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Ask Mint Money | PPF, EPF investments provide a good debt base to a portfolio

Ask Mint Money | PPF, EPF investments provide a good debt base to a portfolio
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First Published: Thu, Dec 02 2010. 08 45 PM IST
Updated: Thu, Dec 02 2010. 08 45 PM IST
I am 29 with a take-home salary of Rs55,000 per month. I am still unmarried. I can save up to Rs40,000 per month out of my salary. I plan to get married by the end of this year and for that I will need Rs3-4 lakh. I have no liability in terms of any loans. At present, I have Rs3 lakh in my savings bank account and Rs2 lakh in fixed deposits (FDs). I also have Life Insurance Corporation of India’s Jeevan Anand with an annual premium of Rs2,02,513 and I have already paid the premium for the current year. I contribute Rs62,000 per year to my Public Provident Fund (PPF) account and Rs1.5 lakh to my employees’ provident fund (EPF) annually. I also have investments worth around Rs1.15 lakh in stocks and mutual funds. The stock market investment is currently at a loss of 19.5%. What should I do about it? Please advise whether my portfolio is okay.
—Rahul Lore
The potential of saving you have is praiseworthy. If you can save more than 70% of your net earnings, it speaks a lot about your inclination towards saving.
Coming to your existing portfolio, the immediate need of your marriage can be provided from your savings account. In case of any deficit, you can dip into your FDs and the balance amount can be continued in the FD. This could serve as a liquidity buffer in case of any need.
Your other investments in the form of PPF and EPF are good and provide you a good debt base.
Investment in stocks yielding a loss of 19.5% in the current market scenario is surprising, considering the upside market has delivered over the last 18 months. Get you portfolio reviewed by an expert and in case you need to book losses do that. There is no point in holding on to losses.
The insurance policy you have taken is a classic example of how all good products do not suit all. Jeevan Anand is a combination of endowment and a whole-life plan. The main feature of this plan is that after the maturity of the policy, the risk coverage on life continues for lifetime to the extent of the sum assured without payment of any further premiums. At your age and considering your needs, this insurance product is not really meant for you. You would be better off buying a pure-term insurance after your marriage. Further, you have also gone overboard in paying the premium amount.
The regular savings of Rs40,000 per month is being assumed as gross. The net amount available after providing for the insurance premium is Rs23,000. Since most of your portfolio is in debt products, it is recommended you start saving every month through systematic investment plans in equity mutual funds.
—Surya Bhatia, certified financial planner and principal consultant, Asset Managers
Queries and views at mintmoney@livemint.com
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First Published: Thu, Dec 02 2010. 08 45 PM IST
More Topics: Ask Mint Money | PPF | EPF | Investment | Debt |