I am Sudha aged 38 and my husband is (39) and we run business together. Our dependents are daughters aged 11 and 5.
Our monthly expense is Rs 40000 this inclusive of home loan EMI of Rs 15000.Our current outstanding is Rs 8 lakh.After meeting all commitment we have a surplus of Rs 10,000 per month.
We have following goals, all in present value.
We need Rs 25 lakh for each child for their graduation and post graduation at 18 and 21.
We will need Rs 15 lakh for each child for their marriages at 25.
We want to buy a holiday home for Rs 50 lakh where we want to live post retirement.
How much do we need to save for our retirement, considering we live till 80 and retire at 60.
We would also like to accumulate some funds for travelling after retirement. Approximately spend Rs 1.5 lakh every year for vacations.
We have few plots worth of Rs 50 lakh, is it a good strategy to sell and buy a flat to earn rental income.
Our present equity portfolio of Rs 30 lakh consists of blue chip and midcap stocks.
Our mutual fund portfolio is of Rs 60 lakh.We have FD for Rs 12 lakh and Rs 3 lakh in PPF.Gold ETF and coins of Rs10 lakh.
Every month we do SIP’s of Rs 30000 in 6 diversified mutual funds, please suggest your choice of funds. Balance fund of Rs 3000 per month.
Every quarter we invest Rs 25000 in PPF and FD, besides that we invest Rs 1 lakh in gold.
Now we are open to take high risk for our investment.
My husband has a term plan of Rs 75 lakh and we have a family floater health plan of Rs 3 lakh.We have emergency fund of Rs 2 lakh.
Solution: Self employed needs to have contingency fund to meet emergencies either in business or medical. So, it is paramount to have proper asset allocation.
While building assets if you wish to go aggressive your can construct your portfolio in such a way that within asset allocation you can take aggressive call. Consider this, within the MF allocation of Rs 60 lakh you can increase the exposure to mid cap and sector funds to earn higher returns. But do understand that since you are managing the portfolio your self you need to spend time to monitor and profit booking is mandatory in the aggressive portfolio. Failing which it will do more harm to your portfolio return.
Goals and investments: With your current investment and asset allocation you can reach all the goals. What is need of the hour is that fix return target for your investment and book profit.For instance for your elder daughter education your present value need of Rs 15 lakh inflated at seven per cent for the next 7 year it will be Rs 24 lakh.
In your MF investment if you earmark Rs 10.9 lakh and manage a return of 12 per cent you can reach the target. Assume due to abnormal equity market if you can achieve superficial return in any particular year you need to take profit and shift it to debt.
Alternatively, follow the current investment pattern of pooling of funds, but ensure portfolio return of 12 per cent and book profit on abnormal return.
Property: Rental yield on residential property at the best will be in the band of 4-5 per cent. Whereas the land will appreciate faster and in the past decade it has give good return. Since you have surplus to meet all the goals, we suggest you to retain the land rather than converting into a flat.
Managing holiday homes is very difficult and that too buying now for retirement is not a good choice. Since you are holding a plot it will hedge any increase in the cost of the land over the years.So, accumulate for construction cost and sell your plot at retirement, avail capital gains by buying property. Since property will be new maintenance cost will not hamper your retirement income.
Investment strategy: Retain all the existing schemes barring HDFC Growth and invest the proceeds in the same folio of Franklin India Bluechip.Already your portfolio is over weight on mid cap schemes, if you wish to go aggressive and invest in sector funds, dilute HDFC Prudence. Continue your debt invest in the same proportion and invest the monthly surplus in direct equity.
Insurance: If you are not increasing your liability, existing current term insurance is sufficient.However; you need to increase your medical claim. Utilise the Top- up option offered by the insurer to buy a cover for Rs 5 lakh, this will ensure that you will have higher cover with lesser premium out go.