I am 37 years old and investing 2000 every month in canara rebecco mutual fund ..have 17L in PPF account and yearly investing 1.5 in ppf ...60000 yearly in LIC policies ..20 lakhs in FD Having a considerate quantity of gold which is personally saved Have around 350000 in mutuals leaving 2000 in 7 scripts ...I have a new born baby and have invested 2 lakh lum sum in 4 mutuals funds Target of 15 years ..by this year end planning more5 lakhs to be invested for her future I am not comfortable with monthly sip .. Need advice on agressive investment for daughter and for retirement planning And should I open a PPF account ? Kindly guide

Ans: Shri, your current financial structure is quite robust. The take-home salary of Rs. 1.13 lakh is well-allocated towards savings and investments. Your monthly investment strategy, especially with SIPs and contributions to NPS, is commendable. You’ve done well to diversify your investments across different asset classes like PPF, stocks, mutual funds, NPS, and EPF.

Evaluating Your PPF and NPS Contributions
The PPF account maturity in March 2025 provides a good opportunity to reassess its role in your portfolio. The current PPF valuation of Rs. 21.04 lakhs (including your spouse’s account) is a safe and low-risk investment. However, with your goal of achieving a Rs. 5 crore corpus, the returns from PPF might not suffice.

Your NPS contributions are beneficial due to the tax benefits under Section 80CCD(1B). However, it’s important to remember that NPS has a long lock-in period until retirement. This could limit your flexibility.

Instead of withdrawing from PPF to invest in mutual funds, you can continue the PPF until maturity and then assess the need based on market conditions. As PPF provides a fixed and risk-free return, it’s wise to balance it with other growth-oriented investments.

SIP Strategy
Your current SIPs in small and mid-cap funds are aligned with higher risk and higher return strategies. Small and mid-cap funds can offer significant growth over the long term but are also more volatile.

As you plan to increase your SIP contributions annually, consider adding some large-cap or balanced funds to your portfolio. These funds provide stability and can cushion your portfolio during market downturns.

Given the one-year duration of your current SIPs, it's essential to regularly review their performance. Consistently monitor the funds, but avoid frequent changes unless there’s a significant underperformance.

Instead of withdrawing from mutual funds for monthly expenses, consider building an emergency fund. You can invest this fund in low-risk instruments that are easily accessible.

Assessing Your Retirement Goal
Your target of achieving a Rs. 5 crore corpus at retirement is ambitious but achievable with disciplined investing. Given the current investment structure, it's feasible to get close to this target. However, it would be wise to regularly reassess your goals and make necessary adjustments to your SIP contributions.

If you maintain and gradually increase your current investment strategy, you’re on the right path. Focus on ensuring that your portfolio remains diversified across different asset classes.

Planning for Daughter's Education
Your plan to fund your daughter’s engineering education through mutual fund redemptions is practical. Given the short timeframe, it's advisable to invest the amount earmarked for her education in safer instruments. You can consider shifting some of the mutual funds into debt funds or liquid funds as the education expenses near.
Real Estate Consideration
While you plan to purchase a 2BHK flat after your daughter’s education, it's essential to evaluate the impact on your overall financial goals. The cost of Rs. 2.5-2.6 crore is significant. It’s crucial to assess whether this investment will impact your retirement corpus goal.

Since you currently stay in your own 1BHK flat, consider whether upgrading to a 2BHK is essential or if the funds could be better used towards your retirement savings.

Insurance and Risk Management
Currently, you lack life insurance, which is a critical aspect, especially as the sole breadwinner with dependents. I strongly recommend getting a term life insurance policy to cover at least 10-15 times your annual income. This will ensure financial security for your family in case of unforeseen circumstances.

Also, evaluate the adequacy of your current Mediclaim policy. Ensure that the sum insured covers potential healthcare costs adequately, considering inflation in medical expenses.

Action Plan to Achieve Financial Goals
Continue and Review SIPs: Continue with your SIPs, but ensure diversification. Add large-cap or balanced funds for stability. Regularly review the performance but avoid frequent changes unless necessary.

Insurance Coverage: Secure adequate life insurance and ensure your health insurance covers inflation-adjusted medical costs.

Retain PPF until Maturity: Let the PPF mature in 2025, then reassess its role in your portfolio. Don’t withdraw now; it offers a risk-free return.

Emergency Fund: Build an emergency fund in liquid or debt instruments instead of relying on mutual funds for monthly expenses.

Real Estate Decision: Reevaluate the need to upgrade to a 2BHK flat. Assess its impact on your retirement goals.

Education Planning: For your daughter’s education, start shifting the required amount into safer instruments like debt funds as the time nears.

Final Insights
Shri, your financial foundation is solid. With the right adjustments and a disciplined approach, you’re well on your way to achieving your financial goals. It’s crucial to regularly reassess your investments and ensure you have the right insurance coverage in place. Continue with your current strategy, but ensure diversification and risk management are prioritized.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in