If your financial goal is three years away, savings need to be more debt-oriented
2 min read . Updated: 17 Jun 2019, 12:49 PM IST- The key to portfolio building is asset allocation
- Monthly savings also need to have an equity bias
Q: I am 31, married with no children. Our total family monthly income is ₹3 lakh of which ₹1.5 lakh is monthly expenses, including EMIs. I want to invest the remaining ₹1.5 lakh. I also have about ₹30 lakh saved in my bank account for a flat I want to purchase in the next three years. I am confident that the additional EMI burden will be offset by the income growth. How should I go about building a portfolio for wealth creation. I am already investing ₹3 lakh annually in Provident Fund (PF) and National Pension System (NPS) which is included in my monthly expenses. What kind of products should I choose? My risk profile is medium to aggressive.
—Name withheld on request
You have been quite proactive in managing your expenses and have saved well over the years. There are three parts to your savings. Firstly, monthly investment from your regular income; secondly the lump sum of ₹30 lakh to be invested for three years for an apartment. Thirdly, the savings through PF and NPS.
Your risk profile is medium- aggressive, so you should be investing your NPS corpus with the maximum permissible equity exposure. Since this investment is meant for the long term, it can also be part of your retirement corpus. Your monthly savings also need to have an equity bias.
Your property corpus is what needs to be well-protected and if your goal of buying the apartment is to be met in three years, then the asset allocation needs to be more biased towards debt. The advantage you have is the investment tenure, which is three years, which will make the debt investment tax-efficient. The investment made in debt mutual funds will qualify for long-term capital gains if held for more than three years from the date of purchase and will, hence, be taxable at a lower rate along with the benefit of indexation.
At the same time, you also need to put aside adequate corpus for contingency purposes.
The key to portfolio building is asset allocation. The debt portfolio could be a combination of short- and medium-term mutual funds and the equity asset class can be a combination of large-, multi- and mid-cap mutual funds.
Q: I used to work with a company five years ago and I now want to apply for PF withdrawal. The office branch has shifted to Mumbai from Pune but the main branch is in Bengaluru. The HR is asking me to visit the Bengaluru office for PF withdrawal. They first asked me to create the Universal Account Number (UAN) on the PF portal but when I tried, the portal said the details entered don’t match with the member information. Can I withdraw my PF without UAN?
—Vanita Dhumal
It is recommended that you create UAN. In case you have changed employment, then you will have UAN and the UAN number can be used for both the organizations—past and present. The benefit of having UAN is to access the PF account—to view balance and redeem online—without submitting physical documents.
However, if you are not employed or are self-employed or are not able to apply for UAN, then for withdrawing the old PF, you need to submit the PF withdrawal form duly attested to the regional PF office. Attestation is required to be done by a defined authority such as a bank manager, gazetted officer or magistrate.
Surya Bhatia is managing partner of Asset Managers
