My name is Nishant, and I am 38 years old. I get a salary of Rs 1.35 lakh per month after deducting tax. I have a family of 3 members: my wife and a 2-year-old daughter.
I have taken health insurance for Rs 10 lakh and term insurance for Rs 1 crore. Please advise if this needs to be increased. I have invested Rs 1.5 lakh per year in PPF for the last 4 years and Rs 50,000 per year in NPS since last year. I had some home loan liabilities, which I closed this month, and now I want to invest for 2 different goals.
The first goal is to create 1 crore in the next 5 years so that I can get some earnings by investing this amount somewhere and can reduce the dependency on my salary for my monthly household expenses, which is 15-20 thousand per month right now .pls advise how much and where to invest to create this fund.
The second goal is to create a retirement corpus of 4-5 Crore; please help to advise where and how much to invest. I am not well aware of mutual funds, so I am not sure in which mutual funds I should invest to create wealth. Please help guide me in creating an ideal portfolio/ financial plan.
Reply by Raj Khosla, Founder and MD MyMoneyMantra.com
Congratulations on being debt-free and having clearly defined financial goals! The need for insurance depends on family size and as responsibilities grow. For term insurance, it is recommended to have coverage that is at least 15 times your annual income. For health insurance, ensure it covers potential medical expenses adequately after factoring in inflation. Therefore, it is recommended to go for a minimum of Rs 25 lakh of family floater and increase term insurance to Rs 2.5 crore.
For your short-term goal of 1 crore in 5 years and for long-term retirement planning, consider a mix of equity and debt. Allocate a major portion of your investment to equity mutual funds for potential growth and create an emergency fund of around Rs 15 lakh by investing in debt instruments like FDs or debt mutual funds. For creating a corpus of Rs 1 Crore in the next 5 years, you need to start monthly SIP in diversified equity funds of around Rs 1 Lakh. Allocate a portion to large-cap, mid-cap, and small-cap funds based on risk tolerance. Recommended funds are Nippon India Large Cap Fund, HDFC Top 100, Kotak MultiCap, Franklin India Smaller Companies Fund and Axis Multi Cap Fund.
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For retirement planning, continue investing in mutual funds and remain invested in NPS in PPF for tax benefits and guaranteed returns. Consider consulting a financial advisor for customised financial solutions and to re-align your investment strategy basis specific circumstances.
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)