Currently I am 50, I am working in a private firm. I am having @ 60 Lakhs in FD, @ 5 to 6 Lakhs in PF, @ 5 Lakhs in PPF and 10 Lakhs in Savings. My current income is @ 70 K per month. Still I have 8-10 Years of earning left. I am having a family of Wife and 2 sons. Their age are 12 and 5. How should I plan my investment so that I can manage my family with proper fund and care.
Ans: You have an impressive financial base. With Rs. 60 lakhs in FD, Rs. 5-6 lakhs in PF, Rs. 5 lakhs in PPF, and Rs. 10 lakhs in savings, you’re on solid ground. Your monthly income of Rs. 70,000 offers more opportunities for future investments.
You have 8-10 years of earning left, providing time to build your wealth. This timeframe is key for financial planning.
Your family consists of your wife and two young sons, aged 12 and 5. Their education and well-being are priorities, which should guide your investment decisions.
Current Asset Allocation
Fixed Deposits (FD): Rs. 60 lakhs is a substantial amount in FDs. FDs offer safety, but returns may not outpace inflation.
Provident Fund (PF): With Rs. 5-6 lakhs in PF, this provides long-term security. However, returns are relatively fixed.
Public Provident Fund (PPF): Rs. 5 lakhs in PPF is a tax-saving, long-term investment. The returns are decent and tax-free.
Savings: Rs. 10 lakhs in savings provides liquidity. However, this amount could be underutilized if kept idle.
Investment Strategy
Diversification: Your current assets are heavily focused on fixed returns. While this provides safety, it's crucial to diversify into higher growth avenues.
Mutual Funds: Consider increasing your allocation to mutual funds. Actively managed funds, through a Certified Financial Planner, can offer higher returns than traditional investments.
Equity Funds: These can potentially deliver higher returns over 8-10 years. Ideal for wealth creation and beating inflation.
Debt Funds: These offer stable returns with lower risk. They can replace a portion of your FD holdings.
Systematic Investment Plan (SIP): Start a SIP in mutual funds. This disciplined approach helps in averaging costs and compounding returns.
Education Fund for Children: Set up an education fund for your sons. Given their ages, you have 6-13 years before they start higher education. Equity mutual funds can be a good option for long-term growth.
Health Insurance: Ensure you have adequate health insurance for your family. This prevents medical emergencies from draining your savings.
Risk Management
Emergency Fund: Keep at least 6 months of expenses in a liquid fund. This ensures quick access to cash during emergencies without breaking your investments.
Insurance: Review your life insurance coverage. With your current financial obligations, ensure your family is protected.
Retirement Planning
Retirement Corpus: With 8-10 years left to work, focus on building a retirement corpus. The current PF and PPF amounts are a good start, but they might not be enough.
Annuity Alternatives: Avoid annuities as they often offer lower returns. Instead, use mutual funds and systematic withdrawal plans (SWP) post-retirement for regular income.
Tax Planning
Tax Efficiency: Maximize your tax savings through instruments like PPF and Equity-Linked Savings Schemes (ELSS). A well-planned tax strategy can increase your net returns.
Rebalancing: Regularly review and rebalance your portfolio. This ensures your investments align with your risk tolerance and financial goals.
Investment in Gold
Gold Investment: If you don't already invest in gold, consider allocating a small portion of your portfolio. Gold acts as a hedge against inflation and currency fluctuations.
Long-Term Goals
Children's Marriage: Plan for your children’s marriage expenses. Given their ages, this goal is about 10-20 years away. Consider a mix of equity and balanced funds for this purpose.
Wife’s Security: Ensure your wife is financially secure if something happens to you. This includes a mix of insurance and investments that provide her with a stable income.
Finally
Your financial foundation is strong. By diversifying into higher growth investments and regularly reviewing your plan, you can ensure a secure future for your family.
Your focus on education and long-term security is commendable. By following this strategy, you can achieve your financial goals with confidence.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
