Have I started well for achieving my financial goals

I am 28 years, single, and have recently (2 months) started investing in mutual funds through SIP. My goals are at different stages of my life. In the next 4-5 years. I wish to buy a house worth 40 lacs (current price). I want to build a handsome corpus for my retirement and children education. My mother will be retiring in the next 5 years so after 5 years I wish to support my parents too. I currently have INR 7 lacs towards my education loan which I can pay in the next 4-5 years in instalment, no other loans. I have term insurance of 1 cr and health insurance too. I seek your advise in building my portfolio and check if my start is good and what all funds do I need to add in order to achieve my goal. House is my first preference in the next 5-6 years. My current investments are: Franklin India Smaller Companies Fund: INR 2500, Mirae Asset Emerging Bluechip Fund: INR 10000, L&T India Value Fund: INR 7500, ICICI Value Discovery Fund: INR 5000. I can invest INR 30-40 thousand more per month. Please advise me if my fund selection is good or not. Also, advise if more funds are needed to achieve my goal and further investment or I should just increase the amount of investment in the existing funds than adding more funds? Many thanks for all your help. I look forward to your reply?

Jun 15, 2017 by Neeraj Singh, Delhi  |   Financial Planning

We think you have made a good start by selecting top performing funds for your SIPs. You have two goals to meet after 5 years – 1) House worth Rs 40 Lakhs and 2) Support your parents financially. But you have not mentioned the amount that you wish to have after 5 years in order to support your parents.

Your current monthly SIP amount is Rs 25,000 only and with this you can create a corpus of only Rs 21 Lakhs (assuming annual returns at 12.5%). Therefore, to meet the above two goals after 5 years, the current monthly SIP amount is insufficient. Therefore, you should increase your monthly SIP amount immediately.

You have talked about your retirement planning and higher education of children, but you have not mentioned the respective goal amounts. It is very important to know the amounts you require in future for these two goals. Also, while determining the goal amounts, you must also take into account inflation.

The 4 funds you have selected, 3 are mid and small cap funds and 1 is a diversified equity fund. For your future investments, you can add large cap and diversified equity funds in your basket. Among large cap, you may consider SBI Bluechip Fund or Birla Sun Life Frontline Equity Fund. Among diversified equity funds, Birla Sun Life Equity Fund or SBI Magnum Multi-cap Funds can be considered.

Once you are able to figure out your retirement corpus and child higher education cost, determining the exact amount of monthly SIP becomes easy. Therefore as a priority, you need to do two things – 1) Increase the current SIP amount to at least Rs 50,000 per month in order to meet the two goals after 5 years. 2) Evaluate the inflation adjusted amounts required for long term goals like retirement and higher education of children and start saving through month SIPs.

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Hope the above helps! Thanks for writing to Advisorkhoj.