Expert advice

Aug 21, 2012,16.01 IST

Financial goals should be based on your income

We are often too ambitious when setting our financial goals. The first step for setting financial goals is to formulate goals that can be achieved with one's current job and income.

In an exclusive interview with CNBC-TV18, Lovaii Navlakhi, MD & Chief Financial Planner, International Money Matters Pvt said if your income does not help realize your goals, you should postpone your goal a bit or to undersize your goal amount that you need to reach.

Below is the edited transcript of Navlakhi's interview with CNBC-TV18.

Q: I can invest Rs 45000 per month from which I wish to buy a house after 5-6 years. I earn Rs 1 lakh per month. My goal is about Rs 90 lakh to Rs 1 crore. My current investments are of about Rs 7 lakh. How should I allocate the money?

A: If you are planning to invest with Rs 45000 a month even if you achieve something like 15% per annum on the higher side, you will not end up reaching your goal. You would only end up getting something like Rs 40 lakh or so at the end of five years.

So, if you need to get Rs 90 lakh at the end of five years, you need to up your investment to something like Rs 1.20-1.25 lakh per month. If you are earning only Rs 1 lakh, I can see that may be a bit difficult. So, you should postpone your goal a bit or to undersize your goal amount that you need to reach.

Q: I can invest Rs 50,000 lump sum per year. I want to save for 10 years and I hope to get Rs 7 lakh, which I want to spend on my daughter’s marriage. How should I allocate the money?

A: From the workings that we have done, with a 10-12% per annum return, if you were investing Rs 40,000 annually, you would meet your goal of Rs 7 lakh. According to me, you need to be a little diversified and not very aggressive. So we recommend multicap funds like Birla Sun Life Frontline Equity, Franklin India Prima Plus.

We also recommend a monthly income plan, which is typically an equity based hybrid product, DSP Blackrock monthly income plan and a value based fund, which is ICICI Pru Discovery. Once you do that, there are a number of tax saving schemes in your portfolio. Again, the advice is once you complete the lock in period, you can actually think of moving them to the schemes that we have recommended to invest.

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