Dear Sir/Madam, I hope this message finds you well. As the sole earning member of my family, I am 41 years old and responsible for supporting my family of five. Here are the details of my financial situation: Income and Expenses: Monthly salary income: ?1.10 lakhs. Monthly expenses: Rent (?35,000) and household expenses (?50,000). Insurance and Loans: ICICI Lombard term insurance: Coverage of ?50 lakhs with an annual premium of ?9,700. Mediclaim for my mother: Coverage of ?1 lakh with an annual premium of ?13,000. Family mediclaim: Coverage of ?2 lakhs with an annual premium of ?6,700. Loan from LIC: ?2 lakhs. Savings and Investments: PPF savings: ?80,000. Endowment policies with an annual premium of ?24,000. SIP investments in the following mutual funds: Aditya Birla Sun Life Pure Value Fund (G): ?1,000/month. Bandhan Sterling Value Fund - Regular Plan (G): ?1,000/month. DSP Flexi Cap Fund - Regular Plan (G): ?1,000/month. HDFC Mid-Cap Opportunities Fund (G): ?1,500/month. Considering this details do help me to design my portfolio for corpus of around 10crores in next 20 years.
Ans: Age: 41 years
Family: Five members
Monthly Salary: Rs 1.10 lakhs
Monthly Expenses: Rs 85,000 (Rent: Rs 35,000; Household expenses: Rs 50,000)
Insurance and Loans:
ICICI Lombard term insurance: Rs 50 lakhs (annual premium: Rs 9,700)
Mediclaim for mother: Rs 1 lakh (annual premium: Rs 13,000)
Family mediclaim: Rs 2 lakhs (annual premium: Rs 6,700)
Loan from LIC: Rs 2 lakhs
Savings and Investments:
PPF savings: Rs 80,000
Endowment policies: Annual premium Rs 24,000
SIP investments: Rs 4,500/month
Financial Planning Goals
Retirement Corpus: Rs 10 crores in 20 years
Insurance Coverage: Adequate protection for family
Debt Management: Efficiently manage and repay loans
Wealth Creation: Strategic investment for growth
Step-by-Step Financial Plan
1. Review and Enhance Insurance Coverage
Term Insurance: Ensure coverage is at least 10-15 times your annual income
Health Insurance: Increase coverage for family to Rs 5 lakhs
Mediclaim for Mother: Increase coverage to Rs 5 lakhs
2. Create an Emergency Fund
Amount: 6-12 months of expenses
Investment: High-interest savings account or short-term FDs
3. Debt Management
LIC Loan: Prioritize repaying the Rs 2 lakhs loan
Avoid New Loans: Focus on managing current debts
4. Increase SIP Investments
Existing SIPs
Aditya Birla Sun Life Pure Value Fund
Bandhan Sterling Value Fund
DSP Flexi Cap Fund
HDFC Mid-Cap Opportunities Fund
Strategy
Increase Contributions: Gradually increase SIP amount by 10% annually
Diversify: Add more funds for balanced growth and risk management
5. Public Provident Fund (PPF)
Contribution: Continue investing in PPF for tax benefits
Increase Investment: Aim to contribute the maximum limit of Rs 1.5 lakhs per year
6. Endowment Policies
Evaluate Performance: Assess the returns and benefits
Consider Alternatives: If underperforming, consult a Certified Financial Planner for better options
7. Additional Investment Options
Mutual Funds
Equity Funds: For long-term growth
Debt Funds: For stability and regular income
National Pension System (NPS)
Contribution: Invest in NPS for additional retirement corpus
Benefit: Tax benefits under Section 80C and 80CCD
8. Regular Monitoring and Review
Review Portfolio: Regularly review and adjust your investments
Rebalance: Ensure your portfolio aligns with your risk tolerance and goals
Disadvantages of Index Funds
Limited Flexibility
Tracking: Index funds strictly follow market indices
Drawback: Lack of active management to adapt to market changes
Lower Returns
Potential: Actively managed funds can outperform index funds
Disadvantages of Direct Funds
Lack of Guidance
Direct Funds: No professional advice
Benefit of Regular Funds: Access to Certified Financial Planner for personalized advice
Convenience
Ease: Investing through Certified Financial Planner offers better management and oversight
Final Insights
Start Early: The sooner you start, the better
Diversify: Spread investments across different asset classes
Consult a CFP: Professional advice ensures a comprehensive plan
Review Regularly: Adjust your plan as needed to stay on track
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
