I am 28-year-old earning Rs 60,000 per month. I am planning to start investing in mutual funds to take care of child education, his/her marriage and my retirement. I want to start with a monthly investment of Rs 20,000. I have shortlisted a few schemes as below:
Rs 6,000 in PPF for retirement and tax saving
Rs 7,000 in Mirae Asset Tax Saver Fund
Rs 4,000 in HDFC Large Cap Index Fund
Rs 2,000 in Parag Parikh Flexi Cap Fund
Rs 1,000 in Axis Small Cap Fund
How much money will I be able to make with these funds by the time I reach my goals?
By Balwant Jain, tax and investment expert
It is impressive that you are serious about saving for your goals specially the retirement goal at a young age of 28. Since you are starting investing early you will reap huge benefits of compounding. An amount of Rs 20,000 savings out of Rs 60,000 monthly income is an excellent proportion as saving. Out of the proposed monthly investment of Rs 20,000, you are planning to put in 30 per cent i.e. Rs. 6,000 every month towards PPF, a fixed income product. It gives 70:30 ratio for equity and debt, which is reasonable proportion looking at your present age.
If we presume the present rate of interest 7.1 per cent on PPF account to continue, you will be able to accumulate around Rs 88 lakh, with your current allocation to the PPF account, by the time you retire at 60 years of age.
Your research and choice of fund is good and is well diversified across categories. With PPF and ELSS investments, you will be able to claim deduction of Rs 1.50 lakh every year. With an investment of Rs 14,000 in equity funds every month for next 32 years and assuming a conservative return of around 12 per cent during this period, you will be able to accumulate around Rs 6.31 crore at the time of your retirement.
So together with PPF and equity schemes, your retirement corpus is expected to be around Rs 8.19 crore.
Taking into account the inflation in future, this may not be sufficient for your goal after 32 years. Assuming an average inflation of 6 per cent for next 32 years, the real value of Rs 8.19 crore then will be equal to Rs 1.27 crore only, which will not suffice for your three goals -- child education, child marriage and your own retirement.
Since your earning will also go up in future, I suggest you to increase your savings and investments.
Please review the performance of the mutual fund schemes at least once in a year and carry out necessary course correction if needed. A scheme doing good today may not perform as well in future. Maintain the asset allocation amongst different asset class and do the asset rebalancing at the time of annual review.
(Views expressed by the investment expert are his/her own. Email us your investment queries at firstname.lastname@example.org. We will get your queries answered by our panel of experts)
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