Forty-three-year old Dhiraj Rao has just returned to India after a long stint overseas. Apart from his savings, he has bought a house and a car. After two decaded, he wants to call it a day. Apart from dabbling in the stock market, he wants to pursue other interests now.
Financial goals
Mr Rao’s top priority is to ensure a good education for his children. The other big expense on the horizon will be their marriages, which is still some way in the future. Apart from these, he wants to maintain his current lifestyle — his monthly expenses work out to Rs 35,000/month.
Where is he now?
Mr Rao used his foreign stint to great effect. Not only did he manage to save enough to purchase a house in Bengaluru and a car, he has also managed to save up close to Rs 1.5 crore.
Half of his corpus is currently invested in equity mutual funds. Around 60 per cent of his investments are in equity while the remainder is in debt/fixed deposits.
Apart from these, he has some cash in a savings account for day to day expenses. His net worth is close to Rs 2 crore.
He also keeps Rs 10 lakh aside — which he uses to dabble in the stock market. There is a health cover
in place for the entire family.
Recommendations
Although his net worth sounds like a lot, we need to remember that Mr Rao will need to fund his lifestyle for the next 40 years or so — in face of rising prices and inflation.
Adding up all the expenses, there is a small financial gap. However, this can be filled by channelling some of the excess cash flow now into long term investments.
He can deploy a part of the fixed deposits in monthly income plans of mutual funds. This will help get a real return. He can channel part of his excess cash flows now — Rs 25,000 a month or so — into SIPs — systematic investment plans with a equity-debt mix of 2:1. This mix will have to be reviewed periodically — every five years or so.
He should also be on the lookout for non-convertible debentures (NCDs) of some top-rated (AAA) companies. Returns in these instruments are higher than bank deposits/inflation.
Mr Rao can also enhance the health insurance cover for himself and his family to Rs 25-30 lakh. He doesn’t need life insurance, since he doesn’t intend to work now. However, a unit linked life cover could be taken for children. All in all, we think he should be able to meet all his financial goals comfortably from his current position. We wish him a long and fruitful retirement!
(L. Ravindran, PhD, is a financial advisor and managing director of Wealthmax Enterprises Management Private Limited.)