Hi, I am 36 year old and employed in Govt sector. I have three kids of 9,2&1 years. I have monthly Gross salary of ?2.4 lakhs before tax. I don't have any liabilities in form of loans or EMI. My assets are as follows:- Provident fund - ?70 lakhs Monthly contribution to PF - ?40000/- I have 06 mutual funds with monthly subscription of ?10000 each. Present value of MF is ?23 lakhs. My funds are :- 1. Kotak Emerging Equity Fund 2. SBI Small Cap Fund 3. Parag Parikh Flexi Cap Fund 4. Mirae Asset ELSS Tax Saver Fund 5. Quant Small Cap Fund 6. Edelweiss Balanced Advantage Fund I have an insurance cover policy of Rs 2 Cr from HDFC. I have an additional insurance cover of ?1.25 Cr from my organisation. I have Sukanya Samridhi Yojna subscription for my 2 eldest kids at monthly subscription of ?12500/-. I have a "Promise for Growth Care" investment plan from "Canara Oriental HSBC" At a monthly subscription of ?12500/- with payment tern of 10 years and coverage for 20 years (insurance cover ?15 lakhs included in it). I have a Bajaj Allianz "Goal Assure II" plan for monthly subscription of ?5000/-. Payment term 5 years and coverage for 20 years (insurance cover of ?6 lakhs covered). I have ?25 lakhs cash in hand. Out of these I am planning to invest ?20 lakhs in Sovereign Gold Bonds. I wish to retire at 56 years. Please suggest me about any requirement to change/ reallocate any investments from existing ones. Will this investment strategy hold me good for requirement during higher education of kids and their other requirements like marriage etc after 20 years. Please suggest any changes if required. Thank you. Regards

Ans: You've made significant strides in your financial journey. Your goals are ambitious yet achievable with the right strategies. Let’s dive into your current financial status and map out a plan to help you retire by 45 with a corpus of Rs 15 crores.

Analyzing Your Current Financial Situation
1. Income and Insurance:

You and your wife have a combined monthly income of Rs 2.5 lakhs. You have a TATA AIA term insurance of Rs 90 lakhs and a Star health family floater insurance of Rs 20 lakhs. This is excellent for providing financial security to your family.

2. Investments:

Mirre Asset Mutual Fund (ELSS): Rs 5,000/month since May 2022.
ICICI Prudential Insurance: Rs 10,000/month since Jan 2020.
UTI Nifty 50 Index Fund: Rs 5,000/month since Sep 2023.
Stocks: Rs 4.47 lakhs.
Gold Bonds + Physical Gold: Rs 10 lakhs.
Sites Advance Paid: Rs 8.6 lakhs for sites worth Rs 30 lakhs.
Provident Fund (PF): Rs 5 lakhs.
Public Provident Fund (PPF): Rs 50,000 since April 2024.
National Pension System (NPS): Rs 50,000 since April 2024.
ICICI Prudential Mutual Fund (ELSS): Rs 5,000/month since June 2022.
Parag Parikh Flexi Cap Fund: Rs 5,000/month since April 2024.
Fixed Deposit (FD): Rs 4 lakhs.
SBI Life Smart Elite: Rs 4 lakhs invested in May 2024.
Evaluating Your Investments
Mutual Funds and ELSS:

You are investing in multiple mutual funds, including ELSS, which offers tax benefits. This is a smart move for long-term growth and tax savings. However, ensure you periodically review their performance.

Insurance Policies:

Your ICICI Prudential insurance and SBI Life Smart Elite appear to be investment-cum-insurance plans. These often come with higher costs and lower returns compared to pure term insurance and mutual funds. It might be beneficial to reconsider these policies.

Index Funds:

Index funds like UTI Nifty 50 are good for passive investing but have certain disadvantages, such as lower returns compared to actively managed funds, especially in volatile markets.

Direct Stocks:

Investing in stocks is a great way to potentially earn higher returns, but it requires careful monitoring and expertise.

Gold Investments:

Gold is a good hedge against inflation but typically offers lower returns compared to equities over the long term.

Real Estate:

You've invested in sites, which is a substantial amount. Real estate can be a good investment but isn't always liquid and can be challenging to manage.

Provident Fund and NPS:

These are solid options for retirement savings, offering decent returns with tax benefits.

Fixed Deposits:

FDs provide safety but lower returns. Consider if they align with your long-term growth goals.

Enhancing Your Investment Strategy
1. Increase Your SIP Contributions:

Given your goal to accumulate Rs 15 crores, you need to increase your SIP contributions. Assuming a reasonable return on mutual funds, you may need to invest more aggressively. Consider increasing your contributions to high-performing mutual funds, focusing on those managed by experienced fund managers.

2. Review and Reallocate Insurance-cum-Investment Policies:

The ICICI Prudential insurance and SBI Life Smart Elite plans could be reconsidered. You might want to surrender these policies and redirect the funds into high-growth mutual funds. Pure term insurance paired with mutual funds often yields better returns.

3. Focus on Actively Managed Funds:

Actively managed funds can outperform index funds due to the expertise of fund managers. Although they come with higher fees, the potential for higher returns can justify the costs.

4. Maintain Adequate Emergency Fund:

Ensure your FD or other liquid investments are sufficient to cover at least six months of expenses. This is crucial for financial security.

5. Maximize Tax-Advantaged Investments:

Max out contributions to PPF and NPS for tax benefits and steady returns. These are excellent for long-term savings with added tax incentives.

6. Monitor and Review Investments Regularly:

Regularly reviewing your portfolio is essential. Adjust your investments based on market conditions and personal goals.

Strategic Investment Recommendations
1. Diversify Across Asset Classes:

While you have a good mix of equities, gold, and real estate, consider more diversification within equities through different sectors and market caps.

2. Enhance Your Equity Exposure:

Given your long-term horizon, increase your equity exposure. Equities generally offer the highest returns over long periods.

3. Consolidate Your Portfolio:

Avoid over-diversification. Focus on a few high-performing funds rather than spreading investments too thin. This can simplify management and improve returns.

4. Professional Guidance:

Consult a Certified Financial Planner for personalized advice. They can help tailor a plan specific to your financial goals and risk appetite.

Building a Robust Financial Plan
1. Set Clear Milestones:

Break down your Rs 15 crore goal into smaller milestones. Track your progress and adjust your strategy as needed.

2. Budget and Save Aggressively:

Ensure a disciplined approach to saving. Allocate a significant portion of your income towards investments.

3. Education and Awareness:

Stay informed about market trends and financial products. Financial literacy is crucial for making informed decisions.

4. Plan for Inflation:

Account for inflation in your planning. Ensure your investments grow at a rate higher than inflation to preserve purchasing power.

Final Insights
You’ve laid a strong foundation for your financial future. With disciplined investing and strategic planning, reaching your goal of Rs 15 crores by 45 is within reach. Prioritize increasing your SIP contributions, reconsidering high-cost insurance plans, and focusing on high-growth investment options. Regular reviews and professional guidance will keep you on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Dear Mr. Jasbir Singh,

First, I must commend you for your disciplined approach to financial planning and your desire to secure a substantial corpus for your children. At 64 years old, with a stable pension of Rs. 1.8 lakh per month and various well-placed investments, you are in a strong financial position. Your investments are diversified across fixed deposits (FDs), Senior Citizens' Savings Scheme (SCSS), gold ETFs, Public Provident Fund (PPF), equities, and mutual funds.

Your primary goal is to leave a corpus of Rs. 20 crore or more for your children in the next 15 years. With your current financial standing, you have laid a solid foundation to achieve this.

Evaluating Your Existing Portfolio
1. Fixed Deposits (FDs)

You have Rs. 1.2 crore in FDs earning 8% interest. This provides stable, risk-free returns and liquidity, which is essential for your age. However, FDs generally offer lower returns compared to other investment options. Given your long-term horizon, consider the opportunity cost of keeping a large portion of your portfolio in FDs.
2. Senior Citizens’ Savings Scheme (SCSS)

SCSS is a safe investment with a reasonable interest rate of 7.8%, offering quarterly interest payouts. This is a good option for generating regular income, especially given the tax benefits. Keep this investment as it aligns with your risk profile and cash flow needs.
3. Gold ETFs

You have Rs. 6 lakh in gold ETFs, which provide a hedge against inflation and economic uncertainties. This is a good long-term investment, but the returns are generally moderate. Since your portfolio is diversified, maintaining this small allocation to gold is beneficial.
4. Public Provident Fund (PPF)

Your PPF investment of Rs. 22 lakh, with a monthly contribution of Rs. 12,500, will mature in March 2028. PPF is a safe and tax-efficient investment, and you should continue it as part of your retirement planning. Given the current interest rates, PPF offers attractive long-term returns.
5. Equities

You have Rs. 1.5 crore in equities, which you manage through self-study. Equities are vital for long-term growth, and your involvement shows that you are well-versed in market dynamics. However, regular portfolio review and rebalancing are crucial to mitigate risks.
6. Mutual Funds

Your mutual fund portfolio is diversified across different funds, with a significant investment in large-cap and multi-cap funds. The monthly SIP contributions demonstrate a disciplined investment approach.
Suggested Adjustments to Achieve Your Goal
1. Rebalance Your Portfolio

Increase Equity Exposure: Considering your long-term goal of Rs. 20 crore, increasing your equity exposure could enhance your portfolio’s growth potential. You might consider reallocating some funds from FDs to equities or equity mutual funds, as they typically offer higher returns over the long term.

Diversify Equity Investments: While you have a strong base in large-cap and multi-cap funds, consider adding mid-cap and small-cap funds for potentially higher returns, though they come with increased risk.

Monitor and Rebalance Regularly: Review your portfolio at least annually to ensure it remains aligned with your goals. Adjust your asset allocation based on market conditions and your risk tolerance.

2. Optimize Your Tax Efficiency

Maximize Tax Benefits: Continue maximizing tax-saving opportunities through your PPF and SCSS investments. Consider tax-efficient mutual funds under the long-term capital gains tax regime, especially for equity investments held for over a year.

Minimize Tax Liabilities: Given your high pension, you might be in a higher tax bracket. Efficient tax planning, including timing the sale of investments to optimize tax impact, is crucial.

3. Estate Planning and Wealth Transfer

Create a Will: Ensure you have a clear and legally sound will in place to avoid any legal complications for your heirs. Specify how your assets should be distributed among your children.

Trust Planning: Consider setting up a trust if you want to manage the distribution of your wealth after your demise. This can provide more control over how and when your children receive the inheritance.

Nomination and Documentation: Ensure that all your investments have proper nominations. Keep your financial documents and information organized and accessible to your family.

4. Increase SIP Contributions

Gradually Increase SIPs: As your pension and existing investments provide stability, consider gradually increasing your SIP contributions. This will help you take advantage of the power of compounding over the next 15 years.

Focus on Growth-Oriented Funds: Since you are aiming for a Rs. 20 crore corpus, growth-oriented mutual funds with a good track record should be your focus. Regularly review the performance of your current SIPs and adjust if necessary.

5. Review Your Risk Tolerance

Risk Assessment: As you age, your risk tolerance may decrease. Periodically assess your risk tolerance and adjust your equity exposure accordingly. A balanced approach that considers both growth and preservation of capital is essential.

Health Coverage: Although you are covered by ECHS, consider having additional health insurance to cover any unexpected medical expenses not covered under ECHS. This will protect your corpus from being depleted due to medical emergencies.

Final Insights
You are in a commendable financial position with a clear vision for your family's future. By making strategic adjustments to your portfolio, optimizing tax efficiency, and ensuring proper estate planning, you are well on your way to achieving your goal of leaving a substantial corpus for your children.

Keep in mind the importance of regular portfolio reviews and adjustments. The financial landscape can change, and staying informed will help you navigate your investment journey successfully.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in