Prudent investing can help you achieve your financial goals

I am Praveen Mishra from Pune. I am 41-year-old. I am living in my own house. I need Rs. 50 lakh after 5 years for my children’s higher education and Rs. 1 crore after 12 years for my retirement. I have made a few investments:

- Axis Equity Mutual Fund: Rs. 5,000 per month, since last 4 years

- PPF: Rs. 8,000 per month, investing since last 3 years

- RD: Rs. 17,000 per month, just started for 1-2-3 years gradually (5k-7k-5k)

- A Term Plan: Rs. 1,000 per month for Rs. 30 lakh

- Mediclaim: Rs. 1,500 per month for Rs. 5 lakh family floater plan + I have Rs. 3 lakh cover

- LIC (JeevanSaral): Rs. 3,500 per month (Sum Assured Rs. 10 lakh after 10 years)

- ICICI Prudential Smart Kid: Rs. 1,100 per month from last 10 years

After all investments and routine home expenses I have spare Rs. 30,000 per month. After 1 year, the spare amount will be Rs. 50,000 per month.

Now my question is following:

How can I achieve my goal? Where more can I invest? How much I have to invest at what place to achieve my goal? I am interested in investing in SIP (Systematic Investment Plan) Mutual Funds. Can I invest my spare amount in share market? Can I purchase one more property? Please guide me what is best for me?

Dear Praveen, congratulations for making regular investments and taking the steps towards preparation of a financial plan for you.

First, continue maintaining your existing savings (SIPs and insurance policies).

Second, as the education goal of the kids is due for 5 years and you require a huge amount of savings (approx. Rs. 55,000 per month) to accumulate that amount. You can direct your Axis MF SIP (Rs. 5,000 per month) and the RD savings (Rs. 17,000 per month) for this goal. These savings would help to accumulate half the amount needed (Rs. 26 lakh approx.). Also, assuming that your ICICI Prudential Smart Kid Plan will stop when the education goal start (year 2019), you would be having an accumulated amount of around Rs. 3.40 lakh from this policy.

For the remaining amount (approx. Rs. 20 lakh), you need to save in around Rs. 17,000 monthly. We recommend that you save this amount into Balanced Fund of a reputed AMC.

Third, as stated that you need Rs. 1 crore at retirement, you would be required to save Rs. 33,000 per month. Given your cash flow after saving for the kid’s education goal, you would be having Rs. 13,000 remaining every month. You can save this amount into a Pension Fund. After 1 year, you would have additional Rs. 20,000 available every month. We recommend that you start SIPs into Equity and Balanced Funds. You will be able to achieve your goal.

In regards to your query for stock market investments, we advise you to go through Mutual Funds channel, as both of your goals – retirement and education are responsibility goals. Mutual Funds are better managed as they have an expert team to do the research, stock picks, etc.

Also, for property purchase, concentrate on kid’s education goal for now. Once they are accomplished, you can look into an attractive location within your budget and specifications.