Going overboard on equities is a common mistake that individuals commit in the expectation that returns from such investments are high; on an average your equity exposure should not be more than 70 per cent of your overall investments. All their current investments were mainly into equities only.
As a first step to create a balance, I advised them to route part of their future ULIP premiums into a debt oriented mutual fund which will help preserve capital as these funds invest their money in safe instruments. Since three years of contribution was already made, partial withdrawals were possible without any exit loads (an ULIP allows for this facility).
They could however, continue to invest (existing commitment) in equity mutual funds on a monthly basis through the Systematic Investment Plan. This would help them buy equities at the right opportunities in the market while restricting the downside thereof.
We also did a detailed evaluation of tax saving opportunities and evaluated the usage of company reimbursements, exemptions like LTA (leave travel allowance) and also deductions. The tax thus saved would help them create a buffer just like the money they would save from spending less on their credit cards. Additional regular investment commitment is a big NO at this point.
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