I am 26 years old and newly married. My wife and I together earn ₹2.5 lakh a month. We want to take an exotic holiday every other year, which will cost us ₹8-9 lakh. We want to systematically invest towards this. Please advise on how much to invest and where.
Your goal requires a holiday fund to be created. You need to start a monthly investment plan to build a corpus. You can start SIPs (systematic investment plans) in mutual funds. Choose a short-term debt fund as you will need the funds every two years. The annualized return on this asset class will be 7-8%, and the tax implication will depend on your marginal rate of tax. Target investing ₹50,000 every month. When you take a vacation, the necessary amount can be withdrawn and the monthly investment will continue, in order to fund your next holiday.
To create a corpus for your long-term goals, the monthly investment can be replicated, but in equity-based instruments. You can consider a combination of large-cap, multi-cap and mid-cap schemes.
I had invested in mutual funds for my son’s higher education and generated ₹30 lakh. However, he has got a full scholarship, so I won’t need to pay more than ₹10 lakh. My other goals like retirement are also taken care of. Where should I reinvest the surplus money?
You are in a good financial position. The only tweaking you may have to do for your son’s education corpus is to determine the investment asset class. If the investments are in debt-based or hybrid debt mutual funds, the asset class needs to be changed to equity, subject to your risk profile.
As all your goals are already in place, this surplus corpus can be considered as long term asset creation and can be used to fill the gaps which you may have in the future. Hence, equity asset class is recommended. But do check your short-term and long-term capital gains before tweaking your portfolio.
Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org