I am a 34-year-old software professional and my wife is 33. We have grandparents and parents as dependants. We also have two children (3 years and below one year). I have a ₹2 crore term insurance. I have also taken health insurance for my parents of ₹3 lakh each. I have planned a contingency fund for expenses worth three months. We have a take-home salary of ₹3 lakh per month. We save almost ₹1.6 lakh. Our goals are building a retirement corpus as per our current lifestyle (after 26 years); higher education of both the children (after 18 and 22 years); and buying a house after 3 years (current value ₹1.25 crore). Please suggest a plan for each goal with equity (large-cap, mid-cap and small-cap) and debt allocation percentage. I have been investing in mutual funds for the last 11 years and I am a high-risk investor.
—Rinkesh Modi
You have a saving potential of ₹1.60 lakh per month or ₹19.20 lakh per annum. You can achieve your financial targets but ensure that you increase your savings every year by at least 5%. Your financial goals are all long term except purchase of house. For that, you can consider giving a down payment of 20% or ₹25 lakh and the balance of ₹1 crore can be taken as loan for a 15-year tenure which at 9% comes to an EMI of ₹1,01,427. The corpus to be saved for this goal can be invested in a short-term debt fund for which you can start an SIP of ₹65,000. The rest of the goals—children’s education and retirement planning—are all long-term goals and hence the balance savings of ₹95,000 can be invested in equity which can be distributed across large-caps, multi-caps and mid-caps. For this, you can pick up one fund in the large-cap category and a couple of funds each in the multi- and mid-cap categories. After three years, once the real estate corpus is provided for, you can reduce the monthly investment in debt investments and further increase exposure in the equity asset class. Do keep a small sum continuing in the short-term debt fund SIP as an emergency fund. The reason being you have many dependants and it’s good to keep a cushion. You also need to review your life insurance policy every few years and based on any change in goals, you may even consider enhancing the same.
Likewise, your medical covers for parents, yourself and children should also be periodically reviewed.
It may also be a good idea to check the availability of health insurance for your grandparents as well—a few companies do provide health insurance to senior citizens.
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Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com