I am 26 years old and my take-home is around Rs 60,000 per month. There is no provident fund in our office. However, I have invested Rs 1.31 lakh in Public Provident Fund (PPF). I have around Rs 1.8 lakh as emergency fund, which is saved in a sweep-in saving account. I have a term insurance cover of Rs 1 crore and a personal health insurance for Rs 5 lakh. I have invested in mutual funds through systematic investment plans (SIPs) over the last couple of years and the value now is around Rs 2,89,500. Currently, I invest Rs 4,000 in PPF per month and Rs 4,000 per month in equity-linked saving schemes (ELSS). I also invest Rs 2,500 in DSP BlackRock Top 100 and Rs 2,000 each in HDFC Top 200, IDFC Premier Equity and Reliance Regular Savings Fund Equity. I am planning to stop ELSS SIP by January as I will be done with my section 80C limit. I also have a surplus of Rs 25,000 per month and I am thinking of adding another Rs 5,000 per month in both DSP BlackRock Top 100 and HDFC Top 200. Please suggest how should I plan for my retirement corpus of Rs 5 crore in another 25 years time. Also, how should I utilize the remaining surplus per month. My parents are dependant on me.
You have done most of it right and what’s best is the fact that you have started saving at the right age.
Your life insurance is more than adequate. Your health insurance is also in place.
As far as your investments are concerned, you have an emergency corpus and your overall fund selection is good. However, you can consider stopping the Reliance Regular Savings Fund Equity and instead look at HDFC Equity or Fidelity Equity—both come under the diversified funds category. You can also add hybrid funds, where HDFC Prudence and HDFC Balanced stand out. Also, have exposure to dynamic or short-term debt funds. Birla Sunlife Dynamic Bond, Templeton Short Term fund are good options.
Further, as you rightly mentioned, you need to increase your pool of savings to achieve the desired corpus. And the savings amount mentioned is adequate to help in achieving the target you have set for yourself. However, you need to make sure you increase your savings along with the increase in salary to match up the inflation rate. The additional savings can be distributed among mutual funds. At the same time, you need to maximise your savings in PPF from the existing Rs 48,000 to Rs 70,000 per year. This will not only help you increase your debt exposure, but also add stability to your portfolio. Also, you will not be able to do the ELSS saving from the next financial year once the Direct Taxes Code gets implemented, which is likely from April 2012.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers
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