Equity-Debt Allocation In Your SIP

Q: I am 40 years old and work in an IT company. I am married and have two children, an 11 year-old daughter and a 7 year-old son.

I need the following amounts (current value) for my goals as listed below:

Rs 10 lakh - My daughter’s education after 8 years
Rs 10 lakh - My daughter’s wedding after 12 years
Rs 12 lakh - My son’s education after 10 years
Rs 50 lakh - My retirement after 18 years

I have been investing in the following funds through an SIP for the past one year and have accumulated Rs 80000 as yet.

HDFC Top 200 Fund - Rs 2500
ICICI Pru Focused Bluechip Equity Fund – Rs 2500
Fidelity Equity Fund – Rs 1500

I can invest Rs 20000-25000 per month after taking care of all my expenses.

Please suggest what changes I need to make in my portfolio.

- Venkat

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A: Venkat, are you expecting your son to elope and get married? No expenditure planned for his wedding? Anyway, on a serious note, the following is a table of what the costs for your goals may look like at the appropriate time:

Given this scenario, you will need to plan your SIP such that you can accumulate the indicated sums. Of course, I have planned for a higher inflation rate as far as education costs are concerned, since that is what past experience suggests.

Your query does not suggest anything about your risk tolerance. Though time is on your side, I do not know whether or not the interim volatility is too much for you to take. Hence, I have suggested three different equity-debt asset allocation plans for you to choose from, depending on your risk appetite.

All the three options are presently beyond your budget of Rs 25000 per month. But you have not considered your EPF accumulation which might be happening. If there is an EPF at your workplace, that amount can be factored in to reduce your contribution towards your retirement corpus.

You are also advised to cover yourself adequately with life insurance to protect your family. I have been advising that term insurance is the best way to protect oneself. Note that term insurance can also be purchased online.

The present set of funds you have invested in is fairly acceptable. However, you may want to review the status of Fidelity Equity Fund once it comes under a new management. You may also consider adding the IDFC Premier Equity Fund to your portfolio to give a low volatility (relatively) Mid-Cap boost, as the other funds are predominantly Large-Cap in nature.