I am 46 years old and plan to increase my SIPs from Rs 40,000 to Rs 65,000 a month for my daughter’s education, wedding and my retirement. For her education, I need Rs 45 lakh in eight years, and for her wedding, I need Rs 40 lakh in 12 years (both current costs). I also need Rs 2 crore in 12 years for my retirement. I have a moderate risk appetite and currently have Rs 45 lakh in my mutual fund portfolio (mix of mid-cap, flexi-cap, small-cap funds). I have employee insurance as well as term insurance worth Rs 2.5 crore. I have employee medical insurance and a family medical top-up cover of Rs 5 lakh. I have paid off my home loan. Are my financial goals achievable?Vidya Bala, Co-founder, PrimeInvestor.in: Since you have mentioned the current cost of education and wedding, we will apply an additional 5% assumed inflation for the respective time periods. This means the future cost of education and wedding will be about Rs 66.5 lakh and Rs 71.8 lakh, respectively. Assuming you need Rs 2 crore as retirement corpus after considering your living expenses, you should be able to meet the education goal with the current corpus and proposed SIP by eighth year, assuming 11% return. You might fall short of the 12-year goals by Rs 20-25 lakh, considering the same return. You must raise your SIPs to Rs 73,000-75,000 to meet the shortfall in your retirement and for your child’s wedding.I am 24 years old, with a monthly salary of Rs 40,000. I have a car loan of Rs 9 lakh that has an EMI of Rs 14,232 for seven years. I have savings of Rs 50,000 and a monthly SIP of Rs 3,000 in the SBI Small-cap fund. I also have a monthly recurring deposit of Rs 1,500. I want to start an investment of Rs 3,000 from December. Should I prepay my car loan or start an investment?
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser:
As per the loan details, your car loan rate would be about 8.5%. Over seven years, you will pay about Rs 3 lakh in interest, in addition to the Rs 9 lakh principal. You haven’t provided the details of your expenses, but given the limited asset base, it is more important to scale up your savings. You should consider having an emergency fund, which is equivalent to at least 3-6 months’ worth of expenses. A recurring deposit of Rs 1,500 is not enough. It’s better to increase your savings base with the extra Rs 3,000 rather than prepay the car loan. You can increase your RD or SIP amount to do this. If your job provides you with an annual bonus, then consider making some loan prepayments using the same. Since cutting down expenses isn’t easy, I would suggest that you look for higher pay opportunities. You are paying almost 30% of your income on the EMI of a depreciating asset and this isn’t an ideal scenario. If you have dependants and don’t have life insurance, consider purchasing one immediately. Being young, you will be able to get one at a low premium. You should also purchase an adequate health insurance plan.
I am 48 years old and plan to retire by 2030. My yearly expenses are Rs 20 lakh, and future expenses will include Rs 1 crore for higher education of kids, and Rs 30 lakh for my mother’s medical needs. My current investments include a mutual fund portfolio of Rs 2.5 crore, with 90% in equity schemes; Rs 2 crore in FDs; Rs 60 lakh in the PPF and PF, and stocks worth Rs 50 lakh. I also have monthly SIPs of Rs 1.4 lakh in mutual funds. I don’t have any liabilities. How should I plan for my retirement after 2030?
Naveen Kukreja, Co-Founder and CEO, Paisabazaar.com: It would be advisable to sell your stocks, unless these are high conviction ones, and invest the proceeds in equity mutual funds. Assuming a 10% annualised return, your equity portfolio should grow to Rs 5.35 crore by your targeted retirement age. Route your monthly SIPs solely to equity mutual funds. Assuming the same returns, SIPs for the next seven years should increase your total equity portfolio to Rs 7 crore. You can distribute your existing equity portfolio and incremental SIPs among flexi-cap, large-cap index and aggressive hybrid fund categories in equal proportion.
As for your fixed income portfolio, park Rs 2 crore in fixed deposits of scheduled banks offering yields of 8% and above, for 2-3 year tenures. You can redeem from your existing debt funds and park the proceeds in these high-yield FDs. Your FD corpus should take care of your emergency fund requirements, higher education needs of your children and your mother’s medical needs. You can continue with your PPF and PF investment after retirement. Till you are 55, maintain at least 60% of your portfolio in high-yield FDs, with monthly payout options. A post-tax return of 6% from these FDs should generate an annual interest income of Rs 33.3 lakh, which should be adequate for your post-retirement income.
The rest of your post-retirement portfolio should remain in equity mutual funds for continued wealth creation. You can redeem from your equity funds to replenish your fixed income portfolio, as and when required. You should also have adequate life and health insurance. One should have a pure term insurance plan that is 10-15 times your annual income. You can consider from among these private life insurers —ICICI Prudential, HDFC Life, Max Life, Tata AIA, PNB Metlife and Bajaj Allianz Life.
I am 37 years old. I invest in a mix of mid-cap, large-cap and blue-chip stocks with four baskets of Rs 50,000 each. My goal is to get Rs 40 crore 20 years from now. I have also taken a loan against gold and started options selling in the Nifty 50. I am making Rs 2,000 per day by selling far OTM options. Should I continue options selling or get into swing trading in equity as I am afraid of volatility?
Adhil Shetty, CEO, BankBazaar: While investing, diversification of sectors and market capitalisation is very important. Your mix of equity categories is a good approach to contain volatility. Selling options can generate regular income, but you must understand its risks. Out-of-the-money (OTM) options can be safer, but there’s still risk of substantial losses if the market moves against your positions. Monitor your options positions, set stoploss limits and have a risk management strategy in place to protect your capital. It’s not advisable to do equity trades on a loan. You should provision for the loan in case you suffer losses. Swing trading in equities can be profitable, but is also subject to volatility. Consider your risk tolerance and the time you can devote to active trading. Swing trading requires you to track the markets closely and take quick decisions. Ultimately, your investment decisions should align with your goals, risk tolerance and expertise.
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