AskBQ: How To Build Portfolio For Long-Term Goals? Best Schemes For 15 Years? Retirement Plan?

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Managing Expectations

Name: Santu Mondal

Query: The 31-year-old has two long-term goals—a retirement corpus of Rs 2.3 crore and Rs 50 lakh for his child’s higher education. Mondal, who lives in Khanakul, West Bengal, also wants to invest another Rs 6,000 a month and wants to know which scheme to choose.

Portfolio Information: A teacher employed by the West Bengal government, Mondal earns Rs 55,600 a month and stands to earn a pension on retirement. His expenses are at roughly Rs 20,000. Of what remains, he invests Rs 4,000 in the Public Provident Fund, Rs 7,000 in Axis Long-Term Equity fund for tax-saving purposes, Rs 10,000 in Kotak Standard Multicap Fund, and Rs 5,000 in SBI Magnum Multicap Fund.

Expert View: BloombergQuint took Mondal’s query to Arvind Rao, certified financial planner and founder of Arvind Rao & Associates.

“On the face of it, Rs 2.3 crore is not enough for retirement,” Rao said. “By my calculations, assuming a lifestyle plus price inflation of 10 percent, he will likely need Rs 4-4.5 crore for retirement alone. And for his child’s education, he will need another Rs 80 lakh to Rs 1 crore.”

Having said that, Rao cautioned that it is too early to set definitive targets, especially for retirement, because there are many unknowns at this point. Instead, Mondal should focus first on his child’s higher education, still about 17 years away.

For this, Rao advised that Mondal should set aside Rs 18,000 per month. The current investments in SBI Magnum Multicap and Axis Long-Term Equity Fund should be counted towards this goal. Also, the remaining Rs 6,000 should be directed towards this goal. Axis Midcap Fund, Rao said, was a good option to consider.

The amount invested per month should be raised every five years by Rs 7,500. As the goal approaches, the investments should be shifted to more conservative options, but this will need to be reviewed much later. This should yield Mondal Rs 35 lakh, assuming a return on investment of 15 percent.

Rao also suggested a similar plan for Mondal’s retirement goal. The investment of Rs 10,000 in the Kotak Standard Multicap Fund should be counted towards this goal.

“Further, for the next 10 years, the SIP needs to be increased by Rs 10,000 per month once every five years. Then for the five years after that, it should be increased by Rs 20,000 and finally, for the last seven years by Rs 30,000,” said Rao. “By the last seven years, with the education goal having been dealt with, there will presumably be more money available to invest.”

Assuming that in the last seven years all investments are more conservative in nature and a return on investment of 15 percent, this is expected to yield Rs 1.35 crore, Rao said, adding it was most important for Mondal to continue to invest diligently because the current plan assumes only the bare minimum increase in salary per month. The plan, the adviser said, must be reviewed periodically.

Best Investment Pick For A 15-20-Year Goal

Name: Jaynam Shah

Query: The 28-year-old is considering starting to save for his retirement. He wants to deploy his available funds into two or three equity mutual fund schemes and is looking at HDFC Top 100 and Mirae Asset Large-Cap Fund.

Portfolio Information: After expenses, Shah has an investible surplus of about 30 percent of his monthly salary. Nearly two-third of this goes into a liquid debt fund to finance his marriage expenses. And of what remains, he invests about half into ICICI Prudential Balanced Advantage Fund.

Expert View: BloombergQuint spoke to Arvind Rao, certified financial planner and founder of Arvind Rao & Associates, about Shah’s query.

“In my opinion, Mirae Large Cap is good,” Rao said. “For the other fund, he should consider multi-cap funds like Kotak Standard Multi-Cap Fund or UTI Equity Fund.” These funds, Rao said, had been consistent performers, and were good picks for a time horizon of more than 15 years.

A Portfolio Approach For Long-Term Goals?

Name: Suraj Uchil

Query: The 33-year-old read somewhere that in order to maintain an ideal asset allocation, one must take a portfolio approach to investing for meeting long-term goals. In that, assuming the ideal asset allocation for a portfolio is 60 percent equity and 40 percent debt, then investments to meet a major long-term goal like retirement should also be split similarly.

Expert View: BloombergQuint reached out to Amol Joshi, founder of Planrupee Investments, to get a response to Uchil’s query.

“The 30,000-feet view on this is that long-term goals like retirement, being 20-30 years away, for most people, given the median age of most Indians, equity is the way to go,” Joshi said. “This is the bird’s eye view.”

But that is only one way of looking at it, he said. Since there is no “one-size-fits-all solution” in personal finance, a deep dive into each individual’s requirements and risk profile will yield a different result.

“If I can’t see my Rs 100 becoming Rs 98, then equity is not for me. If I’m comfortable when Rs 100 becomes Rs 80, but more than that I lose my resolve of investing for long term, then I can consider myself a moderate investor. And in the third case, if I simply do not lose sight of my goal, which is 20-30 years away, then I know that we will come out of it just like we came out of every other bear market or every other crisis,” he said.

But in a situation where a goal is more than 15 years away, Joshi said it made a lot of sense at the current juncture to invest in equity.

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