I am 58 and will retire next month. I will receive Rs 66 lakh in retiral benefits. My wife earns Rs 20,000 a month and we have a 20-year-old son who is studying. We have our own house. We have jointly invested about Rs 44 lakh in post office schemes, PPF, annuity schemes and RBI bonds. I also own about 700 shares of RIL. Our monthly expenses are around Rs 55,000. How should I invest my money to earn around 7% annually?
Naveen Kukreja, CEO and Co-Founder, Paisabazaar.com, responds: Generating 7% p.a. returns from fixed deposits or short/low/ultra-short duration debt funds would be difficult. I will suggest you buy some equity exposure from your retiral benefits to generate higher returns. First, let’s manage your investments to meet your monthly expenses. Invest Rs 23 lakh in a lump sum in short duration debt funds. Assuming an annualised return of 5%, this would last for more than six years on making monthly withdrawals of Rs 35,000. For the remaining corpus, consider the following steps. Stay invested in your existing fixed income investments of Rs 44 lakh. This will ensure a debt/fixed income allocation of 35-50% in your overall portfolio. As investment exposure to a single scrip can be very risky, I would recommend you to sell your RIL shares valued at around Rs 14 lakh.
Invest the remaining Rs 43 lakh from your retiral benefits and the sale proceeds of your RIL shares in equity funds through SIPs of 1-year tenure. Assuming an annualised return of 10%, your equity corpus of Rs 57 lakh should grow to about Rs 91 lakh in six years. Once you are about to reach that six-year mark, withdraw Rs 23 lakh from your equity corpus and invest it in short duration debt funds for five years. Keep repeating this cycle every five years. Invest in direct plans of any of these short duration funds – ICICI Prudential Short Term and HDFC Short Term Debt Fund – for creating your debt portfolio.
Invest in the direct plans of Tata Index Sensex or HDFC Index Sensex Fund; and Parag Parikh Flexi Cap or Mirae Asset Emerging Bluechip Fund in the proportion of 50:50 for creating your equity portfolio.
Invest in the direct plans of Mirae Asset Tax Saver and/or Axis Long Term Equity Fund through SIPs if you need to save taxes.
I am 35 and earn Rs 1.35 lakh a month. I have a house and car, all loan free. I have a 5-year-old child for whom I have been investing Rs 20,000 a month through SIPs in equity mutual funds since the day he was born. I want to have at least Rs 5-6 crore for my retirement and vacation. I have a term plan of Rs 1 crore and a family floater cover of Rs 5 lakh. How much should I invest to create this corpus?
Prableen Bajpai, Founder FinFix® Research & Analytics, responds: The amount of money you will require at retirement depends on your current expenses and factors such as inflation, return expectations and longevity. Assuming a current monthly expense of Rs 50,000, 6% inflation, returns of 11% CAGR, and post-retirement returns at 5%, a corpus close to Rs 8 crore needs to be built to last till the age of 85. This will require a monthly investment of roughly Rs 50,000. You can decide on the final amount based on accurate inputs as well as your other investment allocations such as EPF. You can create a portfolio with a mix of active and passive strategies— index funds (large-cap), flexi-cap fund, mid-cap, and an allocation up to 20% outside India. Your existing SIP of Rs 20,000 will accumulate around Rs 1.3 crore by the time your son enters college assuming a CAGR of 11%. While all relevant information is not available, based on a broader analysis given your age, income and future expenses such as child’s education, you seem ‘underinsured’ and thus it must be revaluated.
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