‘You need equity exposure for your child’s education’
saving for futurebusiness Updated: Jul 08, 2011 21:12 IST
Saving for future
I am 38 years old. I have investments in traditional policies, post office recurring deposits (RD), Kisan Vikas Patra (KVP), fixed deposits (FD) and Public Provident Fund (PPF). I have no loans and have my own house. I have no equity exposure and don’t have a term cover. I have health covers for R5 lakh each for my wife, child and myself. The value of FDs and RD is about R82 lakh and PPF R15 lakh. I inherited R40 lakh 10 years ago. I save about R7,000 per month. I receive monthly interest of R40,000 from FDs. I will get R20 lakh from traditional policies; KVPs will return R10 lakh in 2015 and R9 lakh in 2019. I want R75 lakh over 2021-2023 for my child's education. I want R1 lakh per month after retirement from 2025. Please advise.
RD and KVP do not give the opportunity to participate in higher interest rate cycles. Further, high inflation will be a dampener.
You should have some equity exposure. You could invest the income from FDs through a systematic investment plan. Equities are also recommended as your child's education is still 10 years away. You can create a basket of three-four funds. You can consider large-cap funds such as HDFC Top 200 and Birla Frontline Equity. From the multi-cap stable, you can go for HDFC Equity or Fidelity Equity. Lastly, hybrid funds such as HDFC Prudence and Birla Sun Life 95 Fund can be considered.
You have adequate health cover. Consider a term cover that is five-seven times your annual income.
You should revisit your retirement need. While you have factored in some increment, it needs to get further adjusted. To make sure, you fulfill all your targets, you have to be proactive in managing your portfolio.
The views expressed are of Surya Bhatia, certified financial planner & principal consultant, Asset Managers