I am 51 years old. My annual income is Rs 15 lakh and annual household expenses are Rs 5 lakh. I have three dependents — wife aged 41, a son who is studying in the second year of engineering and a daughter who is pursuing her pre-university. For her higher education I have made some provisions. For her marriage, I may need to spend Rs 5 lakh in today's value. I plan to retire at 60. I would like to know if the insurance policies and savings are sufficient to take care of my future requirements. I will be able to meet our children's education expenses with my regular income. My current EPF balance is Rs 25 lakh. My employer and I contribute Rs 8,000 each. We are covered under group medical policy for Rs 4 lakh. I started investing in equities and MFs 20 years back.

The appreciation though has not been as good as real estate returns. Should I sell all the equity investments? From January I started 8 SIPs for Rs 2,000 each. My overall equity exposure is Rs 35 lakh. Since my job involves travelling I have very limited time to monitor the stocks.

I have 12 insurance policies.

— Chandra

All asset classes will not perform in a uniform way. So, you must always construct a diversified portfolio. Investments should be based on time horizon and risk tolerance. Although you hold quite a few good large-cap stocks, it is still necessary that you monitor your portfolio.

Buy and hold strategy may be a good concept, but that alone will not produce great returns. Whenever there is an abnormal return in the markets, taking profits is often a good idea. With markets in doldrums, you should wait for a bounce back to sell your equity holdings. Since you are travelling and don't have adequate time to monitor your portfolio, we suggest you stick to mutual funds.

Your current portfolio is not diversified. For instance, gold and real estate had a good run in the last decade, but they are more than adequately represented in your portfolio.

The house where you live is not considered a part of asset allocation.

Insurance

ULIP is a long-term product and is suitable for those looking for an investment period of at least 10 years. While buying such a product you should spend time understanding its features. As such you are not happy with your direct equity returns, yet you have bought ICICI Pru Pinnacle Super which is a very defensive fund! Similarly when FDs are giving 10 per cent returns you have recently bought an endowment plan with a sum assured of Rs 75,000.

This small amount is neither good enough to be called risk cover nor a reasonable investment. You can leave your insurance investments as such and allow them to mature.

Retirement

Your wife is 10 years younger than you. Therefore, you need to make a higher provision till her life expectancy. Your monthly household expenses are likely to come down once your children can stand on their own feet. For you and your spouse, the expenses will be 75 per cent of the present levels. If the current expenses are inflated at 7 per cent, the annual living cost will be Rs 6.6 lakh at 60. At retirement, you need a corpus of Rs 1.7 crore and it should earn inflation adjusted return of one per cent for the fund to sustain till your wife turns 80.

If the current investment in equity grows at 12 per cent, it will amount to Rs 97 lakh in 2021. Your current EPF balance and your future contribution will add up to Rs 76 lakh, if the fund continues to earn 8.5 per cent. For your daughter's marriage, utilise maturity proceeds of insurance policies.

In your mutual fund SIP, instead of 8 schemes continue to invest in just five: HDFC Equity, ICICI Prudential Focused Bluechip, UTI- Dividend Yield, IDFC Premier Equity and HDFC Gold Fund. The rest can be discontinued.

At retirement you cannot convert your group medical insurance into individual policy. Hence it is advisable to take individual floater policy for Rs 5 lakh, four years prior to retirement. This will help you get a cover for any pre-existing ailment at retirement.

sureshpartha@thehindu.co.in

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