How do I optimize my portfolio to buy a house, start a family?

Since the last five years, I have been depositing ₹10,000 every month in public provident fund (PPF). My PPF balance stands at ₹7 lakh. I have been investing ₹50,000 annually in national pension scheme (NPS) for the last three years.

I have a health insurance for me and my wife and also my parents. Now, we want to buy a house, which we expect to cost around ₹1 crore. We also plan to start a family next year. Do we need to tweak our portfolio to take care of the expenses coming our way?

—Name withheld on request

You have built a good, diversified portfolio. So far, you have accumulated close to ₹22 lakh. Out of this, ₹7 lakh is in PPF, so it most likely has a lock-in period. You will have to rely on a home loan to buy the house. If we consider a loan of ₹1 crore for 20 years then the equated monthly instalment (EMI) for the same could be approximately ₹87,000 at an interest rate of 8.5% p.a.

Based on your take-home salary, you will be eligible to get this loan amount. If you would like to take a lesser loan then you should try to save more from your monthly income. Practically, a reasonable amount would also go into your monthly mandatory expenses but you still have the potential to save more. These additional savings can be accumulated in your bank account to reduce the loan amount.

A goal amount for your child’s education will help you build that corpus over the long term. In this case, you can treat this goal as wealth creation, as well as you will have more than 15 to 16 years to build it.

You should also consider investing for your retirement while working on the other goals.

As you are salaried, you should also take into account the EPF contribution as a debt investment, hence investing more than required in PPF for long-term goals like retirement may not be the best approach.

Equities are good for long-term goals and equity mutual funds offer a convenient and reliable way to invest for such goals. You have already taken the right step of investing through SIPs and you should continue doing the same.

On the funds, you can relook at Axis Bluechip Fund as the fund has underperformed its peers for quite some time, recently. You can divert this SIP into other funds. Some of the funds you can look at are SBI Large & Mid Cap Fund, 360 One Focused Equity Fund, Kotak Equity Opportunities Fund and PGIM India Midcap Opportunities Fund.

Harshad Chetanwala is co-founder at MyWealthGrowth.com

Updated: 31 Aug 2023, 11:04 PM IST