Goal-based planning gives in­vest­ing a per­spec­tive and helps track it


My first child is 3 years old. These are my fi­nan­cial goals— Rs7 lakh in 3 years; Rs20 lakh in 15 years for my first child’s ed­u­ca­tion; Rs25 lakh in 18 years for my sec­ond child’s ed­u­ca­tion; Rs25 lakh in 24 years for my first child’s mar­riage; Rs30 lakh in 29 years for my sec­ond child’s mar­riage; Rs50 lakh in 25 years for my re­tire­ment. How can I achieve my goal with my in­vest­ments? Should I split the emer­gency fund be­tween fixed de­posits and liq­uid funds? Should I in­vest in PPF or post of­fice schemes? Are ELSS and Ulips safe for in­vest­ment? Is HDFC Life Progrowth Plus - Op­por­tu­ni­ties Fund good to in­vest? Which mu­tual fund is suit­able for my goals? Kindly ad­vice.

—S. Bala­sub­ra­ma­niam It is al­ways prefer­able to have a goal-based fi­nan­cial planning—it not only gives you a per­spec­tive to in­vest, it also helps you to track in­vest­ments, cen­tric to each goal. In ad­di­tion, it leads to bet­ter as­set al­lo­ca­tion. And the key to any long-term in­vest­ment is dis­ci­plined in­vest­ment. If have a reg­u­lar monthly in­come then you should also be sav­ing on a monthly ba­sis. And as your salary or in­come in­creases ev­ery year, you should be in­creas­ing the sav­ings ev­ery year to en­sure you counter in­fla­tion. In sim­ple cal­cu­la­tions, if you tar­get to in­crease your sav­ings ev­ery year by 6% and in­fla­tion in­creases at an av­er­age of 7% and the earn­ings at 10%, the to­tal sav­ings re­quired per month is Rs45,000. And in case you have al­ready fac­tored the in­fla­tion in the above goal set­ting, then with in­fla­tion not be­ing considered the monthly sav­ings comes down to Rs14,000. How­ever, the first goal which is 3 years away will not be fully met with your sav­ings. And do en­sure to max­imise your sav­ings as it all goes to cre­ate a net worth for you.

The port­fo­lio to be cre­ated should en­sure that it is in­fla­tion ad­justed and hence any as­set class should tar­get to match or out­per­form in­fla­tion.

For debt as­set class PPF and debt mu­tual funds are good op­tions. Eq­uity as­set class con­sid­ers mu­tual funds and cre­ates a port­fo­lio of a com­bi­na­tion of large-cap, multi-cap and mid-cap funds. You can also con­sider ELSS for tax sav­ing as part of the port­fo­lio.

Eq­uity port­fo­lios are sub­ject to risks but as your goals are long term, you can con­sider the same. If you want to con­sider other as­sets, do look at their per­for­mance sub­ject to their re­spec­tive as­set class and then de­cide whether they fit your port­fo­lio.

And the emer­gency cor­pus can be main­tained in both liq­uid funds and bank fixed de­posits. If your in­come comes in the high­est tax slab then you can con­sider re­duc­ing your bank FD ex­po­sure.

I am 22 years old. My take home pay is Rs18,000 per month. I am planning to in­vest about Rs2,500 a month in mu­tual fund via sys­tem­atic in­vest­ment plan (SIP). My hori­zon is 25 years. I have an emer- gency fund of Rs20,000. I pre­fer di­rect plans and will keep in­creas­ing the con­tri­bu­tion to the mu­tual funds. Also, I am look­ing for term in­sur­ance of Rs50 lakh cover. Please ad­vise.

—Shan­mukh It is good that you are gear­ing up early in life to cre­ate a long-term in­vest­ment cor­pus. You have cor­rectly de­cided to keep on in­creas­ing your monthly sav­ings as your in­come goes up. The monthly in­vest­ment, as it is planned for the long term, should be in­vested in the eq­uity as­set class and where mu­tual funds are the best way to start a dis­ci­plined in­vest­ment struc­ture via SIP. Within eq­uity, you can con­sider a com­bi­na­tion of three funds—one each in large-cap, mul­t­i­cap and mid-cap funds. There is no con­cept of best mu­tual funds—look at the funds that are con­sis­tently de­liv­er­ing good per­for­mance over a long pe­riod of time across var­i­ous time hori­zons. Your emer­gency cor­pus can be in­vested in a bank fixed de­posit or in ul­tra short-term mu­tual funds. Term in­sur­ance is rec­om­mended when you have de­pen­dents. At the same time, do look at hav­ing a med­i­cal in­sur­ance pol­icy.

Surya Bha­tia is man­ag­ing part­ner at As­set Man­agers.

Queries and views at mint­money@livemint.com.



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