I am 33 years old and work in the service sector, drawing a monthly salary of ₹1 lakh. My investment portfolio includes ongoing systematic investment plans (SIPs) in mutual funds : two large-cap funds ( ₹5,500), a consumer fund ( ₹2,500), a flexi-cap fund ( ₹2,000), a tax saver fund ( ₹1,500), a mid-cap index fund ( ₹1,000), and a small-cap index fund ( ₹1,000). All these SIPs have a step-up of ₹500 every year. The total corpus accumulated from these investments so far is ₹4.32 lakh.
Additionally, I hold a public provident fund (PPF) account, with a corpus of ₹3.56 lakh, and I aim to invest ₹1,500 in it every month. I contribute around ₹50,000 annually to NPS (national pension scheme) tier-1 account.
For my 5-month-old daughter’s future, I plan to invest ₹12,000 every month in a Sukanya Samriddhi account. My wife and I also have a joint home loan that we are actively prepaying. We have repaid half of the principal amount over four years and plan to complete the repayment within the next five years. The monthly EMI for the home loan is ₹25,000.
Looking ahead, my long-term goals include expenses for my daughter’s education, both graduation and post-graduation, with a timeline of 15-20 years. Are there any changes required in my investment strategy?
—Name withheld on request
Most of the equity mutual funds in your SIP are appropriate for your goals. Additionally, you can consider increasing your investments in small and mid-cap mutual funds since your investment tenure is longer. We suggest investing in active funds as there is still potential for them to outperform passive funds in terms of returns.
Assuming an average annual return of 12% from these schemes, your SIPs will grow to ₹2.84 crore on a pre-tax basis, which translates to ₹2.64 crore on a post-tax basis. You may also consider increasing your SIPs even more in the future to reach your goals earlier.
For the PPF, assuming an annualized return of 7.10%, your corpus would grow to around ₹17 lakh. There will be no taxation on maturity. After the repayment of the home loan, you can also plan to increase your PPF investments, which will help you save tax.
Regarding the NPS, assuming an annualized return of 8%, your corpus would grow to around ₹20 lakh. We suggest you continue investing in NPS.
For the Sukanya Samriddhi Yojana Scheme, assuming an annualized return of 8%, your investment of ₹12,000 per month would grow to ₹67 lakh at the current rate. There will be no taxation on maturity.
Your estimated corpus at the end of 18 years would total around ₹3.5 crore.
Assuming the current undergraduate expenses of around ₹20 lakh and post-graduate expenses of around ₹40 lakh, with a 7% inflation in tuition fees, the total cost after 18 years for your daughter’s education should be around ₹2 crore. This can be covered by your corpus at that time.
Do maintain an emergency corpus equivalent to six months of your salary. This fund can be kept in liquid or ultra short mutual funds. Additionally, consider taking medical and life insurance to provide financial protection to your family.
It’s always a good idea to consult with a financial advisor for personalized advice.
Vijay Kuppa is the chief executive officer of InCred Money (formerly Orowealth).
