60, a Rs 50,000 monthly SIP may fall short, but this gap can be bridged by increasing your SIP amount by 6% annually while assuming a 12% XIRR. Remember: 18 years from now, Rs 5 crore will be equivalent to about Rs 1.75 crore in today’s value, assuming a 6% inflation rate. Your retirement requirement calculation will depend on household expenses, inflation, expected investment returns before and after retirement, and life expectancy.
Also Read: I am an NRI. How can I take money out of India after selling inherited property and shares with minimum taxes?
At 32, I’ve closed my home loan and have no liabilities. I have a Rs 1 crore term insurance plan and a Rs 10 lakh family floater health cover. I invest Rs 1.5 lakh annually in the PPF, Rs 1.5 lakh in the Sukanya Samriddhi Yojana (SSY), Rs 10,000 a month in the NPS, and Rs 40,000 a month via SIPs in equity and hybrid mutual funds. I plan to add two Rs 5,000 SIPs in Motilal Oswal Mid & Large Cap and ICICI Silver ETF FOF. My goals include saving for the education of my two children and house renovation. Are my fund choices and allocation on track?
Ravi Kumar TV Co-founder, Gaining Ground Investment Services: Your investment plan is good in terms of foresight and diversification, but you can make some adjustments to strengthen it further. Your term insurance is suitable for the time being, but it will be advisable to enhance the coverage in the next five years. More importantly, you need to increase your health cover as it will prevent any medical emergencies from turning into financial burdens. For your daughter’s higher education, the Rs 1.5 lakh annual contribution to the Sukanya scheme is desirable, but you can lower the amount to Rs 90,000 till she is 15. For your younger child’s education, you can invest Rs 8,000 in monthly SIPs in small-cap and flexi-cap funds. Continue for eight more years and you should be able to amass around Rs 20 lakh. To renovate your house, assuming it costs Rs 25 lakh in about 10 years, use your index and hybrid funds. Add future SIPs in Motilal Oswal Mid & Large Cap and ICICI Silver ETF FOF for this purpose. As for retirement planning, you are currently on track. Continue investing in the PPF and NPS, and include your mid-cap fund in this portfolio. This will help you accumulate about Rs 7 crore by age 60. While it is a significant amount, whether it will be sufficient depends on your lifestyle and spending needs. Overall, you have made prudent investments, but should think of increasing the exposure to mid- and small-cap funds as per your risk profile.
Have a question for the experts? etwealth@timesgroup.com
I need Rs 25 lakh for daughter’s college & Rs 5 crore for retirement. Can I do it with Rs 50,000 SIP?
I am 42, earning Rs 22 lakh annually, and will need Rs 25 lakh for my daughter’s college in six years and Rs 5 crore retirement corpus by 60. My current investments include Rs 12 lakh in MFs (70:30 equity-debt), Rs 5 lakh PPF, Rs 3 lakh FD. I have home loan outstanding Rs 38 lakh (Rs 35,000 EMI). I can invest Rs 50,000 monthly. How can I meet my goals?
Prableen Bajpai Founder, FinFix Research and Analytics: You can achieve your goal of accumulating Rs 25 lakh over the next six years, by allocating your existing mutual fund corpus of Rs 12 lakh, assuming 12% returns. To optimise returns and improve tax efficiency without significantly increasing risk, consider switching your debt fund holdings into hybrid funds, such as balanced advantage or multi-asset allocation funds. You must check the downside protection during market falls for the schemes shortlisted from these categories before investing. For your retirement goal of building a Rs 5 crore corpus by age 60, a Rs 50,000 monthly SIP may fall short, but this gap can be bridged by increasing your SIP amount by 6% annually while assuming a 12% XIRR. Remember: 18 years from now, Rs 5 crore will be equivalent to about Rs 1.75 crore in today’s value, assuming a 6% inflation rate. Your retirement requirement calculation will depend on household expenses, inflation, expected investment returns before and after retirement, and life expectancy.
Also Read: I am an NRI. How can I take money out of India after selling inherited property and shares with minimum taxes?
At 32, I’ve closed my home loan and have no liabilities. I have a Rs 1 crore term insurance plan and a Rs 10 lakh family floater health cover. I invest Rs 1.5 lakh annually in the PPF, Rs 1.5 lakh in the Sukanya Samriddhi Yojana (SSY), Rs 10,000 a month in the NPS, and Rs 40,000 a month via SIPs in equity and hybrid mutual funds. I plan to add two Rs 5,000 SIPs in Motilal Oswal Mid & Large Cap and ICICI Silver ETF FOF. My goals include saving for the education of my two children and house renovation. Are my fund choices and allocation on track?
Ravi Kumar TV Co-founder, Gaining Ground Investment Services: Your investment plan is good in terms of foresight and diversification, but you can make some adjustments to strengthen it further. Your term insurance is suitable for the time being, but it will be advisable to enhance the coverage in the next five years. More importantly, you need to increase your health cover as it will prevent any medical emergencies from turning into financial burdens. For your daughter’s higher education, the Rs 1.5 lakh annual contribution to the Sukanya scheme is desirable, but you can lower the amount to Rs 90,000 till she is 15. For your younger child’s education, you can invest Rs 8,000 in monthly SIPs in small-cap and flexi-cap funds. Continue for eight more years and you should be able to amass around Rs 20 lakh. To renovate your house, assuming it costs Rs 25 lakh in about 10 years, use your index and hybrid funds. Add future SIPs in Motilal Oswal Mid & Large Cap and ICICI Silver ETF FOF for this purpose. As for retirement planning, you are currently on track. Continue investing in the PPF and NPS, and include your mid-cap fund in this portfolio. This will help you accumulate about Rs 7 crore by age 60. While it is a significant amount, whether it will be sufficient depends on your lifestyle and spending needs. Overall, you have made prudent investments, but should think of increasing the exposure to mid- and small-cap funds as per your risk profile.
Have a question for the experts? etwealth@timesgroup.com
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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