I am 45 year old my salary is 42000, wife is house wife, have only one son 13 year old, i'am investing thousand each Large cap, mid cap and small cap 3000 per month now,want to add 2000 more. And I have investing child star vision 25000per year for last 4 years, need four more years to invest. I also took term plan for myself 500000. I have corporate family health insurance also.10000 we are playing committee we 10 of us ..my dream is after 15 years a 3 bhk house price now 35 lkh now in Delhi.My month ly expenses is House Rant giving 4500, 6000 ration, Child school fees 3000 avarage.So how i should invest so i can manage my kids studies and other house expenses with making some my dream . In future as my salary will increase i can increase investment also.
Regards
Jason
Ans: Jason,
Thank you for sharing your financial goals and current situation. I understand your aspiration to buy a 3 BHK house in Delhi in the next 15 years and ensure a secure future for your family. Let's break down your financial plan step by step.
Current Financial Snapshot
Salary: Rs. 42,000 per month
Wife: Homemaker
Son: 13 years old
Investments:
Rs. 1,000 each in large cap, mid cap, and small cap mutual funds (total Rs. 3,000/month)
Rs. 25,000/year in Child Star Vision (for 4 more years)
Insurance: Rs. 5,00,000 term plan
Health Insurance: Corporate family health insurance
Committee: Rs. 10,000/month
Expenses:
House rent: Rs. 4,500
Ration: Rs. 6,000
Child’s school fees: Rs. 3,000
Investing for Future Goals
1. Increasing SIP Investments
You are already investing Rs. 3,000 per month in mutual funds. Adding Rs. 2,000 more is a wise decision. Here’s how you can allocate the additional amount:
Large Cap Fund: Rs. 1,000
Mid Cap Fund: Rs. 500
Small Cap Fund: Rs. 500
Benefits of Mutual Funds
Diversification: Spreading investments across different sectors.
Professional Management: Managed by experienced fund managers.
Compounding: Potential to grow your wealth over time through compounding.
Evaluating Fund Performance
Actively managed funds can outperform the market with the right strategy. Unlike index funds, actively managed funds aim to beat the market index, providing potentially higher returns.
Child Education Fund
2. Child Star Vision Plan
You have been investing Rs. 25,000 annually for the past four years. Continue this for the next four years to build a substantial education corpus.
Managing Risk and Return
Risk: Medium to high due to market volatility.
Return: Potential for higher returns compared to traditional savings.
Insurance Coverage
3. Term Insurance
Your term plan of Rs. 5,00,000 is essential for financial security. Consider increasing the coverage as your responsibilities grow.
Health Insurance
4. Corporate Health Insurance
Ensure that your corporate health insurance covers all major health risks. Consider a personal health policy for added security.
Monthly Expenses Management
5. Budgeting
Your monthly expenses total Rs. 13,500. Here are some budgeting tips:
Track Expenses: Keep a record of all expenditures.
Reduce Unnecessary Costs: Identify and cut down on non-essential spending.
Saving for a 3 BHK House
6. Long-Term Goal
Your dream of owning a 3 BHK house worth Rs. 35 lakhs in Delhi can be achieved with disciplined saving and investing.
Real Estate Price Inflation: Factor in the potential rise in property prices over 15 years.
Saving Plan: Start a dedicated savings plan for the house down payment.
Education and Other Expenses
7. Child’s Education
Education costs will rise as your child grows. Plan for higher secondary and college expenses.
Increasing Investment as Salary Increases
8. Salary Growth
As your salary increases, boost your investments proportionally.
Review Annually: Assess and adjust your investments yearly.
Emergency Fund: Maintain an emergency fund for unforeseen expenses.
Power of Compounding
The key to building wealth is the power of compounding. By reinvesting your returns, your investments grow exponentially over time.
Understanding Fund Categories
9. Large Cap Funds
Characteristics: Invest in companies with a large market capitalization.
Risk: Lower risk compared to mid and small cap funds.
Return: Stable and steady returns.
10. Mid Cap Funds
Characteristics: Invest in medium-sized companies with growth potential.
Risk: Higher risk than large cap funds.
Return: Potential for higher returns.
11. Small Cap Funds
Characteristics: Invest in small-sized companies with high growth potential.
Risk: Highest risk among the three.
Return: Potential for the highest returns.
Actively Managed Funds vs. Direct Funds
12. Disadvantages of Direct Funds
Research Required: You need to research and manage your portfolio.
Time-Consuming: Regular monitoring is necessary.
13. Advantages of Regular Funds
Expert Management: Managed by professionals.
Convenience: Less time-consuming and hassle-free.
Additional Tips
14. Emergency Fund
Set aside three to six months' worth of expenses in a liquid fund for emergencies.
15. Tax Planning
Invest in tax-saving instruments like ELSS (Equity Linked Savings Scheme) to reduce your tax burden.
Final Insights
Your current financial strategy is a good start. By adding Rs. 2,000 more to your SIPs, you are taking a positive step towards your goals. Keep a close eye on your investments and adjust as needed. Continue investing in your child’s education plan and ensure adequate insurance coverage. With disciplined saving and investing, your dream of owning a 3 BHK house in Delhi is achievable.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
