Hello,
My husband and I are both working and 40 years old. Our present financial situation is:
1.5 Cr in various actively managed mutual funds
85L in stocks
15L in PPF
Emergency fund of 20L
Term insurance for both worth 2Cr
Health insurance for both.
Our monthly expense is 1.5L. We have our own house and a 9 year old son. Every month, we invest
2L in mutual funds
1L in equity
12.5k in PPF
Assuming a very conservative return of 10% on our investment, how long do you think we will take to create our retirement corpus of Rs. 7 Cr?
Thanks,
Ans: Current Financial Overview
Age: Both 40 years old.
Mutual Funds: Rs 1.5 crores.
Stocks: Rs 85 lakhs.
PPF: Rs 15 lakhs.
Emergency Fund: Rs 20 lakhs.
Term Insurance: Rs 2 crores each.
Health Insurance: Adequate coverage for both.
Monthly Expenses: Rs 1.5 lakhs.
House: Owned.
Son: 9 years old.
Monthly Investments
Mutual Funds: Rs 2 lakhs.
Equity: Rs 1 lakh.
PPF: Rs 12,500.
Retirement Corpus Target
Retirement Corpus: Rs 7 crores.
Conservative Return Assumption
Return Rate: 10% per annum.
Current Investments and Growth
Total Investments: Rs 1.5 crores + Rs 85 lakhs + Rs 15 lakhs = Rs 2.5 crores.
Monthly Contributions: Rs 3.125 lakhs (Mutual funds, Equity, and PPF).
Analysis and Insights
Growth of Current Investments
Mutual Funds and Equity: Actively managed funds have potential for higher returns. Professional fund managers aim to beat market averages.
PPF: Provides stable returns and is risk-free. However, returns are typically lower than mutual funds.
Investment Strategy
Diversification: Your portfolio is well-diversified with mutual funds, stocks, and PPF.
Professional Guidance: Continue investing through mutual funds with a Certified Financial Planner (CFP). This ensures professional management and informed decisions.
Disadvantages of Index Funds
Passive Management: They follow the market without active decision-making.
Lower Returns: Typically, they provide average market returns.
Disadvantages of Direct Funds
No Guidance: Lack of professional advice can lead to mistakes.
Complexity: Managing investments directly can be time-consuming.
Time to Reach Retirement Corpus
Given your conservative return rate and monthly investments, let's estimate the time required to reach Rs 7 crores.
Initial Corpus: Rs 2.5 crores.
Monthly Investment: Rs 3.125 lakhs.
Return Rate: 10% per annum.
Final Insights
Current Position: You are well-positioned to reach your retirement goal.
Time Frame: With disciplined investments and assuming a 10% return, you could reach your goal in around 8-10 years.
Professional Help: Continue with a Certified Financial Planner for best results.
Review Regularly: Keep reviewing your portfolio and adjust as needed.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
