Invest after retirement

I started investing in 2006. Recently, I have moved to gilt funds. Is it the right choice in the coming months? What should I do to achieve my targets?
– Satish Venugopal

Profile 

* 30 years old

* Two dependents - wife and 7-year old daughter

* Based in Dubai, UAE

Mutual Fund investment Schemes Amount (Rs) ICICI Pru Gilt Investment 26,880 Birla Sun Life Frontline 21,000 Magnum Contra 19,320 Reliance Equity Opp 16,800

Yearly contribution (%) Mutual Fund Debt 27 Ulips 27 Gold 23 Mutual Fund Equity 17 PPF 06

Goals 
* To retire by the age of 45

* To attain Rs 50 lakh in liquid cash by retirement (15 years)

* To save Rs 10 lakh for daughter’s marriage (11 years)

* To save Rs 7-8 lakh for daughter’s higher education (8 years)

Rebalance your portfolio

It’s interesting to see that you have diversified your investments across asset classes. Unfortunately, you only have 1 per cent invested in equity. You need to ramp up this exposure, since it is the asset class that delivers the maximum returns in the long run. The high debt tilt will offer a stable portfolio, but with a heavy compromise on returns.

Also, a lot of your assets arein real estate and gold. Besides ahigher exposure to equity, you need to have a specified amount in a relatively liquid asset for emergencies, like a liquid fund or bank fixed deposit.

You do not require a Unit Linked Insurance Plan (Ulip), as your equity needs will be catered to by mutual fund investments and your insurance requirements are taken care of by your insurance policies.One should stay away from Ulips, as they are costly avenues and carry hidden charges as well. You should stop the premium in the Ulip as soon as the lock-in period expires and invest the accumulated premiums in mutual funds.

Increase allocation to funds

When we look at your annual contribution towards various assets, the allocation towards mutual funds accounts for 44 per cent (equity: 17 per cent, debt: 27 per cent). On the other hand, 23 per cent goes towards gold and 27 per cent towards the Ulip.

Right now, you should focus on wealth accumulation, not wealth protection. So do increase your investments to equity mutual funds.

This brings us to your investment in gilt funds. The portfolio of a gilt fund consists of debt instruments issued by the Government of India. The market value of these instruments depends on the interest rate movement in the economy.

As the interest rates go down, the price of the instrument rises, taking up the net asset value (NAV) of the fund.

The same happened in late 2008. Due to successive rate interest rate cuts by the Reserve Bank of India, the gilt fund category (medium and long term) started delivering fabulous returns.

However, the performance of gilt funds have started to decline and the category delivered a return of -6.28 per cent in the month of January 2009. A better option would be income funds as they have the leeway of investing in both government securities and corporate debt.

Be smart with your retirement corpus You have stated that you would like your entire retirement corpus to be in cash. Why?

You want to retire at the age of 45 years. With a life expectancy of 80 years, you will have around 35 years post retirement.

Your only source of income would be your retirement portfolio. A part of your portfolio can be invested to generate some return. The rest can be invested for growth.

Ideally, you should always keep the money that you need for meeting your expenses for the next three months in liquid form.

image
Business Standard
177 22
Business Standard

Invest after retirement

Value Research  |  Mumbai 



I started investing in 2006. Recently, I have moved to gilt funds. Is it the right choice in the coming months? What should I do to achieve my targets?
– Satish Venugopal

Profile 


* 30 years old

* Two dependents - wife and 7-year old daughter

* Based in Dubai, UAE

Mutual Fund investment Schemes Amount (Rs) ICICI Pru Gilt Investment 26,880 Birla Sun Life Frontline 21,000 Magnum Contra 19,320 Reliance Equity Opp 16,800

Yearly contribution (%) Mutual Fund Debt 27 Ulips 27 Gold 23 Mutual Fund Equity 17 PPF 06

Goals 
* To retire by the age of 45

* To attain Rs 50 lakh in liquid cash by retirement (15 years)

* To save Rs 10 lakh for daughter’s marriage (11 years)

* To save Rs 7-8 lakh for daughter’s higher education (8 years)

Rebalance your portfolio

It’s interesting to see that you have diversified your investments across asset classes. Unfortunately, you only have 1 per cent invested in equity. You need to ramp up this exposure, since it is the asset class that delivers the maximum returns in the long run. The high debt tilt will offer a stable portfolio, but with a heavy compromise on returns.

Also, a lot of your assets arein real estate and gold. Besides ahigher exposure to equity, you need to have a specified amount in a relatively liquid asset for emergencies, like a liquid fund or bank fixed deposit.

You do not require a Unit Linked Insurance Plan (Ulip), as your equity needs will be catered to by mutual fund investments and your insurance requirements are taken care of by your insurance policies.One should stay away from Ulips, as they are costly avenues and carry hidden charges as well. You should stop the premium in the Ulip as soon as the lock-in period expires and invest the accumulated premiums in mutual funds.

Increase allocation to funds

When we look at your annual contribution towards various assets, the allocation towards mutual funds accounts for 44 per cent (equity: 17 per cent, debt: 27 per cent). On the other hand, 23 per cent goes towards gold and 27 per cent towards the Ulip.

Right now, you should focus on wealth accumulation, not wealth protection. So do increase your investments to equity mutual funds.

This brings us to your investment in gilt funds. The portfolio of a gilt fund consists of debt instruments issued by the Government of India. The market value of these instruments depends on the interest rate movement in the economy.

As the interest rates go down, the price of the instrument rises, taking up the net asset value (NAV) of the fund.

The same happened in late 2008. Due to successive rate interest rate cuts by the Reserve Bank of India, the gilt fund category (medium and long term) started delivering fabulous returns.

However, the performance of gilt funds have started to decline and the category delivered a return of -6.28 per cent in the month of January 2009. A better option would be income funds as they have the leeway of investing in both government securities and corporate debt.

Be smart with your retirement corpus You have stated that you would like your entire retirement corpus to be in cash. Why?

You want to retire at the age of 45 years. With a life expectancy of 80 years, you will have around 35 years post retirement.

Your only source of income would be your retirement portfolio. A part of your portfolio can be invested to generate some return. The rest can be invested for growth.

Ideally, you should always keep the money that you need for meeting your expenses for the next three months in liquid form.

RECOMMENDED FOR YOU

Invest after retirement

I started investing in 2006. Recently, I have moved to gilt funds.

I started investing in 2006. Recently, I have moved to gilt funds. Is it the right choice in the coming months? What should I do to achieve my targets?
– Satish Venugopal

Profile 

* 30 years old

* Two dependents - wife and 7-year old daughter

* Based in Dubai, UAE

Mutual Fund investment Schemes Amount (Rs) ICICI Pru Gilt Investment 26,880 Birla Sun Life Frontline 21,000 Magnum Contra 19,320 Reliance Equity Opp 16,800

Yearly contribution (%) Mutual Fund Debt 27 Ulips 27 Gold 23 Mutual Fund Equity 17 PPF 06

Goals 
* To retire by the age of 45

* To attain Rs 50 lakh in liquid cash by retirement (15 years)

* To save Rs 10 lakh for daughter’s marriage (11 years)

* To save Rs 7-8 lakh for daughter’s higher education (8 years)

Rebalance your portfolio

It’s interesting to see that you have diversified your investments across asset classes. Unfortunately, you only have 1 per cent invested in equity. You need to ramp up this exposure, since it is the asset class that delivers the maximum returns in the long run. The high debt tilt will offer a stable portfolio, but with a heavy compromise on returns.

Also, a lot of your assets arein real estate and gold. Besides ahigher exposure to equity, you need to have a specified amount in a relatively liquid asset for emergencies, like a liquid fund or bank fixed deposit.

You do not require a Unit Linked Insurance Plan (Ulip), as your equity needs will be catered to by mutual fund investments and your insurance requirements are taken care of by your insurance policies.One should stay away from Ulips, as they are costly avenues and carry hidden charges as well. You should stop the premium in the Ulip as soon as the lock-in period expires and invest the accumulated premiums in mutual funds.

Increase allocation to funds

When we look at your annual contribution towards various assets, the allocation towards mutual funds accounts for 44 per cent (equity: 17 per cent, debt: 27 per cent). On the other hand, 23 per cent goes towards gold and 27 per cent towards the Ulip.

Right now, you should focus on wealth accumulation, not wealth protection. So do increase your investments to equity mutual funds.

This brings us to your investment in gilt funds. The portfolio of a gilt fund consists of debt instruments issued by the Government of India. The market value of these instruments depends on the interest rate movement in the economy.

As the interest rates go down, the price of the instrument rises, taking up the net asset value (NAV) of the fund.

The same happened in late 2008. Due to successive rate interest rate cuts by the Reserve Bank of India, the gilt fund category (medium and long term) started delivering fabulous returns.

However, the performance of gilt funds have started to decline and the category delivered a return of -6.28 per cent in the month of January 2009. A better option would be income funds as they have the leeway of investing in both government securities and corporate debt.

Be smart with your retirement corpus You have stated that you would like your entire retirement corpus to be in cash. Why?

You want to retire at the age of 45 years. With a life expectancy of 80 years, you will have around 35 years post retirement.

Your only source of income would be your retirement portfolio. A part of your portfolio can be invested to generate some return. The rest can be invested for growth.

Ideally, you should always keep the money that you need for meeting your expenses for the next three months in liquid form.

image
Business Standard
177 22

LIVE MARKET

BSE

  ( %)

NSE

  ( %)

More News

  • Markets open higher; Nifty reclaims 8,650 Nifty hovers around 8,650; Aurobindo Pharma up 5%
  • A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai (pic: Reuters) Welspun India extends losses; tanks over 40% in three days

STOCK WATCH

Company Price() Chg(%)
Sequent Scien. 145.90 19.98
Majesco 530.05 9.37
BF Utilities 629.10 8.26
Torrent Pharma. 1695.00 7.39
Motil.Oswal.Fin. 510.00 7.14
> More on BSE Gainers
Company Price() Chg(%)
BF Utilities 629.20 8.31
Motil.Oswal.Fin. 509.45 7.21
Torrent Pharma. 1692.00 6.77
Engineers India 246.65 6.38
Zydus Wellness 895.00 6.33
> More on NSE Gainers
Company Price() Chg(%)
Welspun India 59.30 -9.95
Lycos Internet 10.68 -3.87
Yamini Invest 36.15 -3.60
Alok Inds. 3.07 -3.15
Idea Cellular 97.75 -3.03
> More on BSE Gainers
Company Price() Chg(%)
Welspun India 59.50 -9.98
Idea Cellular 97.70 -3.27
Escorts 317.00 -3.01
Jai Corp 75.40 -2.77
J Kumar Infra 149.85 -2.57
> More on NSE Gainers
Widgets Magazine
Widgets Magazine
Widgets Magazine

Derivatives

Index
Instrument Type
Expiry Date
Option Type
Strike Price

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard