Investment details and analysis of Mr. Richard Smith's case

Investment details of Mr. Smith

The investment portfolio of Mr Smith covers the following avenues:

►  Investment in bank FDs – Rs. 1,00,000/-

►  Investment in stock and shares – Rs. 2,00,000/-

►  Investment in post office savings schemes EPF / PPF / NSC totaling Rs. 1,82,000/-

Asset classification of Mr. Smith

Mr. Smith’s asset portfolio includes :

►  A residential house property costing Rs. 26,00,000/-

►  Purchase of a car whose current market value Rs. 7,00,000/-

►  Jewellery for his wife costing Rs. 2,50,000/-

►  He is maintaining a bank balance of nearly Rs. 1,00,000/- in his account. The collective outstanding liability on his car loan and housing loan is Rs. 18,00,000/-

Insurance details of Mr Smith

►  He had taken an Insurance plan with a 20 year money back plan worth Rs. 2,00,000/- when he was 30 years. The annual premium is Rs. 18,059/-

Analysis of Mr. Smith’s position

►  Mr. Smith’s annual expenses are Rs. 14,30,059/- and after meeting his annual savings Rs. 2 lakhs, he is left with a cash of Rs. 1,19,941/- per annum. 

[Rs. 17,50,000 – (Rs. 14,30,059/ +Rs. 2,00,000/-)]

►  Mr Smith pays Rs. 60,000/- per month as EMI towards his loans. Hence, his current liquidity position is not in a very good shape as any event that temporarily hampers his monthly earnings can prove disastrous.

►  Though he has invested in many long term assets, he is having only Rs. 1,00,000/- as balance in his bank account.

►  He has only taken an insurance policy for Rs. 2,00,000/-. Under the present circumstances he is underinsured and needs to revise his insurance plan.


Recommendations for him follows here.