Case Study
on
Wealth and Portfolio Management
Swapnil Loya (54)
Harsha Kale (77)
Lokesh Morankar (28)
Samruddhi Sangle (120)
Findings
• Abhishek Goel is working as a Chief Manager for a Private General
insurance company with a monthly salary of 90000/- per month.
• Apart from the savings account, the fixed deposits provide a decent
back up in case of any emergency.
• Investments:
Investments are very well diversified into debt and equity with debt
comprising 55% of the allocation and equity at 45%. Property has
been excluded as its for self-consumption.
• Risk Profile: Moderate
• Liabilities-
Presently there is only 1 loan which is a home loan taken on
the under-construction property. Abhishek has opted for EMI
payments which enables him to claim tax benefits on both
principal and interest payments as well as loan outstanding
keeps reducing with each EMI payment.
• Insurance-
He has sufficiently invested into traditional insurance policies
which covers a good amount of premium.
• Taxation
Abhishek’s Life Insurance premiums and home loan
repayments exceeds limit of Rs 1.5 lakh under 80C.
Recommendations
• Emergency Fund
He should maintain a emergency fund of Rs 1.75
lakhs which is equal to 3 months expenditure.
Presently, he is having Rs 1.05 lakh in saving account,
so additional Rs 70000 should move from his FDs
into a liquid fund.
• Health insurance
The present cover is adequate as per his age. He
should include his wife’s name when he gets married
next year.
• Life Insurance
Considering the financial goals and outstanding liabilities,
Abhishek’s cover is adequate. He needs to stop the
traditional insurance policy and rather invest into LIC or
ULIP which provides cover at low premium with
moderate return.
The yield on these traditional policies are less than 6%
and hence coming out of those will make more sense now
rather than continue them till maturity which is more than
12 years to 20 years (approx) from now.
Change in Cash flow post insurance surrender
Expenses Per Month Annual
Household 10000 120000
Home Loan EMI 19500 234000
Personal Expenses 10000 120000
Insurance Premium 8000 96000
Total 47500 570000
Surplus – Rs 42500 per month
Financial Goals
Goals No of Year Present Future Inflation
Years value Value assumed
Marriage 01 2021 500000 545000 9%
Buying a car 02 2022 400000 466560 8%
Child Education 20 2040 400000 2241764 9%
(for 1 child)
21 2041 400000 2443526 9%
22 2042 400000 2663440 9%
Retirement @ 60 30 2050 360000 1953876 7%
1. Marriage
• Current value: Rs 5 lakh
• Future Value: Rs. 5.45 lakh
• Abhishek should not spend too much on marriage and
considering the fact that the marriage expenses will be
shared with his spouse, he should not exceed his spending
by Rs. 5 lakhs.
• A part of the Fixed deposits can be used for this goal.
• Returns expected in fixed deposits: 6% post tax.
2. Buying a car
• Current value: Rs 4 lakh
• Future Value: Rs. 4.66 lakhs
• He needs to start Sip of Rs. 17000 in debt funds for a
period of 24 months to achieve this goal.
• Returns expected in debt funds: 6% post tax over the
required time horizon.
3. Child Education
• Considering the long-term nature of this goal, Abhishek
needs to invest Rs. 10500 per month for 22 years in a
combination of large cap and balanced funds. Due to the
present surplus, (out of current savings) he can easily
invest for this goal.
• Returns expected in the mutual funds portfolio: 13% over
the required time horizon.
4. Retirement @ 60 years
• Present Expenses (Excluding children’s expenses and EMI’s)
– Rs 3.6 Lakhs
• Future Expenses- Rs 19.53 Lakhs
• Expected life expectancy at 80 years, Corpus required- Rs 4
Crores, Returns on corpus during retirement 9%
• With compounding and regular contribution, the EPF turns out
to be a good amount during retirement.
• Considering a 5% increase in basic year on year his EPF in the
year 2050 should be worth Rs. 1.93 crores.
• The mutual funds and equity shares if maintained that long can
fetch him good amount.
• These 3 assets are sufficient to create a good retirement corpus
as per today’s needs.
Conclusion
• Abhishek’s life is a live example of how his childhood period of
financial turmoil has moulded him to be a better saver and investor.
• At his age, he had done a fairly good job of creating a good
investment basket.
• There are several like him who have an opportunity to choose what
is right.
• Many of his age, having similar salary may not have accumulated
as much as he has.
• In this age of uncertainty, it’s very critical that the younger
generation focuses on saving and building up a good corpus right
from the first salary. Else there will always be regrets and “I should
have done that” sighs when you evaluate your life in your 40s and
50s.
Thank You
