I am 50 years old and working in a private company. I have two daughters who are married. Now I want to focus on my retirement funds. I have provident fund (PF) but it will not be enough as I will have to take care of my wife, who doesn’t work. I can save Rs 12,000 every month. Can you suggest a product that will give me maximum returns?
You are currently working and in normal circumstances you will continue working for another nine years, till you attain the age of 58 years.
If you save Rs 12,000 per month for the next nine years, you will be able to accumulate Rs 12.96 lakh at the end of the said period. Assuming you will be able to earn at an average interest rate of 10%, this will lead to a corpus of Rs 19.55 lakh. However, this amount may not suffice for long. Hence, you need to increase your savings every year by at least the rate of inflation or with the incremental salary (most part of it), whichever is higher. Assuming you are able to increase your savings by 7% annually you will be able to accumulate Rs 17.25 lakh and along with interest at 10%, your net worth will be close to Rs 24.93 lakh. You can even target a higher interest rate which may lead to a higher corpus but that may not be prudent and you should not be targeting an aggressive return as this may make you take higher risks. You also need to ensure that your contribution to PF is increased regularly.
The target should be to enhance your portfolio and the only way you can do this is by investing regularly.
There is no plan which gives you “maximum returns”. Any plan, scheme or investment—which lures you with a higher interest or returns than what the markets offer you —needs to be reviewed carefully. This does not mean that other plans should not be analysed. Any investment you make should be carefully read and the upsides as well as the downsides should be understood. You can start monthly investments in hybrid funds. Funds such as HDFC Prudence, HDFC Balanced and Franklin Templeton India Dynamic PE Ratio Fund of Funds can be considered.
Besides investment, you should ensure that you have adequate insurance protection— both life as well as health. In life insurance, you can consider online term insurance, whose main features are high cover and low premium. Similarly, in health insurance, don’t look at the premium alone. This should be one of the important considerations, but also look at other features such as cover ceasing age, co-payment and sub-limits. These features will go a long way in understanding what you are buying, will make you understand the policy better and there will be no nasty surprises later on.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers.
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