A reader says, “I am 36 and have a 4-year-old daughter, trying to save some money for her education, marriage and my retirement. In one of your podcasts, you mentioned that 50-50 allocation is enough to create a good corpus. I can invest 1 lakh per month based on my current financial situation. Do I still need to follow the same, or is there any other way to invest? I need your advice on how to invest 1 lakh per month wisely to achieve my goals.”
You can treat each goal independently and have separate portfolios, or consider a single portfolio for all the goals, as they are more than ten years away. The asset allocation to be used and products are similar for both routes.
Assuming Rs. 1 lakh a month is the total investment for all three long-term goals (retirement, education, marriage), you can consider a 50% to 60% equity portfolio with the rest in fixed-income
Equity:
- A single Nifty or Sensex index fund direct plan growth option is sufficient.
Fixed Income
- If you are salaried, you might have EPF. If you are not salaried, you can use a PPF.
- You can use a second PPF for your daughter’s education. It will not mature when she finishes school, but the proceeds can be used partly for UG and PG education.
- Sukanya Samriddhi yojana for your daughters marriage
- You can include a debt fund as you reduce equity allocation in future. See: What debt fund should I add to a long term investment portfolio?
Try to invest as much as possible and increase the investment amount as much as possible each year. This is enough to get started.
The next step is to have a risk reduction plan. How can we reduce equity allocation over the years? How and when should you withdraw for each goal using a unified portfolio?
You can use the freefincal robo advisor tool, which automatically gives an asset allocation roadmap to achieve our goal by minimising the impact of adverse market returns (aka sequence of returns risk).
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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