Hi, Myself Raj Banerjee aged 49 years. I am single. I work as IT professional and currently facing some challenges in job. My current annual expense in approximately 12L. I have small house and do not plan / aspire for any more real estate. Till now I have been able to accumulate 7.8cr all in Bank FD/savings, 90L in PF, 20L in PPF (still 7 years to mature), 25L in stocks and gold (50:50 split). I do not have any Life Insurance but have medical insurance for myself (5L retail policy + 8L corporate policy). Recently, I have started moving money from Bank to Mutual Fund monthly as below:
ABSL MediumTerm Debt Direct Growth: 1L
Parag Parikh Flexi Cap Direct Growth : 25K
HDFC Flexi Cap Direct Growth: 25K
Quant Multi Asset Direct Growth: 25K
Nippon Multi Asset Direct Growth: 25K
I plan to follow this till Bank FD falls to 2 cr, then in such case my tax out flow will be negligible in case of job loss and I can have expenses covered from interest.
I am requesting help that assuming if I lose / leave job immediately is my approach looks okay or suggest better option so that I can generate income from investment and plan for living till 90 years.
Ans: Hello,
I’m glad to see that you understand the importance of personal finance and have built a strong financial position at the age of 49. Having said that, after reviewing the information shared, I believe there are a few important changes that can significantly improve the efficiency of your portfolio.
My observations:
1. Term Insurance
Based on your current financial position and the corpus you have already accumulated, I don’t believe term insurance is essential purely from a financial dependency perspective, provided your existing investments are sufficient to meet your family’s long-term requirements and there are no significant outstanding liabilities.
2. Current Asset Allocation
Your total liquid net worth is approximately ?9.15 crore, of which nearly 97% is invested in debt/liquid assets.
3. The biggest concern : excessive allocation to debt.
At your age and with your investment horizon, I believe the current debt allocation is too conservative.
A debt portfolio may reasonably generate around 7% over the long term, while your personal/real-life inflation could be closer to 8% or more, despite the official CPI inflation number being lower. This means that after adjusting for inflation, your purchasing power could actually decline over time.
The objective shouldn’t simply be preservation of the ?9.15 crore corpus, it should be preserving and growing its purchasing power for the next 30–40 years.
4. Retirement Readiness
Based on the numbers shared, your current annual withdrawal requirement is only around 1.3% of your total portfolio.
That is an extremely comfortable withdrawal rate. Subject to your future goals, liabilities and lifestyle requirements, I believe you are financially well positioned to consider retirement even today.
Changes I would recommend:
1. Maintain an emergency/liquidity corpus of approximately ?1 crore
Keep this in liquid/debt-oriented instruments for emergencies, near-term requirements and peace of mind.
The remaining corpus can be gradually moved towards a well-diversified portfolio of equity-oriented investments, including Mutual Funds, PMS and AIFs, depending on your risk appetite and suitability.
2. Re-evaluate your existing Mutual Fund portfolio
From the information shared, several of the funds appear to have been selected based on recommendations commonly seen on social media platforms.
There is nothing inherently wrong with that, but I would strongly recommend evaluating each fund based on portfolio quality, consistency, downside protection, fund manager track record, valuation, risk-adjusted returns and its role within the overall portfolio, rather than simply looking at past returns or popularity.
Appropriate changes can then be made wherever required.
3. Suggested allocation for the 7 crore Mutual Fund portfolio
As a starting framework, I would consider:
15% — Large & Mid Cap
15% — Multi Cap
15% — Mid Cap
15% — Small Cap
15% — Value
15% — Flexi/Value-oriented strategies
10% — Select thematic opportunities
The exact funds and final allocation should, of course, be decided after understanding your risk tolerance, investment horizon, cash-flow requirements and specific financial goals.
My overall view
You have already done the difficult part is building a substantial corpus.
The next stage is not about taking unnecessary risk. It is about putting the corpus to work efficiently while ensuring that it continues to grow faster than inflation.
With a 9.15 crore liquid corpus and a withdrawal requirement of only around 1.3%, I believe your financial position is extremely strong. The focus now should be on asset allocation, portfolio quality and long-term wealth preservation, rather than simply accumulating more money.
These are my preliminary observations based on the information shared. A detailed recommendation would require a deeper understanding of your goals, liabilities, risk profile, family requirements and existing investments.
Would be happy to hear your views and discuss the same further.
Do let me know your views on this on my website or on my LinkedIn profile, attaching the link :
https://www.slwealthsolutions.com/
- CA VIVEK LALA
Question by zhili on Jul 11, 2024Hindi
