Queries
Insurance Premium ( Annual ) ( in ` )
Amount of Cover ( in ` )
Comments
Term Insurance ( self )
Mediclaim ( self , wife & child )
18,000 1 Cr
25,000 10 L
The insurance cover seems to be adequate for now . After purchasing the house , buy an additional term insurance to cover the home loan
Every few years , you would need to review the amount of cover required , based on prevailing medical costs and family members ’ health
Mediclaim ( parents )
33,000 13 L -
Critical illness ( self )
7,000 20 L -
a home loan of `1 crore . The EMI of a 20-year loan of this amount , at the current rate of interest ( 8.35 per cent ), comes to approximately `88,000 . This will put a severe strain on your monthly expenses .
■ Your plan of selling your real estate asset for `50 lakh and investing it in a dividend paying mutual fund to help lessen the burden of home loan EMI , has two major risks :
- Funds may not pay dividends at regular intervals
- The amount of dividend is not fixed As a result , inflow from dividend funds will be uncertain , but outflow of home loan EMI will be fixed .
■ Hence , instead of investing that `50 lakh in a mutual fund , you can use it to make the down payment while purchasing the house . This will nearly halve the amount of home loan required and bring down your EMI to a manageable level .
■ However , even after this , the EMI will significantly change the equation of your monthly outflows . Therefore , at this juncture , you would need to re-evaluate and prioritise your goals .
■ You may invest any surplus income ( bonus , etc .) that you get , spread over a few months , to give a further boost to the growth potential of your portfolio .
■ One or two years prior to your planned withdrawals , you can gradually shift a proportionate amount of the corpus to an equity arbitrage fund ( debt-like performance and equity taxation ) or ultra short-term or short-term fund ; this will help you to preserve your capital .
Since the actual amount invested in each of the 32 funds is not known , a detailed recommendation is not possible . However , your portfolio consists of too many funds . This may result in your portfolio delivering a sub-optimal performance , as the universe of equity stocks ( and sectors ) from all the funds taken together , could be very wide . Since the performance of these securities can be quite divergent , underperforming stocks may prove to be a drag on the well-performing stocks .
It is advisable to consolidate your equity mutual fund portfolio into few select funds , including ELSS , 50-60 per cent of the portfolio in three to four large-cap funds , 20-30 per cent in two to three small / mid-cap funds and the remaining in international fund-of-funds . Over the long term , international funds have had a low correlation with domestic equities , thus , helping in diversifying risk .
When selecting funds , consider their past performances . This , along with their performance vis-a-vis benchmark indices ( like Sensex , Nifty , etc ) would indicate consistency across time-frames and market cycles .
You could consider the fund ’ s AUM ( AUM should be greater than `500 crore ) and period of existence ( longer the better ). This information , along with fund research notes / ratings that are provided by independent research firms , can help one select suitable funds . You should review your investments every 18 to 24 months to ensure that the performance is in line with your expectations .
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Outlook Money March 2018 www . outlookmoney . com