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personal finance

What to do with your PPF account in India after becoming an NRI

I am 30 and have been investing Rs 2,000 in L&T Emerging Business and Rs 1,000 in Mirae Asset Emerging Bluechip per month with a long term view. Should I continue with these funds? Also, please suggest a health plan for my father, 67, and me that also covers critical illness.

Raj Khosla, Founder and Managing Director, replies:

L&T Emerging Business Fund is a small-cap fund. It has delivered very good returns in the past three years. The fund is rated five star by Crisil, but has a high risk profile. Mirae Asset Bluechip Fund is a large- and mid-cap fund and one of the best performers in the past five years. It has given annualised returns of 23 % since inception and enjoys five-star rating. The fund also has a slightly lower risk profile compared to the L&T scheme. Since you are young and can take a long term view, you should continue with both your investments for the next 15-20 years. You should buy two separate health insurance policies because of the age difference between you and your father. For yourself you may consider buying a policy with a sum assured of at least Rs 10 lakh. It should cost around Rs 7,000 per year. For your father, the policy with the same sum assured will cost about Rs 35,000.

My daughter became an NRI this year. She started a PPF account seven years ago. Can she continue to contribute to her existing account for the full 15-year term?

Jayant R. Pai CFP and Head of Marketing, PPFAS Mutual Fund replies:

Yes, she can do so. While an NRI cannot open a new PPF account, as your daughter’s residential status has changed to NRI only recently, the account will be allowed to run till maturity. She can also contribute to it every year, and earn the same rate of interest as resident Indians. However, unlike resident Indians, she will not be permitted to extend the account beyond the 15-year maturity period.

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I am 35 years old and want to invest for my retirement and for my 6-year-old son’s higher education. I can invest up to Rs 25,000 per month. Please suggest where to invest.

Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics replies:

Assuming that you will require money for your son’s education when he is 18 years old and you will retire at 60, you have a 12 years and 25 years to invest for the two goals, respectively. Given the long-time horizon, you can invest in equity mutual funds. Split the sum in hand into two parts— Rs 15,000 and Rs 10,000. Invest Rs 15,000 for your son’s education via SIPs in a large-cap and a multi-cap fund. Additionally, pick a good mid-cap fund for investing the remaining Rs 10,000 for your retirement. The investment of Rs 15,000 over the next 12 years will help build a corpus of around Rs 48 lakh, assuming 12% return. Continue your SIPs, even after the education goal is achieved, for the remaining 13 years to your retirement. You will be able to generate a corpus of Rs 2.41 crore at retirement— Rs 1.85 crore from investing Rs 10,000 for 25 years and around Rs 56 lakh from investing Rs 15,000 for 13 years, assuming a conservative 12% return for both time periods. Do increase your investment amount gradually with the increase in your salary.

I am 23 years old and I invest Rs 50,000 per month. I have invested in Aditya Birla Sun Life Tax (both in growth and dividend options), L&T Infrastructure, HDFC Smallcap and L&T Emerging Business. I have a high risk appetite. Please advise on my portfolio construction.

C.R. Chandrasekar CEO and Co-Founder, replies:

Continue your SIPs in the tax-saving and small-cap funds. Stop further SIPs in the infrastructure fund as the theme has not delivered high returns except in upcycles. Consider replacing L&T Emerging Business with at least one diversified scheme such as Mirae Asset India Equity. Please note that your portfolio is not diversified enough without debt. Make sure you have debt holdings, even if outside mutual funds.

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