Name: Ravi Verma,38
Resides in: Moradabad,UP
Net annual income
(Rs 8.4 lakh)
Status & goals
Ravi Verma is well settled in the business of trading of brass items,which he inherited from his father. His expenses are in manageable limits. Although,he considers his business to be the biggest wealth creator,he wants to ensure that his savings are utilised effectively to fund his childrens education,their marriage and his retirement. Spouse is a housewife,has two children Shitij,4 and Arnav,2
Along with business income,invest across various options to reach all his financial goals in the set time frame
Net monthly surplus
PPF : Rs 7.45lakh,
Gold : Rs 5 lakh
FD : Rs 6 lakh
Cash : Rs 5 lakh
Insurance : Rs 8 lakh
Emergency fund: Ravi maintains Rs 5 lakh in his savings account at all times
Health Insurance: Covered upto Rs 5 lakh through a family floater scheme
Life Insurance: Has five traditional insurance policies and a term plan of Rs 15 lakh with total premium of Rs 1.15 lakh p.a.
Employer provides health cover of Rs 3 lakh for Shubha. Her mother is too covered for up to 70 per cent of actual expenses by her ex-employer. There might be a shortfall in case of major illne-sses. Also for her mother,she will need to bear 30 per cent of the hospitalisation expenses .
Shubha has a moneyback policy of Rs 10 lakh at a premium of Rs 50,000 p.a. This is an unnecessary expenditure as she has no dependents.
Running a car Loan of Rs 3 lakh for 5 years and paying an EMI of Rs 7,000 p.m
Since Ravi is maintaining sufficient balance to meet up to six months expenses,no increase in emergency fund is recommended
Express Tip: The objective of creating an Emergency Fund is to maintain the same lifestyle for a reasonable time period in case the income flow stops for any reason.
Ravis insurance need is R 1.19 crore. There is a shortfall of R 1.04 crore,which can be met through a term plan. He is also advised to discontinue traditional plans.
Express Tip: A term life insurance is the most economical way to protect a family financially.
Ravi should enhance his health insurance to R 10 lakh for his family. Since he travels very frequently,he should also buy an accident insurance of R 50 lakh which will cover the risk of disability.
Express Tip: Its important to assess the risks involved in your profession and buy the right health insurance coverage.
Ravi should extend PPF,maturing in 2019,for another five years and allocate towards Shitijs education needs. For achieving Arnavs education requirement,a monthly investment of R 9,181 is recommended in balanced mutual funds. Return assumed 12 per cent p.a.
Express Tip: Ravi should extend PPF maturing in 2019 for another five years and allocate towards Shitijs education needs. For achieving Arnavs education requirement,a monthly investment of R 9,181 is recommended in balanced mutual funds.
Return assumed 12 per cent p.a.
Switch R 5 lakh from FD to large cap equity oriented MF which will meet Shitijs marriage goal comfortably. For Arnavs marriage corpus,a monthly investment of R 4,000 is recommended in the same mutual fund schemes.
Express Tip: Since equities help in generating inflation beating returns in the long term,it should have maximum allocation in the investment portfolios
Surrender traditional insurance plans and invest the proceeds in equity oriented MFs which will achieve nearly 50 per cent of retirement corpus.For remaining amount a monthly investment of R 8,500 is recommended in large cap equity mutual funds.
Return assumed 12 per cent p.a.
Express Tip: Starting early can do wonders for your retirement years if the mix of asset class is right.
A portfolio of traditional insurance policies and some debt instruments do not yield desired growth in the long term. Early selection of right asset classes and an asset allocation approach helps in aligning the right investments for your financial goals.