Are you sitting on big losses on your mutual fund investments? What should you do now that the stock market has moved up so fast since March this year?
Should you put your money into mutual funds now? Or should you wait for an opportunity to invest?
In a chat with Get Ahead readers on June 3, 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.
vidh asked, Hi Sridhar, my current take home is 50k per month. I have a home loan for which i am paying an EMI of 10K/month, I have a 2 personal loan, the total amount being about 10K, I want to purchase a house in Mumbai (suburb limit), with one home loan continuing, how can I plan for the same? The approx cost for the house i plan to buy would be around 40 Lacs.
Vetapalem Sridhar answers, at 2009-06-03 14:09:26Hi Vidh, with 20K going towards existing loans, u r left with 30K. U will not be able to get a sizable loan to buy a house of 40L with ur current Financial state. U can evaluate of the following works. If u already hv some money for downpayment, then by selling ur existing property and clearing ur existing loans u maybe able to purchase the 40L flat.
buyORrent asked, Hello Sridhar, first i would like to thank you for your great advices ...then ask a simple question (look like) Should i buy or rent a home?
Vetapalem Sridhar answers, This is a very subjective question and it does not hv a simple answer. U will need to evaluate a number of factors to arrive at a decision. Owning a house has advantages like u do not hv to shift often, it is an asset which over time will increase in value, etc. If u can afford a to buy a property this would be a gud time.
Kaushik asked, Which are the stocks that can be bought at these levels for a 2-3 year perspective ? Which are the ones that can be bought for quick gains ? Please suggest. I am not risk averse.
Vetapalem Sridhar answers, Hi Kaushik, the mkts seem set for a gr8 run in the long run with a stable govt in place which seems to be interested in creating an encouraging environment for the economy to grow. If the reforms process starts and the govt is committed, we will see equities touch newer highs sooner than we anticipate. Most large cap stocks r gud picks at this stage with a 3-5 yrs horizon. Infrastructure and PSU stocks maybe benefited more over this tenure.
amar asked, Hi, At age of 30 i am investing 20,000/anum each in NSE & PPF, 40,000/anum for LIC of me & my wife, 15,000/month as SIP in Mutual fund. Is it a good blend? I am planning to buy house soon
Vetapalem Sridhar answers, Hi Amar, stop NSC and allocate this money towards ur PPF. A re-evaluation of LIC should be done. Get urself adequate TERM Cover. Continue with SIPs. It maybe better to finalise on ur house with 3-4 mths.
Suhas asked, Hi Sridhar, I invested in equity and in 15% profit as of now. Shall I sell and buy in dips again?
Vetapalem Sridhar answers, Hi Suhas, timing mkts is not possible. It is best to continue to remain invested with a 5-7 yrs horizon. U should infact look at starting a SIP and invest regularly into equities.
Suman asked, I have invested 10000/- p.m for the last 1 year (split into 4 funds with 2500/- pm for each - the funds being - Franklin India Prima Plus, DSP ML TIGER, Reliance Vision, Birla Sun Life Frontline Equity), and now my current investment value is Rs.165000 against the cost price of Rs.125000/- (Rs.40000 profit, or 32% annualized growth). What should be my policy at this very moment - should I partly book some profits, and keep it in some bank FDs, and continue normally (i.e., the same 10K per month), or should I just continue (without any withdrawals whatsoever) as I am doing right now? My first investment objective is to purchase a flat in the next 2-3 yrs. The next objectives are a bit far away (7-8 yrs from now). So what should be my course of action right now?
Vetapalem Sridhar answers, It would be wiser to keep ur SIPs running and remain invested for a 4-5 yrs period. Evaluate how much savings can u keep invested with a 4-5 yrs horizon and allocated it towards the SIPs. For ur house purchase it is best to start to collect funds in a bank FD by saving money each mth from ur income.
rakesh asked, Hi Sridhar can you let me know wether this market will be stable.
Vetapalem Sridhar answers, Hi Rakesh, currently mkts look to be in a fair value zone with a little premium. It is difficult to say how mkts will move in future. Indian economy look set for a decent growth over the next 5 yrs with a stable govt in place. So domestic factors suggest that mkts will be on a upwards trajectory. Incase there is a major negative event in the global economy, it will affect Indian mkts adversely. So how things will pan out in a 1-2 yrs horizon is difficult to say. With a 5-7 yrs horizon the potential to make gud returns thro equity investing is gr8.
santanu asked, I have invested in DSP Black top 100 equity dividend, dsp black tax saver, birla tax saver dividend, reliance power diversified dividend, fidilety tax saver total amounting to 9000 under sip. is it oky? wht all other finds shud I tgt in coming 2 months, sip only. regds
Vetapalem Sridhar answers, Hi Shantanu, it is best to stick to one or at max 2 ELSS funds for TAX purposes. DSP top 100 is a gud fund. Reliance power is a sector fund. It is better to stick to diverisfied funds.
Newbie asked, Hello Sir. I am currently servicing a home loan at a fixed interest of 8% p.a since 2004. I now have some spare cash available. I want to know if I should be partially prepaying this loan (does not incur prepayment penalty), or use this money to invest elsewhere, like MFs or stocks, or splurge it away on a new car ;) Please advise. Thank you
Vetapalem Sridhar answers, Hi, Prepaying is better than splurging! However it is WISEST to invest this money into equities with a 5-7 yrs horizon. There is gr8 potential in mkts with a long term horizon.
ARP asked, Hello Sridhar, I have invested in tne below mutual funds. As of now all of these are in loss please advise as to what would be a better plan to stay invested for some more time or to book loss and come out. IDFC PREMIER EQUITY FUND-DIVIDEND KOTAK MAHINDRA MUTUAL FUND KOTAK OPPORTUNITIES-GROWTH RELIANCE MUTUAL FUND RELIANCE DIVERSIFIED POWER SECTOR FUND - GROWTH RELIANCE MUTUAL FUND RELIANCE NATURAL RESOURCES FUND - GROWTH SUNDARAM BNP PARIBAS MUTUAL FUND SUNDARAM BNP PARIBAS CAPEX OPPORTUNITIES FUND
Vetapalem Sridhar answers, Hi, by remaining invested thro this turbulent phase the value of ur investments hv risen by 60-70% from the bottom. The lesson to learn is that if u wait with Patience for long enough ur investments will grow and deliever u decent returns. Equities is a long term investment. Dont look at it as something from where u need to recover ur losses. Look at it as an option which over the long run will build wealth for u.
anand asked, My ctc is 5 Lac and I have to purchse a home in mumbai, navimumbai or in thane. Looking for the single BHK home. Is this the right time to purchase a home?
Vetapalem Sridhar answers, Hi Anand, this is a better time to buy a property. With the economy expected to get better over time it does not seem that real estate prices will go done a lot futher from current levels. As and when economy recovers, property prices will start to move up. There is however still some time before it happens..
NITIN asked, At 33 have net income of 25,000 p.m. i am investing 2,000 in SIP 55,000 in LIC 25,000 Infrastructure Bonds 8% additional towards PF 6,700 Home Loan WANT TO KNOW WHETHER I HAVE INVESTED CORRECTLY
Vetapalem Sridhar answers, Hi Nitin, u should evaluate ur LIC. It may be better to get urself an adequate TERM Insruance cover, and invest the rest money wisely. A PPF maybe better than ur Infra bonds. Increase the SIPs in case u decide to replan the insurance part.
Pandurang asked, Hello Sridhar, I have about 5L which I would like to invest preferably in a tax-saving scheme, what are my best options, also i would like to take a rupee cost averaging approach rather than invest everything lumpsum
Vetapalem Sridhar answers, U r eligible for only 1L tax benefit u/s 80C in a yr. To meet this u can look at doing a SIP into a fund like Sundaram Taxsaver or HDFC TAxsaver. The rest of the money may be invested into regular MF schemes like Reliance Vision, Sundaram Select Focus, DSPBR Top 100, HDFC Top 200, etc...
sandyk asked, Hi, following is my asset allocation: savings/FD: 40L, PPF: 4L, PF:5L, MF:10L, ULIP:3L, FMP:0.5L, Income: 0.2L, Propoerty I: 80L II: 55L (for self use). current in hand is 3L PM. plan to retire in 3 years. current age 36
Vetapalem Sridhar answers, Hi Sandy, In case u wish to retire in 3 yrs, a sizable allocation from ur future savings into equities is recommended. It seems possible with some effort into planning ur investments.
mitra asked, hi sridhar, Whether its better to invest in Mutual Fund or Fix Deposits? I am very new to this. I am having some money to invest in.
Vetapalem Sridhar answers, Hi Mitra, in case u have a 5 yrs horizon to invest, then a Mutual Funds would be a better option. For a short period it is better to invest into a bank FD. Consider investing some money into a bank FD and invest into a Mutual Fund via a SIP.
Mukul asked, Hi Sridar. My question to you is how much do you think one should cover for himself & family. I am married and have a daughter (5 yrs old) and need to know the funds as well as the insurance one should have to take care of future needs. Also what could be the best options for the same. Thanks!
Vetapalem Sridhar answers, Hi Mukul, u should hv enough life cover, which is able to support ur family to remain Financially independent in case something happens to u. For this purpose it is best to take up a TERM Cover. For health cover, u can consider taking up a Family Floater policy. For long term investing into equities, u can look at funds like HDFC Growth, Reliance Regular Savings Fund, Sundaram Select Focus, DSPBR Equity, etc....
Aasif asked, I have taken a financial plan with a financial services company! I would like to know what would be the right period of review of my plan! Should it be yearly?
Vetapalem Sridhar answers, Hi Aasif, Financial Planning is a lifelong process. U need to regularly (annually is gud) monitor and keep track of how ur Financials are moving based on the financial plan made. In case there is a major deviation corrective action should be taken. Ideally u should review ur Financial Plan in case something drastically changes in ur life (which was not assumed when the Financial Plan was made). Otherwise u can check every 5 yrs to see if ur Financial Plan needs a complete overhaul.
madhu asked, Hi, I am investing thro 25k in ICICI lifestage pension,10k in ICICI life time super pension,10k in Birla sun life,12k in Sahara life insurance, 20k in LIC market plus,25k in LIC astha. is my porfolio good or need to change? thanks in advance,
Vetapalem Sridhar answers, Hi Madhu, it seems all ur investment r happening in Insurance policies. I think it is time that u seriously consider re-planning ur investments. Spend some time and effor to get to know other investment options. Stop further allocation to ULIPS. Build some money into bank FDs and start a SIP into Equity Mutual Funds.
mukeshdagar2 asked, i have rs. 1000000 i want to invest this amount in kvp am i right if i am wrong please tell me which is befits investment for me peoperty /share/kvp or other
Vetapalem Sridhar answers, Hi Mukesh, this is a sizable sum. It does not make sense to invest the entire amt into KVP. It would be wiser to split and invest the money into debt and equity. For the debt part u can consider PPF in case u already hv one, or then a Bank FD. For the mutual fund u should look at a portf of diversified equity funds. Invest with a 5-7 yrs horizon.
neel asked, Hi Sridhar, I am making investments through SIP in the following mutual funds with amounts as mentioned below: Reliance Diversified Power Sector (G) 4000 SBI Magnum Contra - G 4000 HDFC TOP 200 3000 DSP ML TOP 100 Equity 4000 HSBC Equity - G 3000 Canara Robeco Income (G) 1000 Sahara Growth 4000 What would be your suggestion? Have I made the right selection of funds? Kindly let me know. Regards
Vetapalem Sridhar answers, Hi Neel, the portf looks gud. Continue the SIPs and remain invested with a 5-7 yrs horizon.
Sachin asked, Hello Sir, I just recently sold a property and have 10L to invest, should i invest it in one go or is there a better way like put in FD and invest in SIP etc.
Vetapalem Sridhar answers, Hi Sachin, if u have a long enough (7-10 yrs) horizon, then how u invest into the mkt should not matter. U can look at a mixed strategy. U can start with 2L lumpsum investment now. Say around 5L u can allocate thro SIPs. The rest can be invested as lumpsum in tranches over time.
pradnesh asked, Our Joint income is around 45000 per month. we have four depandable on us (parents). our personal saving ratio is around 70 % which We invent in goverment bonds and LIC. will u please suggest some portfolio of investment basically with moderest risk considering our average age 28 and our parent age 58. we areinterested to purchase the home of around 1800000
Vetapalem Sridhar answers, Hi Pradnesh, both of u should take up adequate TERM Insurance cover. U seem to save around 30K p.m. U will need to have close to 2-3L amt for downpayment to buy a house. This money should be built thro ur savings. Also do build up some funds into a bank FD to take care of any emergencies. Also, it is important for u to allocate some money towards equities to build wealth for u over the long run. So once u hv taken care of the above, u can start of SIPs with a part of ur savings.
raj2 asked, Hi I am 35 Yr Old I do have following investments planning right now LIC Jeevan Anand 21000 p/a LIC endowment policy 5000 p/a LIC MArket Plus 10000 p/a HDFC standard Yougn star policy 15000 p/a Started investing in following SIPs in Mutual funds Kotak 30 Equity Scheme - Growth = 5000 per month Franklin India BLUECHIP FUND-GROWTH = 5000 per month HSBC Equity Fund - Growth = 5000 per month HDFC Mutual Fund Blue Chip = 5000 per month Templeton India PENSION PLAN-GROWTH = 2000 per month Want to know whether my current investment plan is ok or not What will be other better options i can look out for investment in current situation
Vetapalem Sridhar answers, Hi Raj, u seem to saving and investing a gud amt. Over time exit Templeton Pension Plan. Rest funds r gud. Continue with existing ULIPs for their full tenure. Re-evaluate LIC Jeevan Anand and Endowment. Take up an adequate TERM Cover. Also do build some amount of savings into a Bank FD.
Uma asked, Hi Sridhar, please tell me whether this is the correct time for clearing housing loans or not, whether we should wait for some more time.
Vetapalem Sridhar answers, Hi Uma, it is best to continue to pay house loans as per schedule. Any additional savings should be allocated to build wealth for ur future. This invested savings is always available to u for prepayment of the H/L in future. So it is better to maintain liquidity at ur end and get into the habit of investing now itself, rather than waiting to start investing till ur house loan is completely paid off. Also u can enjoy the tax benefits of ur Housing loan.
menar asked, Dear Mr. Sridhar, I have started SIP of 1k each in following diversified MFs.i.e Birla Sunlife Frontline Equity, Sundaram Select Focus, DSPBR Top 100, HDFC Top 200. Pls. evaluate the same and advise.
Vetapalem Sridhar answers, Hi Menar, the portf looks gud...continue with it.
charu asked, am investing in JM tax saving as SIP. is it correct to invest inthis or shall I change to some other tax saving plan of SBI? Please advice
Vetapalem Sridhar answers, Hi Charu, u can look at options like HDFC Taxsaver and Sundaram Taxsaver as more suitable options.
mkr asked, I have invested in Franklin smaller and midcap fund started as closed end fund, has it become open ended,is it advisable to contiune in that fund?
Vetapalem Sridhar answers, As u hv remain invest for a long time, it may be a gud idea to hold onto it. In the next bull cycle when mkts go above previous higher, small and midcaps would hv risen substantially. It maybe be a better strategy to exit then.
Vetapalem Sridhar says, Thats all for now Friends! Will catch up soon to answer ur queries......
Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at firstname.lastname@example.org.