I am 40 years old, with two kids and a diverse investment portfolio. My assets include ₹52 lakh in EPF, ₹18 lakh in PPF, ₹2.85 crore in mutual funds, ₹80 lakh in equities, and ₹20 lakh in NPS. My monthly income is ₹3 lakh, with expenses of ₹1.5 lakh, and I invest ₹1 lakh monthly in small-, mid-, and large-cap index funds. My spouse owns a house worth ₹3 crore. In 8-10 years, I plan to spend ₹3 crore on my children’s international schooling. How can I optimize my investment portfolio and plan for a comfortable retirement? What corpus should I aim for to ensure a secure future
—Name withheld on request
Your asset allocation, with an 85:15 equity-to-debt ratio, is commendable for long-term growth, particularly given your systematic investment plans (SIPs) in diversified mutual funds. To optimize your portfolio for your children’s education and your retirement, consider the following strategies.
For education goal planning, your estimated requirement of ₹3 crore today is projected to increase to approximately ₹5.92 crore in 8 years, assuming a 7% inflation rate. To mitigate risks, shift the required corpus for education ( ₹5.17 crore, the discounted value of ₹5.92 crore in the sixth year) to debt investments two years before the goal. This conservative strategy aims to grow the corpus steadily by 7% annually, ensuring that by the beginning of the eighth year, you will have ₹5.92 crore for your international education goal.
For retirement planning, to earn ₹1.5 lakh per month inflation-adjusted post-retirement, target a corpus of ₹15-16 crore, assuming retirement at 60, a life expectancy of 85 years, and post-retirement inflation of 6%. Continue your current investments and, at the age of 58, transition 70% of your equity corpus to debt investments, utilizing a systematic transfer plan (STP) strategy for withdrawals. Incorporate your EPF, PPF, and NPS contributions effectively to supplement your retirement corpus. Maintain your monthly SIPs in large, mid, and small-cap index funds to ensure diversification and growth.
Additionally, consider increasing investments in PPF, NPS, and other debt instruments, which will add the required balance to your overall portfolio and create liquidity closer to retirement when these investments mature. Ensure adequate life and health insurance to protect your family’s financial future and maintain an emergency fund covering at least 6-12 months of expenses to manage unforeseen financial setbacks.
By following these strategies, you can align your investments with your financial goals, ensuring sufficient funds for your children’s education and a secure retirement. Regularly reviewing and adjusting your portfolio with a financial advisor will help keep your financial plan on track amid changing market conditions and personal circumstances.
Nehal Mota, co-founder, Finnovate.
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Published: 19 Jun 2024, 04:32 PM IST