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Anonymous: Hello Sir, I have saving 50 lakh, i am looking for monthly return of 30k. What the best to possible way to invest this amount. Is it good option to invest in index fund? Please advice
You have not clarified the duration of your requirement, how long do you need monthly return?
But let's assume this is as long as possible.
There are many solutions to this and that involves knowing a lot more about you and your life state but will anyways will provide you a couple of options.
1. Fixed income investment: Invest in FD's at 7%, this will earn you 3.5 lakh a year and should be covering your requirement. But the savings will remain at 50 lakh.
If the rate on FD falls down, then you will end up using your savings to cover your requirements. So this option may not be feasible for a long period. The risk being low, it may not grow your saving and it can erode your saving too.
2. Invest in Equity (mutual funds): You mentioned Index funds, they can be considered along with other equity mutual funds too. But understand, there is a higher level of risk involved.
Markets are and will be volatile and the returns will not be the same each year. If you have the temperament/patience to stay invested in market fluctuations then venture in this direction.
When you are looking to fulfill your requirement each month, your investment will always stay on your mind and this will trigger behavioral traits and hence I mention temperament.
Many people get unsettled seeing their investments erode in a short period of time and take decisions which are not rationale. Hence, enter knowing the risk and yourself.
3. Middle ground -- Invest in balanced option: Something like a hybrid fund. If you are conservative (low risk), then go for conservative hybrid mutual fund schemes (more Debt and less equity) and expect returns slightly above your FD in the range of 8-9% which will serve your requirement and can add a bit to your savings.
If you are not conservative and understand that market linked investment can provide a little extra boost to your investment then balance your risk with Balanced advantage Mutual Fund schemes (balanced approach to equity and debt).
These schemes can provide you better returns up to double digits 10-12% and hence after meeting your requirements, your investment can grow too.
Please understand that equity brings in market risks and hence have expectations but also understand the risks involved.
Make your decision based on the appetite you have for loss bearing and safety and accordingly go ahead. Consult a good advisor or a financial planner who can guide you after knowing more about you and your requirement and also help understand tax implications.
Anonymous: Hi, I am 46 years old residing in a B Town in India. I have 2 daughters one 16 years old and second 7 years old. I have Savings of 25 Lakh in my account as emergency find. I have FD of 65 Lakh. PF, PPF and NPS of 25 Lakh, Mutual Fund and Shares of 25 Lakh, Lic policies worth 25 Lakh, Gold around 1.2 Crores.
I have a medical insurance of 20 Lakh for me and my family, Term insurance of 1Cr. As properties.
I own 2 independent houses, 2 flats and 2 plots in Bangalore which has a current value of about 4.5 Cr.
In my home town i have 2 Houses, 1 apartment and plots which has a current value of 2.75 Cr.
Currently i am drawing a monthly salary of 2 Lakh rupees and get a rent of 30K/ month. I donot have any emis and my monthly expenses is currently 75K.
I am planning to retire at the age of 50. Is my financial condition stable to retire at the age of 50? Thanks for your suggestion in advance.
Let's understand the value of your current Investments at the time of retirement. Below is the list with its current value and (expected rate of return).
- Emergency Fund - 25 lakh (3.5%)
- Fixed Deposits - 65 lakh (7%)
- PF/PPF/NPS - 25 lakh (8%)
- MF/Stocks - 25 lakh (10%)
- LIC Policies - 25 lakh (no change)
Your current investments listed above will achieve a value of 3.5 crore at the time of retirement 4 years from now.
Apart from this you have mentioned properties worth 7.25 Cr. Assuming you will only use/liquidate them if required, so excluding them from consideration for now.
You total income is 2.30 lakh per month (includes rent) and expenses are 75k per month. So there is potential to add to the above investments for the next 4 years.
I will assume your current expenses are sufficient for the lifestyle you want to continue post retirement.
You will require a corpus on retirement after 4 years to sustain your expenses adjusted with inflation of 6% which will be close to 1 lakh per month (at the time of retirement).
With this starting point, and adjusting for inflation of 6% each year, and life expectancy of 30 years post retirement you need a corpus of approx. 2.5 crore - again assumed this will earn a return of 8% for the 30 years.
If you can invest wisely and generate a slightly higher return of say 10%, the corpus requirement will be 2 crore.
Your current investments at the time of retirement with value of 3.5 crore is sufficient to cover your expenses for the next 30 years inflation adjusted at 6%.
And this is excluding the properties you own and additional investments you can make for the next 4 years.
Summary: You are more than stable as far as your financial state is concerned. You have a strong base to meet your retirement needs and also a potential to create wealth for the generations ahead.
I want to highlight/recommend few points:
1. Increase the medical Insurance for yourself and family to 1Crore as medical expenses will only increase in future.
2. Stop the Term Life Insurance and save the premium for investment. As you have no liabilities and net-worth is high enough to cover any outcomes in life ahead, this premium is a lost cause considering your strong financial state.
3. Revisit the LIC Policies you have and consider surrendering/stopping them if they are not nearing their maturity. They are not giving you enough cover and providing below par returns. So do discuss with a trusted licensed advisor and evaluate them. If they will mature in the next 4 years, ignore this point.
4. Post retirement period is a long duration of 30 years, so do consider getting a good advisor - a Certified Financial Planner who can guide you to plan your retirement well and help you design a portfolio for additional wealth creation as a legacy for your children/dependents.
- You can ask rediffGURU Janak Patel your questions HERE.
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