Do you have enough investments? Here’s how you can find out.

If you're just getting started with investments, there may be many questions on your mind. Like how much you should invest, what instruments you should invest in, and how frequently you should save up.

But once you've gone a bit further into your investment journey, a different kind of question may start to draw your attention.

Have you invested enough?

After all, you need to make sure you have enough investments for all your needs, isn't it? So, how do you know if you have enough investments? The answer to this question depends on many factors.

Here's how you can find out if your investments are enough for your future.

Are they enough to replace your income?

Your investments need to be enough to replace your regular income. That way, when you retire, or if you're no longer able to work for some reason, your investments will be capable of supporting you financially. Most investments that can help replace your income are focused on the long term. So, it's a smart idea to invest in instruments that offer high returns over the course of 10 or 20 years.

For example, say your current monthly income is Rs. 50,000. To ensure that your investments are sufficient to replace your income, you need to choose options that give you monthly returns of at least Rs. 50,000. That way, in case you are no longer able to work, you can rely on the funds from your corpus.

But that alone is not sufficient. You'll also need to account for any immediate needs. And a life insurance plan can help you here. With a life cover, you can rest assured that even if something untoward were to happen in the short term, you and your family are financially secure.

Will your investments beat inflation?

Merely replacing your income is not enough, either. Your investments need to beat inflation. That way, you can maintain the same standard of living that you are generally used to.

Let's take the same example we saw earlier. Your current monthly income is Rs. 50,000. But inflation stands at 6%. In that case, if you want your investments to support you 20 years down the line, you'll need Rs. 1,60,357! Each month.

Are they enough to help fulfill your major life goals?

One of the main reasons you invest your money is to meet your life goals easily, isn't it? So, your investments should be planned in such a way that they help you meet all the major milestones in your life right on time, without any compromise.

To ensure that your investments are capable of covering your key goals, here are the factors you need to take into account.

• What those life goals are
• How much money you need for each life goal
• How long you have to fulfill those goals

For instance, say you have two major life goals on your list. The first is to purchase your first home within a budget of Rs. 50 lakhs, 5 years from now. And the second is to save up Rs. 40 lakh for your child's college education, 10 years from now.

So, your investments need to be enough to generate Rs. 50 lakhs in a 5-year period, and another Rs. 40 lakhs in a 10-year period.

Will they cover any emergency financial expenses?

Investments aren't just for the needs you're aware of. They're also for the needs you don't see coming. Like an unexpected medical emergency, or a sudden repair that your house or your vehicle may need.

To take care of these unpredictable financial needs - which can often be expensive - your investments need to include an emergency fund. An emergency fund must be three things:

• Liquid
• Safe
• Sufficient

It needs to be liquid enough so you can easily convert your funds into cash or cash equivalents. It needs to be safe and offer guaranteed returns, so you can preserve your funds and reduce the risk of losing money just when an emergency comes knocking. And it must be enough to cover at least six months worth of expenses.

Will they be adequate to keep your family financially secure, if you're not around?

Lastly, your investments must meet the most important requirement of all - protecting your family. In case there are many dependents in your family, the loss of the primary or the sole earning member could be very disadvantageous to the surviving members.

Investments can help ensure that this kind of a situation does not come to pass. With sufficient investments in your portfolio, you can leave behind a safety net for your family members. Life insurance is also particularly useful in this context. With a sufficient life cover in place, you can rest assured that your family can continue to lead a fulfilling life, come what may.

The bottom line

To sum it up, you have enough investments in your portfolio if they can:

• Replace your income
• Beat inflation
• Help fulfill your life goals
• Cover emergencies
• Keep your family financially secure

Check off these five boxes, and you can rest assured that your investments are enough to give you - and your family - a good life.

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