I am 48 years old. I live in my parental home (worth at least Rs 3.5 crore in which I have an inheritance right) along with my wife, father and two daughters. I fall in the highest tax bracket and don’t have any other property. I have invested around Rs 40 lakh in mutual funds (MFs) and Rs 15 lakh in the equity market. I have a life cover of Rs 90 lakh of which 65% is term insurance. I redeemed my Employees Provident Fund (EPF) when I left my job to become an entrepreneur and have Rs 21 lakh (sum of my contribution, company contribution and interest) to invest. How should I reinvest this amount? I want to build a corpus to secure my old age which can also generate monthly income. Should I consider National Pension System or invest in debt monthly income plan (MIP) fund and invest the monthly earnings in Public Provident Fund?
—Jairaj B. Jatar
You have investments in MFs and in equities. Unless you are keeping a track of the stock market and are an active trader, you should not invest directly in stocks. Instead consider investing more in MFs. Your EPF should also be reinvested similarly. You should take a holistic look at your portfolio and decide on an asset mix for your portfolio before investing. Have equity as base (as you are 48 years old and need funds to secure old age) and consider investing 60% of the corpus including EPF fund. For this purpose, consider MFs from various categories such as large-cap, diversified and mid-cap categories in the equity space. Balanced, MIP, debt and gold funds can be added to achieve the desired portfolio. In total, you should have a total of seven funds. You should evaluate the schemes you have right now and depending on their performance, you can either add to the same funds or switch to new schemes. The rationale is not to have too many funds in the portfolio.
You can also add PPF to your kitty where you can contribute Rs 70,000 per year. This will give you a tax-free return.
The life insurance cover you have mentioned is adequate. However, make sure your cover is actually a term cover and you are not paying a huge premium for the same. Also, equally important is health insurance. As you have turned into an entrepreneur, your employer’s insurance would have gone away. You should have a medical cover for the entire family.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers.
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