Road to Financial Freedom

1. Emergency Cash – Usually 6 months salary. Put this in a Savings Deposit (SD) and do not
touch this unless there is any emergency. SD gives interest of 3.5%. Better option is Liquid Funds
which give 7% pre-tax (expense ratio of 1% in addition to tax).

https://cleartax.in/s/liquid-funds

1A. Health insurance for any medical emergencies of self and family. To cover hospital expenses
and critical illness. Usually employer provides a corporate plan but it is often insufficient.

https://www.policybazaar.com/health-insurance/

https://economictimes.indiatimes.com/tdmc/your-money/lesser-known-features-of-health-plans-
that-you-should-take-advantage-of/tomorrowmakersshow/68387456.cms

https://economictimes.indiatimes.com/wealth/insure/how-to-choose-right-insurer-for-life-
insurance-and-health-insurance/articleshow/68436238.cms

1B. Life insurance. To help family members in case of death of earning member.
How does a term insurance policy work?
Term insurance policy pays out a fixed sum to your family on your death. Opt for lump sum and do
not opt for monthly payouts as the insurance company will not give interest for the amount held
back. Your family can deposit the lump sum (after paying off any liability or expense) in FD and live
off the interest.

How much insurance cover do you need?

The amount of insurance depends on your personal situation. Generally, experts suggest a cash sum
equal to 15 - 20 times your annual income. You might want a term insurance that will provide for
your family's future expenses - marriage or education of your children or any liability like home loan.

What should be the duration of my policy?

This depends on the retirement age (usually 60 years) or the length of your liability (home loan).

Should I go for any extras riders (benefits) that I can add to my policy?
It is better to keep it simple. You can buy a separate critical illness or accidental insurance. Do not
mix Health and Life. Death occurs once. Illness or accident can occur more than once.

How to choose a term life insurance provider in 30 minutes!

https://economictimes.indiatimes.com/wealth/insure/why-you-must-opt-for-a-term-plan-at-an-
early-age/articleshow/50997740.cms

https://economictimes.indiatimes.com/wealth/insure/insurance-cover-which-term-plan-is-for-
you/articleshow/29701605.cms

Website for comparing different policies - https://www.policybazaar.com/

http://www.trucompare.in/blog/best-term-plans-in-india/

NOTE – Do not buy ULIPs or Endowment plans. Do not mix Life and Investment.
https://www.morningstar.in/posts/36257/mutual-funds-or-ulips-where-must-you-invest.aspx

https://www.morningstar.in/posts/36633/how-ulips-compare-to-traditional-life-insurance-
plans.aspx

2. Tax Saving
https://cleartax.in/s/income-tax-allowances-and-deductions

https://www.paisabazaar.com/saving-schemes/

Read the above links (and all the sub-links in the article) and plan your investment to make use of
every possible way to reduce your taxable income. For 80C deduction of 1.5 Lakhs, the EPS that is
deducted from salary and the premium you pay for life insurance are eligible. For the remaining
amount, you can look at:

A) Public Provident Fund (PPF) –Safest investment in India. 8% tax free. But Govt has put a
cap on investment in PPF. Only 1.5L in 1 year. The only problem is you can’t withdraw
money till 15 years from the date of opening the account.

https://www.paisabazaar.com/saving-schemes/ppf/

https://stableinvestor.com/2019/01/ppf-1-crore-crorepati.html

B) Equity Linked Service Schemes (ELSS) – Higher risk and returns! Lock in period of 3 years!

https://www.paisabazaar.com/mutual-funds/what-is-elss/

https://stableinvestor.com/2019/02/elss-vs-ppf-better-tax-saving-investment.html

C) National Pension Scheme NPS – Additional tax benefit of Rs.50000 over and above 1.5L
but can withdraw only on retirement

https://www.paisabazaar.com/saving-schemes/national-pension-system/

https://economictimes.indiatimes.com/wealth/invest/elss-vs-nps-which-is-better-to-save-tax-and-
grow-your-wealth/articleshow/68862482.cms

Do Not Invest Rs. 50,000 in NPS for additional tax saving benefit in 2019!

3. Core (Goal based) Portfolio

A) FD if you have lump sum or RD if its monthly. 6 to 7% depending on the
duration/maturity. Pre Tax. Will also act as emergency cash. It takes few days to break FD and you
will lose some interest gained.

Various Debt Instruments -

B) Indian Government Bonds. 7 to 8%. Corporate bonds give higher returns about 8 to 9%
but have default risk. Pre-Tax.

https://economictimes.indiatimes.com/markets/bonds/what-are-govt-securities-and-how-to-buy-
them/articleshow/67070971.cms?from=mdr
 C) Index Funds -

List of Index Funds and ETFs

https://docs.google.com/spreadsheets/d/e/2PACX-1vTNzVEa3-yGqK2AEri-
drmF_miBIpH8DwW1infiLgzmi0lU8uqeyzRQ81lbuuZ_GWqH0ZT6LR3Yfrli/pubhtml?gid=1871542133
&single=true

4. Satellite (Luxury) portfolio

A) Mutual Funds - https://cleartax.in/s/mutual-funds#intro

Equity Mutual Fund - Debt Mutual Fund -

To research about different mutual funds – https://www.morningstar.in/default.aspx

https://www.youtube.com/watch?v=IsUxUOV5TzY&t=01s

https://freefincal.com/category/plumbline-select-mutual-funds/

https://freefincal.com/best-equity-mutual-funds-april-2019/

https://freefincal.com/select-mutual-fund-categories-suit-goal/

Mutual Fund Taxation - https://cleartax.in/s/different-mutual-funds-taxed

https://cleartax.in/s/indexation-helps-reduce-tax-debt-fund-gains/

5 different risk model MF portfolios - https://economictimes.indiatimes.com/wealth/invest/5-

model-mutual-fund-portfolios-for-different-investor-types/articleshow/61995095.cms

Do no concentrate your money in one single fund. Invest in at least 2 or 3 different funds.

https://www.morningstar.in/posts/7606/how-to-analyze-funds-like-a-pro.aspx

https://www.morningstar.in/posts/5029/view-your-fund-through-the-risk-return-lens.aspx

B) Equity Instruments – You can research and invest in stocks and other equity instruments

Equity Instruments – https://zerodha.com/varsity/

Equity Taxation - https://zerodha.com/varsity/module/markets-and-taxation/

What Return Can I Expect From Equity Over the Long term? Part 1

How to get started in equity investing -

Model Portfolio
To generate 1 Crore by investing only Rs.26000 every month for 15 years. Double your money.
 Model Portfolio.xlsx

Asset Allocation
2. If you are open to taking risks, you can shift the goal based portfolio from Debt to Equity. At any
point in time, have at least 20% in Debt and 5% in Cash/Liquid Funds. Other asset classes are
Gold and Real Estate.

3. Risk takers can look at Debt Mutual Funds instead of FD, RD and Bonds to generate alpha.
4. The basic principle behind age-based asset allocation is that your exposure to portfolio risk
needs to reduce with age. Here, it is especially being referred to proportion of equity as a
portfolio component.

5. You can use the thumb rule i.e. your allocation to debt funds must be equal to your age. In other
words, to find your equity allocation, subtract your current age from 100. It means that as you
grow older, your asset allocation needs to move from equity funds to debt funds.

6. Gold – Instead of traditional gold, one can invest in Gold ETFs

https://cleartax.in/s/gold-etfs

7. Real Estate – Instead of purchasing land or house, one can look at REITs -
https://www.livemint.com/money/personal-finance/reit-makes-india-debut-
1552907323371.html

Inflation
https://www.investopedia.com/terms/i/inflation.asp

https://freefincal.com/inflation-protected-income-retirement-annuity/

https://freefincal.com/sure-term-life-insurance-one-crore-sufficient/

Further Reading

https://stableinvestor.com/2015/09/building-wealth-sip-mutual-funds.html

https://stableinvestor.com/2015/02/How-I-Created-Corpus-Rs-3-Crores-10-Years-Part-1.html

https://stableinvestor.com/2019/01/nifty-pe-ratio-returns-analysis-updated.html
Blogs:

https://www.jagoinvestor.com/

https://freefincal.com/

https://stableinvestor.com/

Books:

https://www.amazon.in/Retire-Rich-Invest-Rs-40-Day/dp/9387860310

Complied by –

Langval Capital

langvalcapital@gmail.com

I am not a SEBI registered analyst. The document was made for educational purpose. Do not
consider it as recommendation. Invest at your own risk. Mutual Funds, Equity and Debt instruments
are subjected to market risk. Past performances do not guarantee future returns.