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Is my investment portfolio correct to meet my financial goals

My self Gaurav Pratap Age 33 years, working as Design Engineer. I am from Varanasi Uttar Pradesh. I have one daughter of 5 years old and my Annual Income is 14 lakhs/Annum. My investment details are as follows-: 1. Term Plan - 75 lakhs, 2. Medical insurance - 8 lakhs(personal) + 3 lakhs (company provided), 3. PPF - 3500 per month (presently having approx 4 lakhs in PPF), 4. SIP Details - Presently having approx 8 lakhs in Mutaul Fund. Mutual Fund Scheme details follows - 1. ICICI Pru LTEF (Tax Saving) - Growth - 2500 Aug 14, 2. ICICI Pru Value Discovery Fund - Growth - 8500 April 15, 3. ICICI Pru Focused Bluechip Equity - Growth - 9500 Aug 14, 4. ICICI Pru MidCap Fund Plan - Direct Growth - 4500 Jan 15, 5. HDFC Long Term Advantage Fund - 2500 Aug 14, 6. HDFC Top 200 Fund - Growth - 4000 Aug 11, 7. HDFC Prudence Fund - Growth 3000 Aug 11, Total - Rs. 35000 per month. Emergency Fund - 1.5 lakhs, PF - 120000 per Annum (approx 5 lakhs in PF), Share - Approx 1.1 lakhs. Goals - 1. Retirement – 1.5 Cr., 2. Marriage - 75 lakhs, 3. Education – 75 lakhs. I have made my home. Query - 1. Whether I should reduce/stop my SIP in HDFC Top 200 if yes where to invest? 2. If I start another SIP then how will I get the benefits of compounding? 3. My portfolio is correct or not?

Sep 15, 2016 by Gaurav, Chennai  |   Financial Planning

1. Some of the key details in your query is missing – Like, your retirement age and current monthly expenses. However, we will still try to answer based on whatever details you have shared with us.

2. Your life coverage through the term plan is only 75 Lakhs. Financial experts suggest that you should have coverage of minimum of 10-12 times of your earnings. Therefore, your life coverage should be approx 1.68 Crores. Buying another term plan or enhancing the life cover in the existing plan makes sense.

3. You have medical Insurance for yourself. But what about having Health Insurance or Mediclaim policy for your family? You can think of taking a floater plan for your wife and daughter. We do not know whether you have dependent parents, then you should think about their health issues and buy plans accordingly.

4. You have selected good funds for your SIP and should continue for long time while reviewing the same once every two year or so. Continuance of SIPs for the long term is must as most of your future goals could be achieved through this.

5. You have an emergency fund of 1.50 Lakhs only compared to 6 times of monthly income which financial experts suggest. Therefore, you need to enhance this by investing in liquid funds

6. You should not stop your SIP in HDFC Top 200 Fund as the performance has come back for this fund after lying low in the recent past. It is managed by one of the best fund managers and therefore, you should have patience and believe in his ability to deliver you good long term returns. This is one fund, where the fund manager himself has invested a hefty portion of his savings and thus should provide you enough comfort level : )

7. Since your current age is 33 years, you have 22 years more to achieve your retirement goal. We have assumed that your retirement age is 55. We also think, that the retirement corpus of 1.50 Crores is very less compared to your current earnings and the time horizon that you have. You should not forget that inflation can be a big dampener if you do not plan your retirement well. You should think through your retirement corpus again. Use this tool to find out what should be your retirement corpus https://www.advisorkhoj.com/tools...

If we assume that your current monthly expenses are around Rs. 50,000, then after 22 years the same expenses would be around 1.80 Lakhs per month (assumption 6% inflation and period 22 years) or 21.60 Lakhs annual https://www.advisorkhoj.com/tools... Therefore, instead of 1.50 Crores, you should actually plan for 3.00 Crores. Assuming that you will be able to earn around 7-7.25% returns on 3.00 Crores, this corpus should be sufficient for your retirement.

8. SIP corpus – If you continue your monthly SIP of Rs. 35,000 for 22 years, you will be able to create a corpus of around 5.00 Crores (assuming annual returns @ 12.50%)

9. Therefore, to summarise, the key is if you continue your monthly SIPs till your retirement then your retirement corpus, marriage of your child and her higher education is well taken care off. However, you need to review your SIP portfolio at least once every 2 years or so to check if these are aligned to your long term goals!

Your other investments, like – shares, PPF and PF will come handy in meeting some other goals or some unforeseen circumstances / expenses which we have not discussed here.

Hope the above helps you. thanks for writing to Advisorkhoj.

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