K. Senthil lives with his wife and two children, aged 13 and nine, in his own house, in Chennai. He gets a monthly salary of Rs 2.14 lakh, and combined with the annual bonus and rent, his total income comes to Rs 3.15 lakh. Besides the self-occupied house, he has three properties and one plot of land, all worth Rs 4.8 crore.
His portfolio also includes equity worth Rs 1.46 crore in the form of stocks and mutual funds, and debt worth Rs 89 lakh in the form of EPF, PPF, gold, gratuity and superannuation. His goals include building an emergency corpus, buying a car, saving for his children’s education and weddings, and his own retirement. Given the quantum of his existing resources, Senthil will not need to make any fresh investments to achieve all his goals.
Chintan Vora of 5nance.com suggests that Senthil create an emergency corpus of Rs 5.5 lakh by allocating a part of his mutual fund corpus. This should be invested in a liquid fund. He also wants to buy a car worth Rs 27.2 lakh in four years, for which he can allocate his gold holding and Rs 7 lakh from his mutual fund corpus.
For his older child’s higher education in four years, he wants to amass Rs 51.2 lakh and can achieve the goal by allocating Rs 29.3 lakh of his mutual fund corpus. For the second child’s education in eight years, he wants Rs 85.7 lakh and can amass it by assigning Rs 28.1 lakh of his mutual fund corpus. For the weddings of his children in 16 and 19 years, Senthil has estimated a need of Rs 1.3 crore and Rs 2.1 crore, respectively. He can do so by allocating Rs 14.7 lakh and Rs 15.1 lakh from his mutual fund corpus for these goals.
How to invest for goals
For retirement in six years at the age of 52, Senthil will need Rs 2.08 crore, and can assign his EPF, PPF, insurance maturity value, mutual funds, and retirement benefits. No fresh investment is required for this goal. Since Senthil is retiring early, he should also ensure that he repays his home loan before this period.
For life insurance, Senthil has a term plan of Rs 1 crore and two traditional plans of Rs 7 lakh. Vora suggests he continue with these. Senthil does not require any more life insurance. He should retain the traditional plans as a debt component of his portfolio. For health insurance, he has a Rs 5 lakh family floater plan. Vora advises him to buy a top-up plan of Rs 5 lakh, which will cost Rs 1,000 a month in premium. This will take care of his insurance needs.