2/23/2012 9:30 PM Thursday
I am 29 yrs old, married and have a take-home salary Rs 50000. My monthly household expenses amount to Rs 22000, medical and life insurance premiums are Rs 6000 and Rs 15000 go towards as bank savings. I would like to invest the balance Rs 7000 in a monthly MF SIP.
I'd like to build corpus of Rs 2.5 crore for my retirement, considering our son's education and daughter' wedding (we presently have no children). Considering my age, I believe that the asset allocation could be 60:30:10 in equity, debt and gold/ETF respectively.
The life and medical insurance policies we presently have are:
- Jeevan Anand, for a sum assured of Rs 1 lakh, with an annual premium of Rs 7892
- Jeevan Saral, for a sum assured of Rs 2.5 lakh, with an annual premium of Rs 12252
- Amulya Jeevan, for a sum assured of Rs 50 lakh, with an annual premium of Rs 12852
- Limited Endowment Assurance Policy, for a sum assured of Rs 6.5 lakh, with a yearly premium of Rs 25600
- Mediclaim Policies worth Rs 1.5 lakh each for my wife, my mother and me
Please suggest how I can build a corpus by investing in MFs (considering asset allocation) or direct equity. Also, please tell me by when I need to revise my asset allocation
It is very heartening to see that you are starting to save from a young age and are planning for your and your unborn children’s future well in advance. This is a rare quality – who can defeat the prepared? I have taken the liberty of suggesting graduation and wedding expense plans for two children, instead of one graduation plan and one wedding plan.
Keeping in mind your age and the fact that your children are yet to be born, you have quite a long time frame for your investments. Hence, you can afford to be a little more aggressive than the plan that you had suggested in the accumulation stage of your investments.
Age is not always the only criterion for deciding the asset allocation. There are thumb rules which suggest that one may deduct the investor’s age from 100 and the result can be the suitable equity allocation – in your case the resultant equity allocation would be 71 per cent. However, I am not in favour of such thumb rules, as allocation depends more on one’s risk profile and attitude. For example, an old and wealthy gentleman may prefer a lot of equity, and this may be right for his profile!
A graduation degree in a technical field should cost roughly Rs 1000000 in today’s terms. The inflated cost in 18 years should be around Rs 5500000 each for your children. Your daughter’s wedding should cost you another Rs 500000 in today’s terms. In 23 years, that would work out to approximately 19 lakh. Thus, the future value of your children’s goals adds up to Rs 148 lakh, apart from the goal of saving Rs 250 lakh for your retirement.
| ||Equity (Rs)||Debt (Rs)||Total SIP (Rs)|
|Education ||4700 ||2000 ||6700 |
|Wedding ||750 ||320 ||1070 |
|Retirement ||2850 ||1220 ||4070 |
| ||Rs 8300 ||Rs 3540 ||Rs 11840 |
Find More Articles on: DSIJ Magazine, Financial Guidance, Personal Finance, Mutual Funds, Insurance