Hellow sir.
being a PSU employee ( age 35) and basic salary of 80k, I dont have much worry about the mediclaim ( which is free for my family and parents ) or PF & NPS ( which is sufficient considering basic salary ), I have following saving in my pack.
1. PPF 30L ( contributing 1.5L/ yr)
2. MF of valuation 43L ( contributing 50k/ month)
3. Fixed deposit around 12L
4. LIC around 50k / yr.
5. No loan.
6. No home under my ownership .
What additional investment can be done for securing the future .
Ans: Understanding Your Current Financial Situation
– You have built a strong financial foundation already.
– Being a PSU employee, your job offers stability and retirement benefits.
– Your family’s medical and pension needs are covered by your employer.
– Your investments are well-diversified across PPF, mutual funds, and fixed deposits.
– You have no debt, which is a very healthy financial situation.
– Your life insurance premium is low, but we will discuss this later.
– You are saving Rs 50,000 per month, which is appreciable for your age.
– But you still need a clear plan for wealth growth and retirement security.
– A 360-degree review of your investments will help optimise your future.
– Let’s now assess each investment one by one.
Assessing Your Current Investments
Public Provident Fund (PPF)
– You have Rs 30 lakh in PPF, contributing Rs 1.5 lakh per year.
– PPF is a low-risk, tax-free debt option.
– But its return barely beats inflation in the long run.
– Keep contributing to maximise the Section 80C benefit.
– But PPF should not be your main wealth creation tool.
– Don’t increase your allocation beyond Rs 1.5 lakh yearly.
– Also, avoid opening another debt instrument for long-term goals.
Mutual Funds (MF)
– You have Rs 43 lakh in mutual funds, contributing Rs 50,000 monthly.
– This is your primary wealth-building avenue.
– But you have not shared your mutual fund types.
– Ensure that your funds are diversified across flexi-cap, mid-cap, and small-cap categories.
– Avoid putting all money in large caps or sectoral funds.
– Prefer regular plans over direct funds.
– Direct funds don’t offer periodic portfolio reviews or goal alignment.
– Regular plans with a Certified Financial Planner help align your funds with your financial goals.
– A Certified Financial Planner monitors performance, suggests rebalancing, and reduces emotional investing.
– Regular plans offer support during market downturns, which direct funds lack.
– Also, regular plans via MFDs provide peace of mind and avoid self-managing your portfolio.
– If you are holding index funds in your mutual fund portfolio, please take note.
– Index funds have several disadvantages.
– They blindly track the index without filtering out bad stocks.
– They don’t provide active stock selection or risk management.
– In volatile markets, index funds fall as much as the index without protecting downside.
– Actively managed funds are better suited for Indian markets.
– Active funds adjust allocations dynamically, which index funds cannot.
– Hence, please switch from index funds to actively managed regular plans.
– Rebalancing this Rs 43 lakh corpus periodically is essential.
– Otherwise, you will carry unwanted risks in your portfolio.
– A Certified Financial Planner can help fine-tune your mutual fund mix.
– Your SIP of Rs 50,000 monthly is healthy, continue it consistently.
– You may consider a step-up in SIP by 10% yearly to beat inflation.
Fixed Deposits
– You have Rs 12 lakh in fixed deposits.
– Fixed deposits are low-return, taxable instruments.
– Use this only as your emergency fund or short-term goal savings.
– Don’t lock large amounts in fixed deposits for the long term.
– Interest from FDs is fully taxable as per your income tax slab.
– Instead, you can move surplus FD money to short-term mutual funds.
– For example, liquid or low-duration debt funds.
– These funds are tax-efficient and offer better returns than FDs.
– You can keep about 6 to 12 months of expenses as an emergency fund.
– Rest of the FD money can be re-invested for better returns.
Life Insurance (LIC)
– You are paying Rs 50,000 annually for LIC.
– Please clarify what type of LIC policy this is.
– If it is a money-back, endowment, or Jeevan Anand type, please surrender it.
– These policies give poor returns, usually below inflation.
– They mix insurance and investment, which is inefficient.
– Buy a pure term insurance policy instead.
– A term plan covers your life at a low cost.
– Reinvest the surrendered LIC amount into mutual funds.
– This will help you grow your wealth faster.
– Also, keep your insurance and investment separate.
What You Are Missing
Adequate Life Insurance
– Check if your PSU offers enough group life insurance.
– Still, take a personal term insurance cover of 15 to 20 times your annual salary.
– This protects your family if anything happens during your working years.
– Don’t depend only on employer insurance.
– Personal term cover ensures protection even if you change jobs or retire.
Emergency Fund Planning
– You mentioned no loans, which is great.
– But have you built a separate emergency fund?
– Ideally, you should keep 6 to 12 months’ expenses as emergency corpus.
– Use liquid mutual funds, not savings account or FD for this.
– This fund protects you against unexpected expenses or job loss.
– Don’t mix this with your long-term investments.
Goal-Based Financial Planning
– You haven’t mentioned your goals yet.
– You need to define your financial goals.
– For example, child’s education, retirement, foreign trips, etc.
– Assign a time frame and cost for each goal.
– Allocate your investments according to these timelines.
– For short-term goals, use debt mutual funds.
– For long-term goals, use diversified equity mutual funds.
– Without goal clarity, investments remain directionless.
Retirement Planning
– PSU pension and NPS are there, but don’t solely depend on them.
– Inflation will erode your pension’s real value.
– Build a personal retirement corpus through equity mutual funds.
– This ensures financial independence in retirement.
– Target a corpus that can provide inflation-adjusted income post-retirement.
Tax Optimisation
– Your PPF contribution gives you Section 80C benefit.
– But what about Section 80D (health insurance premium) and 80CCD(1B) (NPS)?
– Though your health insurance is covered, consider claiming Rs 25,000 deduction under Section 80D.
– Your voluntary NPS contribution above Rs 1.5 lakh can get you Rs 50,000 extra deduction under 80CCD(1B).
– Also, monitor mutual fund capital gains taxation.
– Equity mutual fund LTCG above Rs 1.25 lakh is taxed at 12.5%.
– STCG in equity mutual funds is taxed at 20%.
– Debt mutual funds’ gains are taxed as per your income tax slab.
– Tax planning with a Certified Financial Planner can optimise your tax outgo.
Where You Can Invest Further
Increase SIP in Equity Mutual Funds
– Gradually increase your SIPs as your income rises.
– Focus on flexi-cap, mid-cap, and small-cap funds.
– Actively managed funds adjust better to market conditions.
– Prefer regular plans through Certified Financial Planner and MFD.
– Don’t add index funds or ETFs, as explained earlier.
– Stay invested for 10 years or more to beat inflation.
Add a Hybrid Mutual Fund for Stability
– For medium-term goals, hybrid funds can be useful.
– They balance equity and debt for smoother returns.
– But avoid conservative hybrid funds, as your risk appetite is healthy.
– Discuss with a Certified Financial Planner for the right mix.
Explore International Mutual Funds Later
– Currently, your focus should be domestic equity.
– International exposure can be evaluated later.
– This can diversify currency and market risks.
– But keep allocation small and reviewed periodically.
Voluntary NPS Contribution
– Your employer is contributing to NPS, but you can contribute more.
– This increases your retirement corpus and reduces tax.
– Use the Tier I account for tax benefits.
– Tier II is useful for medium-term goals but has no tax benefits.
Reinvest LIC Savings Wisely
– If you surrender your LIC, invest the proceeds into mutual funds.
– This unlocks better returns than what LIC policies offer.
– Don’t use this for low-return or locked-in products.
Reduce Fixed Deposit Reliance
– Reallocate part of your fixed deposits to short-term mutual funds.
– This increases your post-tax returns without increasing risk much.
– Keep only what is needed for emergencies in FDs.
Other Action Points for a 360-Degree Plan
Regular Portfolio Reviews
– Review your portfolio every six months with your Certified Financial Planner.
– Rebalance if any fund underperforms or if your goals change.
– Don’t leave the portfolio untouched for years.
– Avoid emotional exits during market falls.
Will and Estate Planning
– Create a simple Will to secure your family’s future.
– Nominate your family in all your investments.
– Keep your spouse aware of your financial accounts and plans.
Avoid Unnecessary Investments
– Don’t go for real estate purchases just for investment.
– Real estate locks money and offers poor liquidity.
– You have no home currently, but buy one only if you plan to live in it.
– Also, avoid gold investments for wealth creation.
– Gold is a store of value but not a wealth multiplier.
– Don’t explore annuities as they give poor post-tax returns.
– Stick to mutual funds and PPF for your financial goals.
Personal Financial Discipline
– Increase your SIPs with each salary hike.
– Track your expenses but don’t compromise on essential lifestyle needs.
– Plan vacations and family expenses without disturbing your financial goals.
– Keep your debt at zero or minimal.
Finally
– You are doing well for your age with savings and investments.
– Focus on optimising your portfolio, not chasing new options.
– Actively managed mutual funds through a Certified Financial Planner should be your core.
– Exit inefficient products like endowment LIC plans.
– Maintain your emergency fund separately and review goals yearly.
– Add voluntary NPS and hybrid funds for diversification.
– Regular monitoring with your Certified Financial Planner will fine-tune your journey.
– Stay consistent, disciplined, and goal-focused.
– This approach will secure your financial future with peace of mind.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment