I am 70 and a Central Government pensioner. My wife, 62, suffers from serious ailments. The investments that I have made in mutual fund schemes and direct equity are worth ?7.1 lakh and ?14.5 lakh, respectively. I hold gold worth ?7 lakh and have parked ?4 lakh in a 10-year tax-free bond.
Whenever I need money I liquidate my share holdings. Occasionally, I monitor my portfolio and hold them for the long term. I expect to live till I turn 75. I feel stressed at times due to lack of a good financial planning.
Please suggest an optimal portfolio for me.
Considering your wife’s ailments, managing assets and spending time to monitor your portfolio would be quite challenging. You will need to earn good returns to make ends meet, but at the same time considering your age, taking too much risk is also not advisable.
In your current portfolio, mutual fund and direct equity account for 52 per cent of the pie. Considering your life expectancy, it is not wise to leave equity shares in your wife’s name, since she constantly needs medical attention. Gradually, liquidate all the shares and move the proceeds to mutual funds.
Presuming your wife to live till she turns 80 with the present ailments, with simple management of your portfolio, you can lead a life without much financial stress.
Since you have not disclosed the composition of the equity shares in your portfolio, we presume it to be predominantly large-cap stocks. While large-cap stocks have done well and have good liquidity, they could face risks if markets fall. Wait till the election outcome and move the shares to mutual funds.
Your current monthly receivables are marginally higher than required. However, since you tend to withdraw in bulk at times for medical expenses, it makes sense to go for marginal withdrawal from mutual funds. This will help you minimise the market risk.
Construct a mutual fund portfolio of large- and mid-cap schemes and set up a monthly systematic transfer plan (STP) of ?20,000 from equity funds to liquid funds. This will help you accumulate emergency funds to meet medical expenses and earn better returns than a bank savings account. With such a strategy don’t withdraw more than one per cent of the portfolio value every month.
Since mutual funds will charge an exit load, first exhaust the STP option from the present mutual fund investments before moving to new schemes.
Your portfolio should provide returns, equal or marginally higher than the inflation rate, to sustain till your life expectancy. In future, avoid tax-free bonds with longer lock-in period as the liquidity is poor.
(The writer is an investment advisor and founder myassetsconsolidation.com. Send your queries firstname.lastname@example.org)