'Invest in Indian stocks for the long term'

Do you want to become a millionaire after 10-15 years? Do you know how can you achieve this goal?

What role can long term investments in mutual funds and stocks play for you to achieve financial freedom? Why should you invest money in a disciplined manner?

In a chat with Get Ahead readers on March 18, 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: 'Emotions lead to irrational financial decisions'

savybh asked, hi sridhar. I am 36 yrs old and my monthly salary is 70K. (i have an LIC Policy Endowment SA 20,000 USD, Term 10 Yrs) (B.LIC policy Cash Back AS 30,000 USD , term 18 yrs) (C. ICICI Multipilier Rs 100,000, Term 6 years) my total investment/return is around 32 Lakhs now which i will get over a period of 18 yrs. I would like to invest more and build of corpus of 1 crore. What should I do?

Vetapalem Sridhar answers, Charge structure of Insurance based investments are high. It would make sense for u to do further investments into diversified equity Mutual Funds with a long term (5 or more yrs) horizon of investing. Also u may look at taking a TERM Insurance cover if u need addition insurance cover.

mukesh.goud asked, Dear Mr. Sreedhar, I have to clear huge debts that came from my parents about 20 Lacs. I earn about 50K pm and my wife about 30K pm. I'm 32years old. we havent planned for kids. Till now I am paying interests only. How should I proceed to clear the debts. Should I save, invest or do what to clear the debts? I am completely clueless as to how to proceed? I am caught in this vicious infinite loop. Please advice to come and clear debts in a planned manner. Thanks in advance.

Vetapalem Sridhar answers, This would depend on a number of factors. 1. from whom the money has been borrowed. 2. Wat is the interest rate being charged 3. ur current assets/savings etc. Ideally it makes sense to work out a structure with ur lender to fix up a EMI (as per ur current capacity) based on a benchmark interest rate and continue to pay this EMI for the said period. As ur salary increases, the additional money should be invested. this is just general advice. Would need to go into more depth to provide a better solution.

Ravi asked, I am 33 years old with two kids, five and one year old. My financial goals are kids education/marriage and retirement. I need around two crore for these goals. I am building mutual funds portfolio through SIP in HDFC Growth, Magnam Contra, Reliance Growth, DSP ML Tiger and Franklin Prima Plus with Growth option. I have invested 15 lakhs so far and adding 75K per month, 15K per month in each of these funds. Are these right funds for my financial goals?

Vetapalem Sridhar answers, Dear Ravi. Portf seems gud. Though i would suggest that u can look at a fund like JM Emerging Leaders or Sundaram SMILE instead of Reliance Growth. In around 8-9 yrs u should have around 2 crore in ur MF portf if u continue investing in the same manner.

Surender asked, Hi Sridhar, i'm 22 years old and i'm workin in a software company as a test engineer and im gettin 12k as my take home, its really hard for me to save money out of this take home, but im interested to save money upto 2k PM and pls tell me how i can use that saving for investment in such a way that i can get good returns in long term, pls suggest me where and how to start the investment? Thanks Sridhar.

Vetapalem Sridhar answers, Hi Surender. It is gud to see u thinking about saving and investing at such a young age. In addition to investing it is important that u spend time and effort into learing more about investing and the various investment options. U can do a 2K SIP into a fund like HDFC Growth or SBI magnum Equity fund. Invest with a minimum 5 yrs horizon.

Stuti asked, Dear Mr Sridhar, this is Stuti from Delhi. i am in my first job and my salary is Rs 15,000pm. I have accumulated Rs 25,000 out of my income. kindly suggest a secure way of invesstment.

Vetapalem Sridhar answers, Hi Stuti. If u r looking at a secure investment, then probably a Bank FD would be amongst the best option for u. I would also suggest that u start a SIP of a small amt like Rs 1,000 into a diversified equity mutual fund like HDFC Growth Fund with a long term (10 yrs or more) horizon. This will help u grow ur money in the long run.

Mona asked, Hi, I m 28 years old working in a software company. Can u pls advice me how i do investment to secure my and my family's future?

Vetapalem Sridhar answers, Hi Mona. To secure ur depandants, u should first take up adequate TERM Insurance cover. Once this is done, then u should invest that part of savings which u can keep invested for atleast 5 yrs or more into diversified equity mutual funds thro a SIP. Also do maintain some money as a contingency fund in ur bank to help u in case of any emergency.

PRADEEP asked, Respected Sir, I am 52 years old. Due to some family problems, I want to take VRS at my present age. How much corpus should be there with me to sustain an expenditure @ 30K/month upto the age of 85-90 years?

Vetapalem Sridhar answers, If u r able to grow ur money at an average rate of 12% then u will need around 60L to keep withdrawing 30K inflation adjusted till ur age 85 yrs. If the return drops to 10% annualised then the amount needed increases to 75L. To keep making higher returns a suitable allocation to equity based investments is essential.

gauri asked, my saving per month is 15k, which type should i invest for good returns after 5yrs. i want to invest Rs 70k in the the name of my baby (6 months old) in PPF this is a right track for her future?

Vetapalem Sridhar answers, Dear Gauri. Do a SIP into diversified equity MFs if u have a 5 yrs horizon of investment. Also for ur baby PPF may not be the best option to invest. Read thro the following link to know more about Investing for children. It's a slide show, click NEXT to read thro.

PAWAN asked, Dear Sridhar, Hi, My wife has just started working again and she wants to invest about Rs. 5 to 6000/- P.M. through SIP mode, into 2 or 3 some really good Mutual Funds who can get her good solid returns. Pls. suggest some really good MF's with best of returns.....and what kind of horizon (Time Frame ) one can look at and what would be rate of returns.....? Pls. advise suitably. Regards, Pawan Sharma.

Vetapalem Sridhar answers, Hi Pawan. U can look at around 2-3 funds to do a SIP. Cannot say which funds will be best performers in future. U can look at options like HDFC Growth, SBI Magnum equity, Reliance Vision, Sundaram SMILE, JM Emerging Leaders Fund etc. U should have a horizon of 7-10 yrs ideally. U can expect around 15% annualised return.

simon asked, Hi, I got stuck in the downturn of the market. sitting on 27% losses. total investment 40K. way forward please.

Vetapalem Sridhar answers, Sit tight. Have patience. Invest more if u have more money. In 3-5 yrs time u would have made reasonable returns on ur investments.

Deepak asked, Hi Sridhar, is it wise to have a SIP into diversified Mutual funds for 2 LACKs/Month for 5- 10 Year period? I do make enough now and have substancial fixed assets. My goal is to be a Millioanare($) in 5 years time in liquidity. Having an NRI status, what will be the tax implications? Thanks in advance.

Vetapalem Sridhar answers, If u invest in equity oriented Mutual Funds and remain invested for more than 1 yr. then the returns r Long Term Capital gains. As per current tax laws tax on LTCG is NIL. This is irrespective of u being an NRI. It does make sense to invest into Indian equities with a 5-10 yr perspective to create wealth. U should be able to meet ur goal in around 7-8 yrs thro investing in India.

tina asked, hello i'm tina. 24yrs. married recently and have no kids. please give me good ideas which i can save my money or other solutions for the investment.we both work in same office but after first weeks of the month we become broke. money never remain in our hands. please give suggestion to my poblems. waiting for your answer.....

Vetapalem Sridhar answers, This appears more of a emotional problem rather than a financial problem. Both u and ur husband need to sit and talk and decide on certain aspects of managing ur finances. Go thro the following Tips for saving money:

1. Understand ur income and expenses. keep a written record of ur expenses. review it at the end of each month. look at expenses that u could have avoided. In future avoid such expenses.
2. Look at ur lifestyle habits. if u go to a multipex every week and spend money, cut down on number of visits and try to find activities that cost lesser money and which r more adventurous.
3. keep a tab on ur mobile bill. select a plan that works out cheapest for ur profile of usage.
4. Get into a SIP into a mutual fund which ensures discipline as far as saving is concerned.
5. If u have a credit card then cut it into 2 pieces as u should not fall into the habit of using it. Keep a debit card handy instead. Use it only if really necessary.

Vetapalem Sridhar says, Thats all for today! Hope that the u use the fall in the mkts to buy with a long term horizon rather than sell due to fear.