Sam Raj is a marketing professional, who is currently single and gets a monthly salary of Rs 2.1 lakh. He stays in a rented accommodation in Hyderabad, but has bought a house worth Rs 75 lakh, for which he has taken a Rs 55 lakh loan and is paying an EMI of Rs 55,000. Besides the house, his portfolio comprises equity worth Rs 46.2 lakh in the form of stocks and equity funds; debt worth Rs 18.8 lakh in the form of EPF and debt funds, and cash of Rs 22,000.
His goals include building an emergency fund, taking a vacation, saving for his sister’s child, buying a car and a house, saving for his future child’s education and wedding, and his retirement. Despite the long list of goals, Raj will be able to meet all of these with the help of his existing resources and fresh investments.
According to Fincart, Raj can build an emergency fund of Rs 5.8 lakh, which is equal to six months’ expenses, by allocating his cash, stocks and a part of debt funds. This should be invested in an ultra short-duration debt fund. To amass Rs 2 lakh for a vacation in a year, Raj should start an SIP of Rs 16,147 in an arbitrage fund. To build a corpus of Rs 1.5 lakh in a year’s time for his niece, he can allocate his debt fund. To buy a car worth Rs 8.9 lakh, he can allocate his remaining debt fund corpus of Rs 20,600 and Rs 7 lakh from his equity funds. Raj also wants to buy another house worth Rs 1.6 crore in 15 years. For this, no existing resource has been allocated and he will have to start an SIP of Rs 35,248 in an equity fund.
How to invest for goals
Sam Raj, 39 years, salaried, Hyderabad
Due to excess surplus, Rs 5,000 a month can be invested in an equity fund for wealth creation. Annual return assumed to be 12% for equity and 7% for debt funds. Inflation assumed to be 6%.
Since Raj is planning to marry soon, he wants to save Rs 2.1 crore for his future kid’s education in 19 years, and Rs 3.04 crore for the child’s wedding in 28 years. Both the goals can be achieved by allocating his equity fund corpus and no fresh investment is required. For retirement in 17 years, Raj will need Rs 4.5 crore and should allocate his EPF corpus to it. He will also have to start an SIP of Rs 41,207 in an equity fund to meet the goal.
Premiums are indicative and could vary for different insurers.
For life insurance, Raj has two term plans worth Rs 1 crore. Fincart suggests he discontinue these, and instead buy a Rs 1.5 crore term plan for Rs 2,427 a month. As for health insurance, Raj only has a Rs 3 lakh cover from his employer. Fincart recommends he buy a Rs 5 lakh family floater plan and a Rs 20 lakh top-up plan, which will cost him Rs 811 a month. For his parents, he can buy a Rs 3 lakh plan for a monthly premium of Rs 2,537 a month.