Name: Saranian Iyer 35 Resides in: Pune Profession: Software Developer with an MNC Net annual income (Rs 11.39 Lakh) Status & goals Saranian Iyer is working with a multinational IT firm in Pune and stays in his self-owned house and is at present the only earning member in the family. Supriya is expecting a second child soon. The couple's primary goals are to create sufficient wealth for their children's education and marriage and for their retirement. Needed Create corpus to take care of the education and marriage related expenses of the children. He also needs to build a retirement corpus. Current Investments PPF: Rs 9.25 lakh Fixed deposits: Rs 10 lakh ELSS mutual funds: Rs 40,000 Bonds: Rs 40,000 Insurance pension plan: Rs 60,000 Observations Saranian's investments have been heavily concentrated in safe investments such as PPF and bank fixed deposits. There is no life insurance coverage for either self or spouse. Due to no liabilities he is able to save nearly 72 per cent of his monthly income. Though he has ambitious goals for his children's education he can still meet them due to his high savings ratio. FindingsEmergency fund There is adequate provision of an emergency fund Health insurance Entire family is covered by company provided group mediclaim policy. No other health insurance cover. Life Insurance Nil Cover Liabilities Zero Existing Investments Almost all the investments have been done in PPF and bank fixed deposits with a minor allocation to equity mutual funds through ELSS schemes. Except PPF,his fixed deposits are yielding him low post tax returns. Lack of diversification evident in the present portfolio. RecommendationsEmergency Fund Need to maintain Rs 1 lakh for emergency fund purpose in savings account while the rest can be invested in an ultra short term debt fund Express Tip: Contingency planning via emergency fund is the first level to access funds when unfortunate events occur. Health Insurance Saranian and his wife should each take an individual health cover of Rs 5 lakh and Rs 2 lakh for the children. Express Tip: Individual health policies provide cushion against rising medical costs. Life Insurance There is a shortfall of Rs 85 lakh in life cover which can be secured by buying pure term insurance plan. Annual premium will be approx Rs 17,000 for the term plan. Existing insurance pension policy can be made paid up and the resulting premium savings can be utilised for the new cover. Express Tip: Adequate life insurance cover of the primary earning member protects the dependent family from losing their current lifestyle in case of any unfortunate event affecting the insured. Children's education Allocate Rs 5 lakh from the present fixed deposits to balanced mutual funds and start SIPs of Rs 38,000 in the ratio of 80:20 in favour of balanced equity mutual funds and gold mutual funds for a period of 16 years to achieve this goal Rate of return assumed at 11 per cent p.a Express Tip: Equity Mutual funds provide the diversification and inflation beating returns in the long run while gold act as a perfect hedge against inflation. Children's marriage Invest Rs 12,000 in the ratio of 70:30 in favour of equity mutual funds and PPF. Rate of return assumed 8 per cent p.a for PPF & 12 per cent for equity MF Express Tip: A balanced portfolio approach with the right asset allocation provides the desired results for achieving your financial goals. Retirement Funding (2036) As per the expense replacement method,Saranian will require a corpus of Rs3.04 crore at retirement. Allocating R 56,800 in PPF and Rs 60,000 in voluntary PF every year will help create a corpus of R 1.6 crore at retirement. The balance corpus can be achieved by investing Rs 8,000 a month in diversified equity funds. Rate of return assumed: PPF & GPF - 8 per cent,Equity MF - 12 per cent. Express Tip: PPF and company PF should always be kept for your retirement needs. A balanced approach with debt and equity can contribute to stable returns over longer periods. Conclusion Prudent expense management helps in allocating higher amounts towards investing for achieving your goals. Clearing your liabilities in the early years enables creating a higher corpus for retirement. While debt provides the stability and fixed income,equity and gold can provide inflation beating and better post tax returns in the long run
