Long-term portfolio can need significant course corrections depending on how the markets move
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I and my wife earn Rs1.84 lakh a month and can save about Rs1 lakh. We have two children and our goal is to save Rs20 lakh (future value: Rs42 lakh for first child and Rs63 lakh for second child) each for their education; and Rs25 lakh each for their marriage (future value: Rs1.03 crore and Rs1.55 crore). I also want to invest Rs60,000 a month for retirement (future value: Rs7 crore). We have invested in HDFC Balanced fund - direct plan (growth), HDFC Equity fund - direct plan (growth), ICICI Prudential Value Discovery - direct plan (growth), SBI Bluechip fund - direct plan (growth), and Franklin India Smaller Companies - direct plan (growth). There is about Rs10 lakh in the savings accounts and Rs2.5 lakh in fixed deposits. We also invest in Public Provident Fund and Sukanya Samriddhi Yojana and have real estate worth Rs42 lakh. We want to move Rs5 lakh from the savings account to other forms of investment, which can be easily liquidated. Please suggest some balanced, multi-cap and mid-cap funds.
—Name withheld on request
At the outset, it is heartening to see that you have a clear idea about your future financial goals, the impact of inflation, and specific time frames for each of your goals. A simple investment-need calculation shows that you need to be investing a total of Rs75,000 a month to get to all your goals in the respective time frames that you have mentioned. However, please note that 27 years is a long period and the portfolio and calculations would need significant course correction during these years, depending on how the markets move and other factors. My advice would be for you to split your monthly investments into 5 portfolios and invest as needed in each of them (Rs16,000 for first child’s education, Rs10,000 each for second child’s education and first child’s marriage, Rs7,000 for second child’s marriage, and Rs32,000 towards your retirement). You can create long-term portfolios for these purposes and invest consistently in them through the years.
Coming to your question, if you need your investments to be easily liquidated and be available, you need to stick to liquid and ultra-short-term fund categories for your investments. And regarding fund suggestions, you can go with HDFC Balanced, Mirae Asset India Opportunities, and Invesco India Midcap funds. For more such suggestions, please consult the Mint50 list to get good choices for each of the categories that you are seeking recommendations for.
I am 33 years old, working in an IT company in Hyderabad. I need your suggestion for retirement planning. I am married and currently do not have children. My monthly salary is Rs1.35 lakh, and the home loan EMI is Rs75,000. SIP details are as follows: Motilal Oswal Most Focused Multicap 35 fund - regular growth (Rs5,000); HDFC Balanced fund - regular plan (Rs1,500); SBI Dynamic Bond fund - regular plan (Rs1,000); Aditya Birla MIP II wealth 25 plan monthly dividend (Rs2,500); ICICI Prudential banking and financial services fund - growth (Rs2,000); Aditya Birla Sun Life frontline equity fund - growth (Rs2,000); Aditya Birla Sun Life equity fund - growth (Rs2,000); L&T infrastructure fund - growth (Rs3,000); Mirae Asset India Opportunities fund - regular growth plan (Rs2,000); SBI blue chip fund - regular plan - growth (Rs2,000); Mirae Asset Emerging Bluechip fund - regular plan growth option (Rs2,000); DSP Blackrock tax saver fund - dividend (Rs1,000).
Doing a simple math with the numbers you have given, you are presently getting a take home salary of Rs1,35,000 and spending Rs75,000 of it in an EMI. That leaves you with Rs 60,000 from which you are saving Rs 26,000 in a monthly SIP, leaving you with Rs 34,000 for your household expenses. Assuming this grows in a few years (if, say, you have a child), we are still looking at a current monthly expense of about Rs50,000. If you’d like to maintain a similar lifestyle after your retirement in 27 years, you would be looking at monthly cost of about Rs3 lakh a month (assuming a 7% annual inflation), and to generate that kind of monthly cash flow, you would need a corpus of around Rs4.5 crore. To generate this corpus in 27 years, you would need to be investing about Rs24,000 a month in these interim years. You are well on your way to getting there with your current investment schedule. Of course, if other additional life goals (such as a kid’s education) get added, you would need to start saving and investing similarly for that as well.
Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.
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