Just SIP your way through good mutual funds. And good mutual funds are a plenty.
But you need to be a patient investor. Understand the importance of time in creating wealth. If you fall in this category then investing in a mutual fund's systematic investment plan can do the trick for you.
In a chat with Get Ahead readers on January 2, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.
For those of you who missed the chat, here is the transcript.
Part I: Is this the right time to buy mutual funds?
Also read: How to build an ideal mutual fund portfolio
ajaysharma asked, Hi, first of all, wish u a very happy new yr. I am 28. I want to invest for my one month old baby for her education. I want to have one time investment of 50K. Kindly suggest where would it be most beneficial?
Vetapalem Sridhar answers, A diversified equity Mutual Fund. U can split the amount between HDFC Growth Fund and JM Emerging Leaders Fund.
Sam asked, Hi! I am 33yrs with 4 dependents & have got 25k of surplus funds per month to invest. I have not started investing anywhere be it retirement, kids education, house. PLs guide me on investments breakup to be done.
Vetapalem Sridhar answers, It makes sense to buy a residential house if it ur cash flows permit u to. Take an adequate Term insurance policy. If u do not plan to pick a residential property, invest that part of the money which u can keep invested for atleast 5 yrs into equity oriented MFs thro a SIP.
dd asked, hello sir, i have invested in 3 mutual funds for 10,000 each as this was the 1st time. fidelity euity, franklin prima plus and icici services fund.also for tax exemptions have taken birla tax relief '96, sundaram paribas and sbi tax gain.do i continue to invest in the same funds or can u suggest anymore in which i can do SIP? How much tax would be deducted if i plan to sell my mutual funds? how long shud i stay invested in mutual funds to get good returns as i don't have any urgent requirement coming up. our take home aged (25 & 28) is 90k and house loan 22k, other expenses-15k. have LIC insurance of 15k. can u also suggest any term insurance we can take?
Vetapalem Sridhar answers, U can look at adding JM Equity Fund to ur above portfolio. Pick just 1 tax fund and continue further invests in it along with the rest. Immediately take up a suitable TERM Cover that sufficiently covers all loans and also would provide sufficients to support ur dependants. Remain invested with a 10-15 yr horizon in the Mutual Funds.
ajit_roy asked, i want to have a tax saving instrument like balanced funds where money should be divided in equity and debt as 50-50. Is there any scheme available without insurance cover?
Vetapalem Sridhar answers, Put 50% money into a ELSS (100% equity) scheme and 50% money into the 5 yrs Bank FD where u get tax benefit. It is as simple as that.
Vani asked, Dear Mr. Sridhar, I am a single working woman and earn Rs. 37K post tax currently but am able to save about 15k each month. How can I deposit it so as to be able to achieve self-generated income in the next 5 yrs of atleast 5000 per month? I have about 4lacs in NSCs and 2lac cash and 1lac in shares besides 70k in mutual funds at the moment.
Vetapalem Sridhar answers, Put a majority of the 15K into Mutual Funds. U can do a SIP in 2-3 funds for that. U can look at HDFC Growth Fund, Reliance Vision Fund, SBI magnum Equity Fund as options.
joy asked, Hi, I have already invested 15k each in 3 ELSS (sbi magnum, Hdfc and sundaram). I am planning to start SIP for sundaram and sbi magnum from april. Other than that I want to start 4 SIPs Rs1500/month. I hav selected Kotak Opportunities, Reliance Power sector, ICICI infra and Hdfc Prudence. I already hav LIC (20k/year) and ULIP(TataAIG: Rs 1850/month). Is this portfolio ok?
Vetapalem Sridhar answers, To build a sound portfolio u need to have strong core funds in it. Funds like HDFC Top 200, Reliance Vision play that role. U should not have more than 2 ELSS funds in ur portfolio. I generally prefer not to invest in Thematic/Sector funds unless there is a very strong reason for the same. Also it makes more sense to invest into debt and equity separately.
cvgbb asked, Hi Sridhar. My take home salary is 47K per month. i am investing 17.5K per month as Sip in few Mutual fund which includes 5K in Rel Diversified power sector, 2.5 K in SC premier equity fund, 2.5 K in Rel Regular savings fund, 2k in Fidelity adv tax saver, 2k in DSP meryll tax saver, 1.5K in HDFC tax saver, 1k in ICICI pru dynamic. when can i become a crorepati with this investment? I can increse my Monthly investments to 21K if required. apart from that i am also investing in stocks which has yielded me 26% return in 2007. Pls suggest...
Vetapalem Sridhar answers, U have build an aggressive portfolio. Most funds r gud. U should look at adding a stable fund like HDFC Growth Fund. Also over time reduce the number of Tax funds in ur portfolio.
R asked, Hi, I am 30 years old and married. My gross salary is 9.2 lacs/year. I don't have any outstanding loans. I am planning to buy a individual house for 34.5 lacs with a loan amt of 26 lacs and cash of 10 lacs. Is it the correct thing to do?
Vetapalem Sridhar answers, It definitely does makes sense if u r going to live in that house.
saumya ranjan asked, Sir My age is 30 and working since 2002. My take home pay is 21 K. I made big mistake by investing 72 K in LIC since 2002. No other kind of saving except EPF. What can be done now? Pls suggest ...
Vetapalem Sridhar answers, The beauty of Mistakes is that if u wish to choose u can learn a lot from them. It would make sense for u to make the LIC Policy paid up. Visit a LIC office for the same. U should look at doing a SIP into Mutual Funds to create wealth in the long run. U can look at HDFC Growth Fund, JM Equity Fund and Sundaram Select Focus.
sophia asked, Hi Mr Sridhar. i am earning Rs.12000 p.m. and i am only the working person in my family(mom,dad and granny). i can save rs.500p.m and i want to invest in funds. please suggest which one will be best for me to invest in market. Thanks in advance.
Vetapalem Sridhar answers, It is not possible to know in advance which will be the best fund. U can start with a SIP in HDFC Growth Fund of Rs 500. But to make gud return u need to remain invested for the long run.
shell asked, Hi Vetapalem, I believe in investing based on the duration concept, hence I have set aside funds for investment into instruments with varying time frames: 1. Retirement funds: (>25 years) 2. Life Insurance: (>30 years) 3. House: 2 houses with 20 year loans each 4. PPF: 15 years 5. NSC: 6 years 6. MFs: 3 years (minimum) 7. Stocks: short term horizon My problem is that between the 6 year and 15 year horizon I have not been able to figure out investment assets. Now this is a sizeable duration and I would like to know your views on some instruments that can be used to narrow down this gap in my investment plan?
Vetapalem Sridhar answers, I respect ur logic. But it is not necessary to invest in places with suggested names. Like for ur retirement need it is not necessary that u invest only in Retirement funds like Pension Plans. Over the long run say more than 5-7 yrs, equities have a potential to outperform all other asset classes. So selection of assets for investing should be based on duration, but not the products. For a 15 yrs horizon a SIP in a equity MF is more appropriate than PPF.
Vani asked, Dear Sir, how should one save so as to be able to have income generating investments? I want to save in such a manner that after a few years, I do not have to depend only on salary to cover my expenses. I am single working woman, 30, earn 4.5 lac and save 15K per mth. and have savngs of about 7 lacs till date between NSCs and MFs and some stocks. Please advice.
Vetapalem Sridhar answers, NSC as an investment option no longer makes sense. I would suggest that u increase ur allocation towards MFs in future. U have not given any details of cost of living, so cannot estimate how long u will need to invest the money.
TR asked, Hi My current cash position is 1.13 crore. 45% in debt, 32% in equity, 25% in real estate. I have take home salary of 1.10 lak. I have a term insurance. I have current SIPs of 60k p.m. in TIGER, JM Basic, Prima Plus, Rel Growth, Rel Vision, Magnum Contra. I want to build a corpus of min 5 crore at the age of 45. AT present, I am 35. Pls suggest how to go about it?
Vetapalem Sridhar answers, A more realistic target seems to be between 3.5 to 4 Crores based on ur current situaion. The funds u have picked r pretty gud. I would suggest that u can look at JM Emerging Leaders fund instead of Reliance Growth (it has grown very large in size).
ricky asked, Hi SRIDHAR, Can you please advise me on my portfolio, 20000 in principal personal tax saver, 20000 in sundaram bnp paribas tax saver, 10000 in sbi magnum tax gain. I have sip in reliance rsf 1000, icici infra 1000, hdfc growth 1500, sbi magnum equity 1000, stan chart premier 1000 and reliance power diversified 1500 and magnum contra 1000. pls advise.
Vetapalem Sridhar answers, Too many funds. It would become difficult to track and it does not add any value to ur portfolio. U shouls pick just one ELSS of the above and continue further investments in it. U should look at eliminating SBI Equity and one of the Sector Funds over a period of time (in the next 2-3 yrs) from ur portfolio.
abcd asked, Hi Sridhar, we are parents of 2 kids aged 9 and 1 yr, salary 140,000/-. investment 10 lacs (property), ICICI smart kid (5k per month-80000 now), Kotak headstart (5k per month, 20 k now), ICICI maximiser (1 lac per ann--280000 now), ICICI pension (1 lac per ann-1 lac now), reliance tax saver (45 k one time - 70,000 now), UTI (10k one tiem), DBS (10k one time). housing loan - 30Lacs, my own house value 65 Lacs. Where do you see us. My husband is 36 Year and I am 30 year. Pls advise on our existing and future investments. Horizon is long (appx 10 yrs).
Vetapalem Sridhar answers, U did not make the best choice for creating funds for ur childern's future. Pl read thro the foll Slide Show to understand more http://specials.rediff.com/getahead/2007/aug/07sli1.htm. U need to look at creating a gud portf in Mutual Funds, which would help u build funds for most of ur future needs. MFs would be more appropriate than a Pension Plan to build long term funds to take care of retirement needs. If investing is done wisely, u can achieve Financial Freedom in around 10-12 yrs based on info provided above.
Vetapalem Sridhar says, It seems the questions never stop flowing in. But will have to end the chat session here as have run out of time. Wishing all of u a Happy and Prosperous New Year.
Part I: Is this the right time to buy mutual funds?
Also read: How to build an ideal mutual fund portfolio
Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at vetapalems@rediffmail.com.
More from rediff