Suggest any good investment plans

 Query:

I am an IT professional aged about 37 years. I have two kids and my wife is a home maker.

– Earning a gross salary of around Rs 1.2 lakh per month.
– Own a house in outstation which is earning a rent of Rs 9,000 per month. I stay in a rented house @ Rs 10,000 rent per month.
– No debts as of now.
– Having Rs 10 lakh cash with me right now.
– Pay an insurance premium of Rs 60,ooo per year.
– Completely done with my sec.80c investments.
– My company provides for free health insurance.

Please suggest any good investment plans.

 Reply:

Based on your query and the data provided, following is my reply:

Life Insurance

  • You must first calculate an optimum cover amount for your life insurance, so that any unfortunate incident in future does not deprive your spouse and children of a good life in your absence. This required cover for you may be well above Rs 1 crore.
  • Check if your existing insurance policies provide you with this required cover. Also check if these policies fit right as a part of the debt component in your investment portfolio.
  • If it is not as above, the expense of Rs 60,000 p.a. as insurance premium may be on higher side, which will seriously harm your net worth in the long term.

Health Insurance

  • The free health insurance provided by your employer company will be helpful till you are employed. In a scenario you cease to be in this employment due to any reason in future, you and your family may become uncovered for the health risks, for which you may not get any right policies at that time.
  • Needless to say, the possible huge expenses on Medicare now-a-days can throw the most intelligent investment plans out of track. You have to check if your family members are covered well for the risks of hospitalization, critical illnesses and personal accident.

Tax

You must check your Sec 80C investments individually if these are worthy of your investment portfolio. Saving tax is important but it is subordinate to investment planning.

Investment

  • You have asked about good investment plans. Accumulating cash and then investing on the basis of just the knowledge of existence of any good investment options is a wrong strategy. Analysing your existing financials and future requirements is essential for arriving at the right investments for you.
  • First you have to plan an allocation ratio for your investments in the Equity, Debt and Liquid asset classes primarily, and stick to it. For example, this ratio may be 60:30:10 (Equity:Debt:Liquid).
  • Mutual fund schemes offer good investment options in all these asset classes catering to your short, medium and long term requirements.
  • You have at least two clear financial obligations for which you have to start accumulating the corpus for, right now. These are your kids’ future (higher education, marriages) and your retirement.
  • Selection of the actual investments require further analysis involving more of your financial data, investment risk profile and future requirements (which may be short, medium or long-term).

For the right start, you should write down your monthly expenses to get proper information, which you can then use for your financial planning based on your actual situation. This way you will also ensure you keep investing optimum and do not accumulate cash. You can make use of the Free Excel Tool provided at FinlifeCare.com for this – “My Expenses & Savings” – after taking the following 2 steps:

  1. Register Here
  2. Download “My Expenses & Savings

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The writer, Sukhvinder Sidhu, is a ‘SEBI registered Investment Adviser’ and a ‘Certified Financial PlannerCM’. He writes to contribute his bit to create financial awareness, so that readers take right personal finance decisions for a better financial life for themselves and their families.
Know more about him.