Portfolio

Financial Planning

SURESH PARTHASARATHY | Updated on January 07, 2014 Published on January 07, 2014

I am 36. My wife is a home maker. We have a son aged three . We expect to live till we turn 80. My monthly household expenses are Rs 32,000.Apart from my investment to EPF, my employer too contributes an equal amount every month. My retirement age is 58. Please suggest the appropriate asset allocation strategy, which can help me reach my goals. I can take moderate risks.

- Prakash Hulji

If you continue to work till your retirement, without taking too much of risk on investments, you can reach all your goals with your current surplus. If you wish to buy a house, a car and go for vacations during and after your retirement, then in your portfolio you would need a higher dosage of equity to reach all the goals.

With the flats you own, you can contemplate buying a bigger house later.

You need to factor for any change in lifestyle, extra goals etc to build a future corpus .

Son’s education: You wish to accumulate Rs 50 lakh by 2028. But if you discount the same with an inflation rate of 7 per cent, the present value will be Rs 18 lakh. If you wish to send your ward for overseas education this projection may be inadequate.

To reach Rs 50 lakh in next 15 years you ought to save monthly, a sum of Rs 12,063 and it should earn 10 per cent return.

If you wish to accumulate for his marriage, start for it a bit later .

Retirement: Assuming monthly expenses of Rs 20,000 for your spouse yourself currently, the same will be Rs 88,600 in 2035. To receive such an income at retirement, you should have a corpus of Rs 2.09 crore and it should earn one per cent return over and above inflation.

If your employer’s and your contributions increase by 5 per cent every year and if the EPF interest rate remains 8.5 per cent, your retirement corpus will be Rs 1.09 crore. There will be short fall of Rs 1 crore

To meet the short fall you ought to save a sum of Rs 10490 every month for the next 22 years, and it should earn a return of 10 per cent. Even if there is a short fall in income, the family pension will come handy. Review your portfolio at least once a year and step-up your savings for any short fall in returns.

Set aside six months’ expenses as an emergency fund.

Since you have not disclosed the sum assured of your endowment policy, we presume it to be Rs 5 lakh based on the premium paid. Utilise the maturity proceeds for future goals. If you continue your ULIP savings for the next 10 years, the maturity value is likely to be around Rs 10 lakh if it delivers 10 per cent return.

Do increase your risk cover by another Rs 75 lakh.

Mail your queries to fp@thehindu.co.in

(The author is founder of myassetsconsolidation.com)

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