Planning Whiz- Are the investments we made sufficient to meet our goals?


I am working for a private firm and my husband is in government service. I am 45 years old and husband is 49. We have a son and a daughter. They are studying in 11th and 8th standards, respectively. I am earning ₹ 50,000 per month and my husband earns ₹ 80,000. Our monthly household expense is ₹ 50,000.

We have made some investments. We are investing ₹ 30,000 per month in an SIP and its current value is ₹ 23 lakh. We have a monthly recurring deposit of ₹ 10,000 and the invested amount is ₹ 1,50,000. This will mature in January 2023. We have a bank fixed deposit of ₹ 65 lakh and in savings accounts, the balance is ₹ 5 lakh. We are staying in own house and we have a flat worth ₹ 50 lakh. Currently, we have let out this flat for ₹ 14,000 per month.

We are planning to allocate ₹ 30 lakh each for children’s higher studies. For daughter’s wedding expense, we would require around ₹ 40 lakh. On our investments in fixed deposit, currently we are getting very less interest. So, we want to know whether there is any other investment option for getting more return. We want to change our car in next two years and expect this to cost ₹ 15 lakh. We also want to know whether the investments we have made are sufficient to meet our goals or how to organize our existing and new investments to full fill our dreams. Please give your investment suggestions.

Gibin John, a certified financial planner replies:

You have already accumulated certain investments. Now, you want to know whether these investments are in the right path. You have higher allocation of investments in fixed deposits. In existing situation fixed deposits are providing interest rate in the range of 4.5% to 6% only. This will affect growth of the wealth. In this situation you may shift some investments into bonds or debt mutual funds which can give a little better return than the fixed deposits. There is no gold investment mentioned in your portfolio. You may add some gold allocation, say 15%, by investing in sovereign Gold Bond Scheme. Proper asset diversification is an important thing in the wealth creation process. For example, now the gold price is high and the interest rate is low. If you had allocated some portion of investments in gold, you would have got good growth in your wealth now. There will be ups and downs on the returns on your investment in every asset classes. We can come out of such situations by making proper allocation of the portfolio.

As per the given information, total income of your family is ₹ 1,44,000 and the household expense is ₹ 50,000. The surplus of ₹ 94,000 can be allocated for investment purpose.  Currently, you have a monthly investment of ₹ 40,000 and the balance ₹ 54,000 is not getting used for any other investment purpose. Firstly, you have to allocate some amount for meeting contingency situations. Ideally this amount should be 4 to 6 times of your monthly expenses. In your case, the contingency reserve should be ₹ 3 lakh. You may allocate this amount from the existing savings account balance. This amount you may park separately.

Further, you have mentioned your future goals and their expected costs.. Therefore, we are not considering any inflation effect on the goal amounts. The amount for higher education of your son and daughter will be required within one year and four years, respectively. The amount fixed for this goal is ₹ 30 lakh each. Both amounts are required in very short span of time. So you may allocate the amount from fixed deposit for these goals. Today, you shall allocate ₹ 28 lakh and ₹ 24 lakh, respectively from your fixed deposit towards these goals, at an existing interest rate of 5.50%.

Your next important goal is wedding expense of your daughter and required amount at the time of marriage is ₹ 40 lakh.  You have an estimated time of 11 years in hand.  If the inflation during this period is 4.5%, then this amount is equal to ₹ 25 lakhs in today’s cost. For accumulating this amount, you may allocate ₹ 16 lakhs from your existing equity mutual funds. This would grow and yield the requisite amount by that time.

Your next goal is to upgrade your car after 2 years. To accumulate this amount, you have to invest ₹ 40,000 from the surplus amount in debt mutual funds or recurring deposit.  You can also make use of your existing recurring deposit for this purpose. You will be able to create ₹ 13 lakh from these investments. Balance required amount you can take from equity mutual fund.

You have not mentioned about your retirement goal. We assume that your husband’s pension amount and your EPF amount are sufficient to meet the post- retirement expenses. You will also get the rental amount from your flat during those days.

You should continue your existing SIP in equity mutual funds. New investments you may allocate to debt mutual funds and recurring deposits. After achieving the amount for car, you may use the monthly investment towards retirement corpus creation.

You have not mentioned life insurance and health insurance coverage. You both should take at least ₹ 1 crore pure term life insurance and minimum 10 lakh health insurance. Health insurance can be the combination of both base policy and top-up policy.


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