Do you think you are invested in too many mutual fund schemes? Will it benefit you and your family in the long term? How many mutual fund schemes should you have in your portfolio to get ideal returns?
Which are the best mutual funds that you can still invest your money in? Which mutual funds can you safely knock out from your portfolio without affecting your returns?
In a chat with Get Ahead readers on December 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 II: Financial freedom: You CAN achieve it!
jv asked, Dear Mr. Sridhar I want you to have a look on my investment portfolio and suggest me which two mutual funds should be added in my porfolio. my present investments are as follows :- sbi tax gain 3000/-, kotak tax saver 2000/-, reliance vision 1000/-, franklin prima plus 1000/-, tata infra 1000/-, reliance power 1000/- I want to add two more funds. my investment horizon will be 5 to 8 yrs. initially.
Vetapalem Sridhar answers, Hi JV, I would recommend u to add HDFC Growth Fund and ICICI Dynamic Plan. Limit ur exposure to Sector Funds. U don't need to have more than 6 funds to create a well rounded portfolio. So trim down ur portfolio over time.
sonee asked, respected sir, i am a woman employee under the state government earning 2.16 lakhs p.a. please advise me as to which mutual funds should i go in for and which funds should i go in for to save tax. i have invested in sbi taxgain. is it a good fund?
Vetapalem Sridhar answers, Hi Sonee, SBI Taxgain has done well during the past. In Mutual Funds there is always a DISCLAIMER: Past performance may or may not be sustained in Future. Currently in my watch list the following ELSS Funds appear -- Principal Tax Savings Fund, Sundaram Tax Saver and HDFC Tax Saver.
RAJIV asked, HELLO SIR, MY SELF RAJIV. I AM A PHYSICIAN AND I CAN INVEST RS.15,000= PER MONTH I WANT TO SAVE RUPEES ONE CRORE UP TO MY AGE 58 YEAR AT THE MEAN TIME I AM JUST 36 YEAR OLD PLEASE TELL ME WHICH WAY IS BETTER FOR ME?
Vetapalem Sridhar answers, There is still 23 years for u to attain the age of 58 yrs. If u continue to invest 15K pm till ur age 58, and are able to grow ur money at a 12% annualised rate over this tenure, u would accumulate close to Rs 2 Crore. Such a return over the next 23 yrs can be met thro investing into equity based mutual funds thro a monthly SIP.
monu asked, age 30, mine and spouse takehome abt 80k pm. have 2 children (7,1 yr). Have one own house and paying an EMI of 6500 pm (another 7 more years tp pay) invested 13 lakhs in MF - (Franklin Prima Plus 1.5 L, SBI Balancedn Fund - 5L, Reliance Vision Fund - 1.5, HDFC Equity Fund - 2L, SBI MF Magnum Equity Fund - 1.5 L, Reliance Growth Fund - 1.5L) Also started SIP for 25K pm for each (Sundaram Mutual Fund, ING Mutual Fund, HSBC Mutual Fund, JM Mutual Fund, Franklin Templeton Mutual Fund). 3 Questions - Is the portfolio good? For long shud I continue to invest in SIP - 25K pm? to do a Systematic withdrawal of 25 K pm. and how long can I do SWP Plan to construct a house where I need 30L. Is it advisable to take loan for the whole amt or break some MFs but would like to conntinue on SIP?
Vetapalem Sridhar answers, 1. Ur portfolio seems to b gud. It makes more sense to take exposure to debt and equity thro dedicated separate funds and not thro a Balanced fund. U need to limit number of funds to a maximum of 6 in ur portfolio. 2. If u continue to do a SIP for the next 14 yrs in the above funds they should grow to around 1.35 Crore. Have not taken into account the 13L already that u hold in MFs (this u can use for ur house in future). 3. The SWP of 25K (in today's terms) adjusted by 7% for rise in cost of living each year, should last till ur age 85 yrs (based on certain assumptions) If u r not adequately insured, then take up a suitable TERM Insurance cover.
JDS asked, Hi Sridhar, I am 28 single earning 50,000 pm. I have insurance policies on which I am paying premium of Rs 65000 pa sum assured 12,00,000, PPF balance is 2,00,000, medical premium 4500. I have a monthly SIP of 2000 Rs in Franklin India Prima fund. Flat worth 18,00,000 (no loan pending). Kindly advise how can I invest to generate wealth for retirement. I am planning to purchase a 2BHK flat costing 35-40 laks in near future. Thanks for your advice.
Vetapalem Sridhar answers, Hi JDS, U need to increase ur allocation towards equities. I would suggest that u re-evalute the insurance investment that u r making. U can get a TERM Insurance cover of 12L at ur age for around 3-4K p.a. premium. It would definitely make sense for u to take a flat, as u can get tax benefits on the EMI paid. If u can postpone buying the flat till u get married, it may help u structure finances much better.
tips asked, Hi Sir, I'm 24yrs old and My monthly take home sal is about 27,500 and I have invested in three ELSS since 2005 and my net worth is about 100000. I invest 5k every month and I also have an ULIP from Aviva(it really sucks) where I have to put 6k every quarter. Apart from this I also have a liquid amount of about 90k. I'm planning to reconstruct my house which requires about 1.25 lacs for paper work etc. and have taken a home loan for construction. My question is now should continue investing about 7k along with my home loan EMI or should I just invest 3k and keep remaining 4k as liquid for emergency. What do you suggest?
Vetapalem Sridhar answers, Hi, U need to build some funds for the needs that will hit u in the near future. Especially for ur marriage and any higher education if in ur scheme of things. Also u need to have around 4-5 mths worth of expenses in ur savings account at all points of time. Other than this u can set aside some funds for any emergencies that u may anticipate. All other funds should be invested with a long term focus into equity oriented Mutual Funds to create wealth.
JIT asked, Hi sridhar, This is the third time i am writing hope this time i will get some reply, I am 29 want to invest 5500 per month in ULIP(AVIVA) for 12 yrs and withdraw the whole amount after 10 yrs more is it possible to reach 1 crore within this time horizon?? ULIP coz i want growth and isurance from a same investment tool...i also have sip in ICICI pru, PPF and LIC...pls advice
Vetapalem Sridhar answers, Dear JIT, I would suggest that u take a TERM Insurance separately and invest the money into a equity based Mutual Fund. Assuming that ur TERM Cover costs u 6k p.a. This would enable u to invest 5K in a SIP. This 5K invested each mth for the next 12 yrs and then left for a further 10 yrs in a Equity MF should roughly become 60L. For it to become 1 Crore u should have to leave for 13 yrs instead of 10 yrs.
naresh asked, For a beginner in the share market should I go in secondary market or should he go via systemic investment plan?
Vetapalem Sridhar answers, This is what I would recommend. 1. To be sure of that ur investments r on the right track, put around 90% money thro the Mutual Fund route into Equities. 2. Start with a small seed capital. Also u can keep adding 10% of the money into this fund regularly. Using this money u can start investing into shares directly. During the initial 2 yrs the focus should be on learning and not on returns. Never increase the allocation to this fund, even if u r doing exceptionally well for the first 2 yrs. Once u feel that u have started to understand direct equities, u can take an informed decision then.
kesarirs asked, Hello sir, I'm a self employed professional aged 33 yrs married & having only child aged 3 yrs. My total earnings at present are 25000 pm appx. My initial savings are: 26k with post office rd, 50k in bank fd, 40k in nsc, 110k in diff mutual funds. I have a combination of LIC policies wherein total premium is 44k & total sum assured is 20 lac. I also have a mediclaim for myself & family for 3 lac (1 lac each). My current monthly investments are: 3000 in rel tax saver, 2000 in franklin India oppor, 1000 in FT India balanced fund, 2000 in post off rd. My current monthly expenditure is 13k appx. I have following long term goals: higher education for my child after 18 yrs & her marriage after 23 yrs which shall cost me roughly 10 lac & 20 lac respectively. I want to know whether I can attain these goals & continue my current life style once I stop working at age of 55 considering my present investment mix! Please guide.
Vetapalem Sridhar answers, If u plan to maintain ur cost of living at 13K p.m. adjusted for a rise of 7% cost in living, then u would be able to accumulate enough resources to meet all ur above mentioned objectives by ur age 50 yrs. Have taken some realisitic assumptions for the above. As ur savings potential increases, u should look at adding 2 large cap funds to ur investments.
srini asked, Can you provide me name of good portfolio management companies and their websites to manage my investments.
Vetapalem Sridhar answers, Dear Srini, even though u may plan to give ur money to a Portfolio Mgmt company, u sould take full responsibility of ensuring that ur money grows. The companies are there to make profit. If they make money irrespective of u making money then they would have protected their interest but not urs. It is upto u to protect ur own interest.
parry777 asked, Hello Sir, i plan to make an FD of about 45000 and show it as saving under section 80 c. Is there a specified period for which i wil hv to make the FD. I have heard that the FD has to b of 5 years. Please confirm.
Vetapalem Sridhar answers, The FD where u can claim tax benefit U/s 80C has a 5 yrs lockin.
moneymatters asked, hi sridhar i am 30, single. have a home loan (floating) for 24 years more, which takes away Rs 16k from my pocket as EMI. Have a term policy for 20L for a period of 25 years, with the annual premium coming to around 6k. Have investments in HDFC Prudence, Reliance Vision, Sundaram Midcap, SBI Magnum Contra, HDFC Taxaver, HDFC Long Term Advantage, Magnum Taxgain, and ICIC Taxplan. I have started SIPs in Kotak Opportunities (2000) and Franklin Flexicap (2500). I also have NSC for 30,000 that will mature in 2011. My take home is 30k. Can u review my financial health and suggest measures to improve it? shud i go in for a health cover, a floater plan perhaps that will also cover my parents aged 65? Also, i wud like ur opinion on the funds i am invested in with suggestions for addition/deletion.
Vetapalem Sridhar answers, Out of 30K take home salary 16K is going towards EMI. So u r left with 14K. U already hold too many MF schemes. U need to trim the no. of funds in ur portfolio. Collect funds for ur marriage, as there will be some expenses to set up ur home then. Also u maybe able to save more now as u r single. If possible it would make sense to prepay some part of the loan over time to reduce the tenure. If ur company does not cover ur medicals, then u should look for a suitable health cover.
CV asked, Hi Sridhar, I am 29 yrs old & my take home salary is 8 lacs. I have taken care of tax savings and now would like to concentrate on investments.I have decided to do a SIP of 20K p.m & selected Reliance-Growth, Reliance Diversified Power Sector Fund, DSP Merrill Lynch and JM financial Mutual fund. I have couple of questions, firstly is it the right combination of MF's and when can i attain financial freedom?
Vetapalem Sridhar answers, The fund houses r all reputed. Even though I would not suggest a sector fund, if u plan to invest into a Power sector fund, u should have a 10 yrs horizon for the same. U have not mentioned the specific scheme names, though JM Equity and JM Emerging Leaders fund appears in my watchlist. DSP ML Tiger too is a gud fund.
sandman asked, Sir, I have invested in the following mutual funds (All Growth options): Reliance Growth-20000 Reliance Vision-20000 Fidelity Equity-15000 HDFC Equity-15000 Franklin India Prima Plus-15000 SBI Magnum Global-15000 Sundaram Select Mid Cap-15000 HDFC tax Saver-20000 DSP TIGER-7000 Birla Sunlife Equity-7000 Kotak Opportunities-7000 Reliance Equity Advantage-10000 Franklin India High Growth Companies-10000 Need to know your comments on my fund choice and whehter I need to prune my selection. Which funds do I retain and which ones to give up? I will continue investing every year in these existing funds. Also, I have a HDFC Pension Plan and am intending to go for LIC Jeevan SARAL. Do invset in PPF's too (70000 per yr.) Are my investment options good enough?
Vetapalem Sridhar answers, U need to hold not more than 6 funds. Of the above I would suggest that u can exit Reliance Growth, HDFC Equity, Sundaram Midcap, Birla Equity, Kotak Opp, Reliance Equity Advtg and Franklin High Growth fund. Exit fund with lockin only after the lock in period is over. U should take up a Term Insurance cover instead of a LIC Saral.
Part II: Financial freedom: You CAN achieve it!
Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at vetapalems@rediffmail.com.
