I am 25 years old and earn Rs3 lakh per annum. I have an education loan of around Rs6 lakh. I hope to pay off the loan in five years or so. I pay Rs28,260 in premiums towards a life insurance policy per annum; the sum assured is Rs7 lakh. My annual personal expenses are Rs72,000. I have systematic investment plans (SIPs) worth Rs66,000 per annum in three mutual funds—IDFC Premier Equity Fund Gr, UTI Opportunities Equity and Reliance Regular Savings Equity Gr. My employer has given me a health insurance worth Rs2 lakh and a life cover worth Rs10 lakh. I have Rs20,000 in my saving account for emergency. My family is not dependent on me. I plan to save Rs2 lakh for my sister’s marriage two years from now and then around Rs3-4 lakh for my marriage which is about four years away. Is my portfolio okay?
Your potential to save is much higher than what you are actually saving. And to provide for the said needs—sister’s marriage, your own marriage and repayment of education loan—you need to start saving aggressively right now. As per the details given, you have an additional potential to save Rs10,000 per month.
Your existing investments in mutual funds are all good performing funds. All these three funds were launched in 2005 and have a track record of five years and above. UTI Opportunities is a large- and mid-cap fund, IDFC Premier Equity which is mid- and small-cap -oriented fund and Reliance Regular Saving Balanced fund is a multi-cap fund with investment across companies with various market capitalization. You can continue with all three funds.
Since your company already covers you for your life, you should evaluate your existing insurance policy where 30% of your existing savings are invested. This is driven mainly because of two reasons—how the insurance policy is performing in case it is a unit-linked insurance plan and also going forward you will need funds spread over the span of next five years. After your marriage, you should consider having a life and health cover over and above what your company offers.
The additional proposed saving of Rs10,000 can be started through an SIP in a hybrid equity fund. You can pick from funds such as HDFC Prudence, Reliance Regular Saving Balanced and Birla Sun Life 95.
Also, plan to move out gradually from equity and hybrid funds to a safe asset class like debt as you come closer to your date of actual need.
Surya Bhatia, certified financial planner and principal consultant, Asset Managers
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