Name: Rajiv Chandok,27 Resides in: Delhi Profession: ZCM in a private insurance company Net annual income (Rs 10.14 lakh) Status & goals Rajiv is a self made man working with a leading insurance company and having a stable job. He owns a house and a car,both of which are on loan. Most of his investments are skewed towards insurance due to which his allocation to other assets has suffered. His primary concern is to fund his children's future education and marriage along with a retirement corpus for himself Needed A financial plan that takes care of his childrens future education and marriage along with a retirement corpus. Net monthly surplus Rs 11,500 FindingsEmergency fund There is no provision of an emergency fund done so far Health insurance Covered upto Rs 3 lakh through a family floater mediclaim policy from company & a separate family floater policy of Rs 2 lakh Life Insurance Rs 60 lakh cover from 6 different insurance policies Liabilities Home loan and car loan EMI are within manageable limits Existing Investments Most of the investments have been done in insurance policies which form the bulk of the investment portfolio. PPF account is rightly maintained for retirement purpose but with a low corpus. Off late,investments have been going into mutual funds which is a good sign of diversification. The overall portfolio returns will be lower due to higher weight-age to insurance RecommendationsEmergency Fund Need to maintain Rs 2 lakh for emergency fund purpose with Rs 1 lakh in savings account and the rest in a liquid fund. You can consider surrendering a few traditional policies and utilise its proceeds to create an emergency fund Express Tip: Emergency fund prevents breaking your medium to long term allotted assets to fund the emergency Health Insurance The present health cover of Rs 5 lakh which includes the company provided cover is sufficient. You can revisit the same next year Express Tip: Illness injury can affect anyone,and at any age. It's better to be adequately covered than to see your investments being broken to meet the cost. Life Insurance As per the expense replacement method there is a shortfall of Rs 65 lakh in life cover which can be done by buying pure term insurance plans. Annual premium will be approx Rs 10,000 for online term plans. Existing traditional policies can be made paid up and the resulting premium savings can be utilised for the new cover. Express Tip: Term insurance is the cheapest and the purest form of insurance Educational funding of Kashvi (2019) & Navya (2024) SIPs of Rs 7,500 needs to be done in two balanced MFs having a good track record for a period of 8 years for Kashvi,While Rs 5,500 needs to be allocated in balanced funds for a period of 13 years to fund Navya's higher education. Rate of return assumed 10 per cent per annum. Express Tip: Balanced funds have an in-built debt equity ratio and hence avoid the hassles of rebalancing the portfolio Marriage funding of Kashvi (2026) & Navya (2031) SIPs of Rs 5,250 needs to be done in equity diversified MFs & gold ETF for a period of 15 years for Kashvi,While Rs 4,750 needs to be allocated similarly in equity funds & gold ETF for a period of 20 years to fund Navya's marriage expenses Express Tip: Investing in Gold ETF is better than buying physical gold since the cost structure in an ETF is cheaper over buying physical gold and they can be held in the paperless form in your demat accounts. Retirement Funding (2025) Rajiv will require a corpus of Rs 2.58 crore at retirement. PPF account needs to be continued and renewed till retirement along with investment of Rs 70,000 per year. Stop further allocation of premiums into non- performing and high charge ulips and divert that money into SIPs of diversified equity MFs. The PPF will yield nearly Rs 37 lakh at retirement. Invest Rs 29,000 per month in a ratio of 80:20 in favour of equity MFs. Rate of return assumed 8 per cent p.a. for PPF and 10 per cent for balanced and equity MFs. Conclusion The diversification mantra works well in our overall investment planning. The first step is to first identify goals and time horizon and then work out a suitable asset allocation to allocate investments accordingly. Insurance should be taken only to cover the risk aspect while for investments,you have a plethora of options to choose from.
