Photo: iStock
Photo: iStock

Goal-based planning gives investing a perspective and helps track it

The portfolio to be created should ensure that it is inflation adjusted and hence any asset class should target to match or outperform inflation

My first child is 3 years old. These are my financial goals—Rs7 lakh in 3 years; Rs20 lakh in 15 years for my first child’s education; Rs25 lakh in 18 years for my second child’s education; Rs25 lakh in 24 years for my first child’s marriage; Rs30 lakh in 29 years for my second child’s marriage; Rs50 lakh in 25 years for my retirement. How can I achieve my goal with my investments? Should I split the emergency fund between fixed deposits and liquid funds? Should I invest in PPF or post office schemes? Are ELSS and Ulips safe for investment? Is HDFC Life Progrowth Plus - Opportunities Fund good to invest? Which mutual fund is suitable for my goals? Kindly advice.

—S. Balasubramaniam

It is always preferable to have a goal-based financial planning—it not only gives you a perspective to invest, it also helps you to track investments, centric to each goal. In addition, it leads to better asset allocation. And the key to any long-term investment is disciplined investment. If have a regular monthly income then you should also be saving on a monthly basis. And as your salary or income increases every year, you should be increasing the savings every year to ensure you counter inflation. In simple calculations, if you target to increase your savings every year by 6% and inflation increases at an average of 7% and the earnings at 10%, the total savings required per month is Rs45,000. And in case you have already factored the inflation in the above goal setting, then with inflation not being considered the monthly savings comes down to Rs14,000. However, the first goal which is 3 years away will not be fully met with your savings. And do ensure to maximise your savings as it all goes to create a net worth for you.

The portfolio to be created should ensure that it is inflation adjusted and hence any asset class should target to match or outperform inflation.

For debt asset class PPF and debt mutual funds are good options. Equity asset class considers mutual funds and creates a portfolio of a combination of large-cap, multi-cap and mid-cap funds. You can also consider ELSS for tax saving as part of the portfolio.

Equity portfolios are subject to risks but as your goals are long term, you can consider the same. If you want to consider other assets, do look at their performance subject to their respective asset class and then decide whether they fit your portfolio.

And the emergency corpus can be maintained in both liquid funds and bank fixed deposits. If your income comes in the highest tax slab then you can consider reducing your bank FD exposure.

I am 22 years old. My take home pay is Rs18,000 per month. I am planning to invest about Rs2,500 a month in mutual fund via systematic investment plan (SIP). My horizon is 25 years. I have an emergency fund of Rs20,000. I prefer direct plans and will keep increasing the contribution to the mutual funds. Also, I am looking for term insurance of Rs50 lakh cover. Please advise.


It is good that you are gearing up early in life to create a long-term investment corpus. You have correctly decided to keep on increasing your monthly savings as your income goes up. The monthly investment, as it is planned for the long term, should be invested in the equity asset class and where mutual funds are the best way to start a disciplined investment structure via SIP. Within equity, you can consider a combination of three funds—one each in large-cap, multi-cap and mid-cap funds. There is no concept of best mutual funds—look at the funds that are consistently delivering good performance over a long period of time across various time horizons. Your emergency corpus can be invested in a bank fixed deposit or in ultra short-term mutual funds. Term insurance is recommended when you have dependents. At the same time, do look at having a medical insurance policy.

Surya Bhatia is managing partner at Asset Managers.

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