I am 31 years old and married. My monthly take home salary is Rs 1.60 lakh. I pay an equated monthly instalment (EMI) of Rs 17,500 for a home loan and Rs 25,000 for a car loan. My parents stay in the house on loan, which will run for 10 years. I stay in a rented house with a monthly rent of Rs 27,500. My monthly household expense is around Rs 30,000. I have a term insurance plan for a sum insured of Rs 1 crore for which I pay an annual premium of Rs 21,000. I have a family floater health insurance for my wife and I with a sum insured of Rs 5 lakh. I have been investing Rs 40,000 for the last one year in some systematic investment plans or SIPs —Rs 5,000 each in Birla Midcap Fund (G), Birla Sun Life Frontline Equity Fund (G), HDFC Equity Fund (G), HDFC Top 200 (G), ICICI Prudential Discovery (G), IDFC Premier Equity A (G), Reliance Regular Savings (G) and Sundaram Select–Midcap (G). I have recently taken a unit-linked insurance plan (Ulip) for 10 years and invest Rs 1 lakh per annum. I have Rs 2 lakh in savings account. I want to buy a second house in the next 5-10 years and the current worth of the house is Rs 1 crore. I would need money for my children’s education 15-20 years from now (Rs 50 lakh), for children’s marriage 25 years from now (Rs 50 lakh) and a retirement corpus at the age of 60. Should I invest in gold exchange-traded funds (ETFs) every month?
Does it makes sense to start investing in National Pension System (NPS)? Should I invest in Public Provident Fund (PPF)? I also want to start stock SIPs in bluechip companies. I plan to take a life cover of another Rs 2 crore through an online term plan. Is it wise to take the policy now or should I wait. Is my health cover adequate?
The good thing is you have started saving early. We have been repeatedly saying the key to wealth creation is to start saving early in life. It is not only the amount (what you save) that is critical, it is the habit of saving that makes all the difference and this you will realize when your income starts increasing.
Starting with your first goal (buying a second house). This you can do after five years as by that time you would have sufficient corpus to make the down payment and the balance can be taken as loan. You can consider doing a 60:40 split, wherein 60% can be loan and the rest margin money. Also, since your car instalments would also be over by that time, your cash flow will be eased.
Further, prefer to buy a ready-to-move property. This will help you save rent. However, this may make you buy a more expensive property but then it could be worth the cause as your cash flow would have improved by then.
Similarly, meeting your other goals of child’s education and marriage as well as planning for your retirement are all doable, subject to regular saving. Another key is to ensure that you increase your savings every year. You can keep the benchmark as the inflation rate. Even if for some years you are not able to match the inflation rate, you can try to increase it in subsequent years subject to your finances.
As far as your investments are concerned, you are investing Rs 5,000 per month in eight funds. You should not have more than five-six funds in your portfolio. You can stop the SIP in Birla Midcap, Reliance Regular Saving Equity, ICICI Prudential Discovery and Sundaram Select Midcap. Instead you can start an SIP in gold ETFs. Kotak Gold and Reliance Gold Savings funds are good options. Also, consider having a hybrid equity fund in your portfolio. HDFC Prudence and HDFC Balance is good options. Along with the same, you can open a PPF/NPS account. All this will add stability to your portfolio.
There is no reason why you should be doing stock trading, whether in bluechip stocks or otherwise. You already have good large-cap funds in your portfolio. Let the fund manager handle the stock markets for you. Even then if you want to do some trading, keep it limited.
Your insurance cover seems to be adequate. However, when you plan to go for the second house, you should get extra cover then. Also, it is not very clear why you have invested in a Ulip. Now you are in it, evaluate its performance. Your medical cover is also in order.
Queries and views at email@example.com