12,125.90133.4
Stock Analysis, IPO, Mutual Funds, Bonds & More

Family finance: Why salaried Manikandan should start investing in equity to reach money goals

Coimbatore-based Manikandan will have to stagger his investments to reach his financial goals. His goals include building an emergency corpus, funding his child’s education, wedding, etc.

, ET Bureau|
Last Updated: May 06, 2019, 10.05 AM IST
0Comments
Getty Images
plan-65
Manikandan has a meagre portfolio, with no equity investment and debt comprising only the EPF corpus.
Tax Calculator
Manikandan G, 35, is from Coimbatore and stays in a rented house with his homemaker wife and five-year-old child. He gets a monthly salary of Rs 73,000, and after considering household expenses, rent, EMIs and insurance premium, he is left with a surplus of Rs 18,187. Manikandan has a meagre portfolio, with no equity investment and debt comprising only the EPF corpus. He has bought a house worth Rs 13.5 lakh, for which he has taken a loan and is paying an EMI of Rs 11,549. He also has a credit card debt of Rs 54,000, with an EMI of Rs 6,500. Manikandan’s goals include building an emergency corpus, saving for his child’s education and wedding, and creating a retirement kitty.

Portfolio

18-1

Cash flow


18-2

To start with, Chintan Vora of 5nance.com suggests Manikandan pay off the credit card debt of RS 54,000 with Rs 1 lakh cash. This will free up the EMI of Rs 6,500, which can be used to fund a goal. Next, he can set up his contingency corpus of Rs 2 lakh, which is equal to six months’ expenses, by allocating his remaining cash of Rs 46,000 and investing it in a short duration fund. For the balance amount, he can save his surplus Rs 24,687 for six months before investing for other goals.

How to invest for goals

18-3

Manikandan wants to save Rs 67.9 lakh for his child’s higher education in 13 years. He can do this by starting an SIP of Rs 20,000 in an equity fund for 12 years. For the child’s wedding, he has estimated a need of Rs 41.1 lakh in 23 years. He can build the corpus by running an SIP of Rs 6,000 in an equity fund for 10 years.

However, he will have to begin investing after three years due to lack of surplus. As for retirement in 21 years, at the age of 56, he will require a corpus of Rs 3.3 crore. He will have to assign his EPF corpus and maturity proceeds of the traditional insurance policy, which will yield nearly Rs 1 crore. For the remaining Rs 2.3 crore, he will have to start an SIP of Rs 5,000 a month in an equity fund, but will have to start investing after a year. This amount will alao have to be increased incrementally with a rise in income.

Insurance portfolio

18-4

As for life insurance, Manikandan has a traditional plan of Rs 7 lakh, which is inadequate for him. Vora suggests he buy a Rs 1 crore term plan, at a cost of Rs 1,000 a month. He can also continue with the traditional plan as a debt component of his portfolio. Manikandan also doesn’t have any health insurance, and Vora advises him to buy a family floater plan of Rs 5 lakh. It will cost him Rs 1,000 as monthly premium.

Financial plan by Chintan Vora, Vice-President, 5nance.com

Write to us for expert advice
Looking for a professional to analyse your investment portfolio? Write to us at etwealth@timesgroup.com with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals.
Click here for all the information and analysis you need for tax-saving this financial year

Also Read

Family finance: Das needs to align investments with goals to reach them easily

Family finance: Why Rawats should link their investments with money goals

Family finance: Awasthis need to increase their investments to reach money goals

Family Finance: Government employee Kumar should focus on main money goals for now

Family finance: Bhardwaj can reach all goals on time with existing savings, investments

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service