Family finance: Goyal should link investment to goals, increase insurance cover

Sandip Goyal, 37, works with an MNC and stays with his homemaker wife, seven-year-old child and father in his own house, in Kolkata. He has saved and invested aggressively and has a net worth of Rs 1.69 crore. He has no liabilities and his portfolio comprises a house worth Rs 25 lakh, cash of Rs 15 lakh, debt in the form of EPF (Rs 20 lakh) and fixed deposit (Rs 27 lakh), and equity in the form of mutual funds (Rs 50.6 lakh) and stocks (Rs 8.03 lakh). His goals include building an emergency corpus, buying a house, saving for the child’s education and wedding, and retirement.

Financial Planner Pankaaj Maalde suggests Goyal build the emergency corpus of Rs 8.1 lakh, which is equal to six months’ expenses. He can do so by allocating a portion of his fixed deposit and investing it in an ultra-short duration fund. He also wants to buy a house worth Rs 1 crore at the earliest, for which he can make a down payment of Rs 75 lakh by allocating his house, silver, cash and remaining fixed deposit. For the remaining amount, he can take a loan and at 8.5% for 20 years, and his EMI will come to Rs 21,300. This can be easily sourced from the surplus.

Portfolio

Cash flow

For the child’s higher education in 11 years, Goyal has estimated a need of Rs 84 lakh. He can allocate his stocks to this goal and will also have to start an SIP of Rs 21,000 in a diversified equity fund. For the wedding of the child in 18 years, he wants to save Rs 1 crore. For this, he can allocate his gold and remaining silver, and will also have to start an SIP of Rs 10,000 in a diversified equity fund. However, since he doesn’t have the required surplus, he can do so after a rise in his income.

How to invest for goals

* Due to lack of surplus, investment for this goal will begin after a rise in income.
Annual return assumed to be 12% for equity, 8% for debt funds. Inflation assumed to be 7%.

Finally, for an early retirement in 18 years, at 55 years of age, Goyal will need to build a retirement kitty of Rs 8.2 crore. For this goal, he can allocate his mutual fund corpus and EPF. In addition to this, he will have to start an SIP of Rs 24,000 in a diversified equity fund for the specified term.

Insurance portfolio

Premiums are indicative and could vary for different insurers.

For life insurance, Goyal has two term plans worth Rs 1 crore and two traditional plans worth Rs 2.05 lakh. Maalde suggests he retain all the plans and buy an additional term plan of Rs 1 crore at Rs 1,167 a month. For health insurance, he has a family floater plan of Rs 10 lakh and another Rs 8 lakh cover provided by his employer. He is advised to buy a top-up plan of Rs 15 lakh with a deductible of Rs 5 lakh, at Rs 667 a month. He should also pick a Rs 50 lakh accident disability plan for Rs 500 a month.

Financial plan by Pankaaj Maalde Certified Financial Planner

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