This weekend, we discuss three important questions: (1) Why term life insurance alone will not protect your family (2) A beginner question: Which equity mutual fund should I choose first? (3) How to define a financial goal – part one.
If you have not heard my Paisa Vaisa podcast, go give it a listen. This is part one. Part two is coming up. Why we need to forget about “pension after retirement” & focus on “financial freedom” – Paisa Vaisa Podcast Part 1. Do share it with those who have not yet thought about retirement.
Also, do check out Lazy Investing: Five Test Stock Portfolios Aug 2018 Update I am currently working on three different ways to list “good stocks”. Watch this space.
Why term life insurance alone will not protect your family
A term insurance cover is subject to inflation risk. A once crore cover can halve in value over a decade. So it is important to start investing early, investing right and investing as much as possible.
Give yourself 10Y to reach a net worth of 50% of your life cover. So invest at least 60% of what you can in equity. With some luck, you can make it.
Here are 3 personal finance milestones to conquer: liquid net-worth = 50% of term life cover ===> liquid net-worth = 100% of life cover. The equity portion of net worth ====> 100% of life cover ====> Fixed income portion ===> 100% of life cover.
As an example: Suppose you start with no net worth and one crore life cover, give yourself 10Y to have a wealth of 50 lakhs (50%). Another 5-10Y to make that one crore (100%). Then your equity holdings should become one crore and then your fixed-income holdings.
With aggressive investing, I was able to achieve this within 10Y (don’t get ideas, my life cover is < 1 crore). You can too. All it takes is time and non-interference.
Which equity mutual fund should I choose first?
This is a question that has multiple “right” answers. I had written a slightly different version here: what should be my first mutual fund? To the funds mentioned, you can also add Franklin Balanced fund (now called Franklin Hybrid Equity Fund)
How to define a financial goal – part one
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