Portfolio reorientation
Recommended allocation: Given that Amitesh has so far not experienced any market linked instruments, barring the exposure through ULIPs, it is important that he starts building some exposure to equities.
Short-term: Large part of his current savings should go into debt mutual funds and liquid mutual funds given that he has big goals like buying a house and a car coming up in the next few years.
Also given the age of his parents, it is of paramount importance that he builds up a decent fund to meet contingencies. Therefore, he should be more focused right now in building liquidity and cash around the portfolio.
Medium- to long-term: Once some of the shorter term goals are met, it is important that Amitesh’s equity exposure goes up. He should at least have around 40-50 per cent of his assets in equities or equity linked funds. This will ensure that he generates long term inflation beating returns.
It is important to revisit the goals after one year, after the short-term actions on insurance, liquidity management and emergency funds have been dealt with.
The next one year is critical to get on the right path; reduction of goal values is not necessarily a permanent action. Once Amitesh gets on the path of disciplined savings, belt tightening in the near term, avoiding unnecessary debt and taking appropriate life cover, he should look at revising his goals upwards and getting back to his original plan.