Is it a good idea to invest in a debt fund or fixed deposit?
Is it healthy to invest in real estate in the present scenario?
Is it better to invest in bank deposits or invest in equity mutual funds at present with a 2-3 year investment horizon? When will the market bottom out or when can you start investing in the stock market?
Are unit linked insurance plans a good bet for the future?
To answer these and various other money and invetsment related queries, financial planning expert Vetapalem Sridhar, hosted a chat with GA readers on December 31.
For those of you who missed the chat, here's the unedited transcript:
dd asked, what is the maximum limit that i can claim under Sec 80C for a jeevan tarang policy of LIC?
Vetapalem Sridhar answers, at 2008-12-31 13:20:12The maximum limit u/s 80C is 1L. Under this section there r a number of other investment options tht qualify - ELSS MFs, Postal Savings, Insurance, ppf, etc. Jeevan tarang is an insurance policy.
venkatramprasad asked, is it good idea to take the jeevan nidhi policy of LIC which has a earlier vesting age of 40?
Vetapalem Sridhar answers, Dear Venkat, first and foremost u should be clear on wat is the objective of investing or need to be fulfilled. If u r looking at an Insurance cover, then a TERM plan would be the best option. If u r looking at investment then a mix of equity and debt is advised. The returns with respect to the long term horizon of investing in Jeevan Nidhi policy is comparitively quite low. There r better solutions available.
sharmila asked, Good afternoon. My working with a reputed stock broker has very bitter experience. Pl suggest how to go ahead with on line share transaction. Secondly kindly suggest should investment in Gold MF is a good option? Regards,
Vetapalem Sridhar answers, Dear Sharmila, when dealing with investments and money it is your primary responsibility to take care that things r moving as u desire. When opening a/c's with brokers u r made to sign a comprehensive agreement with them which ensures that they cover themselves very well. For online Transaction, u can consider HDFC Securities, IDBI Paisabuilder or ICICI Direct. Here cost maybe slightly higher. U can get in touch with the respective banks. There r a number of other brokers too who have online facility. If u plan to build gold over time, then it does make sense to invest into Gold MF. It is safer and easier to manage and costs r lower.
StockNvestor asked, Dear Sir, I had invested in the below mention stocks when the market fall below 7k in October 2008, will stay invested for 5-7 years or more than that,pls let me know the future prospect of the stocks
according to you which stocks from the list are going to be the multibagger in the future
..mine dream is to earn crores from the stocks that's the reason I had invested so much amount
from the below list which are the stocks that can make mine dream fulfill
30k RAJESH EXPORTS
.1000 GVK POWER
.1000 KS OILS
1000 PRAJ IND
.100 GMR INFRA
.100 SESA GOA
.100 JP ASSOC
Vetapalem Sridhar answers, U have invested at gud levels in the Mkt. Most of the stocks tht u have invested in are midcap stocks. It does make sense to build ur core portf consisting of large cap stocks. With a 7 yrs horizon most of the stocks u hold will be multibaggers.
Susan asked, My friend has just joined a new co- however the new company does not have any PF benefits- can you advise on to invest (long term) the PF money which she got from the old co. so that it will come in useful when she retires. She still has about 15 yrs of service left. Thanks
Vetapalem Sridhar answers, Hi Susan, 15 yrs is quite a long. The best place to invest with such a long term horizon is equities. Now that mkts r at lower levels, I would suggest that she should invest the money in 4-5 chuncks into diverisified equity MFs like HDFC Growth, Reliance Vision, Sundaram Select Focus, DSPML Top 100, etc... If she plans to use part of the money within 2-3 yrs, it is best to do a FD of that Amt.
Rajasekhar asked, How long can we expect to see raise in returns of Gilt funds
Vetapalem Sridhar answers, Hi Raj, returns from income/gilt (debt funds) will be high as long as RBI keeps reducing the rates. Return from such funds has an inverse relation with interest rates. We can expects rates to come down further over the coming few mths. Once interest rates have bottomed out it makes sense to shift money into short term debt funds.
shourieacs asked, Hi Sridhar, What stocks can u recommend as best "buys" with 2-3 years perspective. I want to invest for long term, but want to be sure that they are fundamentally good stocks
Vetapalem Sridhar answers, Hi, in such markets it is best to invest in the best companies in our Economy. The Index (Nifty/Sensex) is representative of the best companies. These will be the stocks that will lead the recovery in the mkts once there r signs that the economy is on path to higher growth. Banking and some Infra companies can be looked at attractive options among them.
Ash asked, Hi, I am planning to buy a flat worth 16lakhs in one of the prime areas in Bangalore... I have still not yet planned for any financial investments as of now... Is timing the market and buyinh Tax saving ELSS seem to be a good option or better to go for SIP? PLease let me know
Vetapalem Sridhar answers, Dear Ash, if u r planning to buy a flat in the near future then u will need money for downpayment. If u invest money in a ELSS MF, it will get locked in for a period of 3 yrs. If u r having surplus money u can go ahead with investing money into a ELSS MF at current levels without worrying about timing the mkts.
Deepali asked, Dear Sir, Todays market scene is worst. I have invested in ICICI Prudential Pension plan with maximizer. But right now the value of my invested money is 40 % less than what I have invested earlier.Plz help me , Should I continue to invest in this plan of ICICI Prudential.
Vetapalem Sridhar answers, Dear Deepali, u seem to have invested in the equity option of this ULIP. It is important that u continue to invest during the falls in the mkt as it enables u to buy units cheaper. Over time when mkts recover u should make reasonable returns.
bp asked, Wish you a Happy New Year! I have invested a lot in Franklin Templeton Prima Fund with dividend reinvestment. Over the years I have got handsome dividends. Should I exit it or hold on? Thanks
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Beginner asked, I would like to invest Rs. 45000 in another 2 to 3 days for tax saving purpose. Can you suggest the best ELSS MF for this purpose?
Vetapalem Sridhar answers, Hi, u can look at Sundaram Tax Saver and HDFC Tax Saver as options.
pava asked, Is it good idea to invest in Debt fund or Fixed deposit?
Vetapalem Sridhar answers, Hi Pava, the choice of investment would depend on which tax bracket u come under. If u r looking at pretax returns and ur horizon is around 1 yrs a debt fund (income/gilt) maybe a better option as compared to a bank FD. If ur horizon of investing is 3 yrs odd then a bank FD maybe a more suitable option.
Nidhi asked, I am 29 yrs old & my daughter is 4 months old with 32K take home salary I pay 30K yearly LIC,PF1880/month.Kindly suggest good option for education of my daughter.
Vetapalem Sridhar answers, Dear Nidhi, U will need major funds for ur daughter at her age of around 17 yrs. This is a very long term horizon. Equities have the potential to deliver the best returns over this horizon. I would suggest that u do a SIP into a Diversified MF like HDFC Grwoth, Reliance Vision, etc. The investment should be done in the name of One Parent, and the second holder should be the daughter with the other parent as the guardian. Also read thro the following link for futher info: http://specials.rediff.com/getahead/2007/aug/07sli1.htm Investing for children A Slide Show, click NEXT to read thro.
romi asked, I stay in china & want to invest in share market & by/sell on line Pls advise is it safe & how d I proceed ? tks
Vetapalem Sridhar answers, Hi Romi, if u have a bank a/c with one of the new generation banks (ICICI/HDFC), they do offer an online Equity Broking Platform. It should be safe. U can talk to such a bank to proceed further. Alternatively u can invest into equities thro the Mutual Fund route.
kamakshi asked, we are looking for a insurance converage for our entire family...combined family income is 17L per annum.How much head of the family,my husband need to be insured which will also cover me and my mid?pls suggest
Vetapalem Sridhar answers, Hi Kamakshi, u and ur husband should consider taking up a TERM Insurance cover. The reason for Life insurance is to provide for the risk of death. It is to take care of any Financial Discomfort that a family may face due to death of the earning member. The amount of insurance for each individual depends on their Financial State. If u r already not covered for ur Mediclaim, u can look at taking up a Family Floater cover from ICICI Lombard or one of the general insurance players.
cheena asked, could you name some good diversified equity fund which I can apply online without paying entry load?
Vetapalem Sridhar answers, Hi Cheena, u can look at the following funds in the diverisified equity fund category - HDFC Growth, Reliance Vision, Sudnaram Select Focus, DSPBR Top 100, SBI Contra, etc. If u invest directly without going thro a broker, u can avoid paying entry load.
sweety asked, i want to invest my money for some limited persiod where could i invest it and which plan is best
Vetapalem Sridhar answers, By limited period if u r refering to a short term horizon of less than a year, u can consider putting the money into a bank FD.
Manoj asked, Hello, Bank FD's have traditionally been low risk, low return instruments but having burnt my fingers in 2008, I am very confused as of now. I continue to invest in FD's but I feel I am missing out on an oppurutnity in MF's/Equity. What do you suggest I should in 2009 ?
Vetapalem Sridhar answers, Dear Manoj, a lot of investors would be in the same state that u r in and similar thoughts would be going thro their minds. The fall in value of investment makes us experience tremendous discomfort. It tests ur patience and convictions regarding ur investments. It is extremely important that u learn from ur experience in a positive way and become aware that equity investing is for the long run and not to make a quick buck. It is a choice that each individual has, to learn from experience and become better investors or then due to fear miss out on the great opportunity that equity as an investment option has to deliver. I would STRONGLY suggest u to contiune investing via a SIP into MFs/ Equities and remain invested with a 5-7 yrs horizon.
Dinesh asked, Sir, I own the following Mutual Funds: 1) SBI tax saver 2) ING vysya tax saver 3) SBI Contra 4) Reliance Vision 5) Reliance Power Fund. I am having SIP for HDFC Balanced and SBI Tax saver. What should i do with existing schemes and SIPs? should i switch to any other scheme ?
Vetapalem Sridhar answers, Hi Dinesh, continue with ur SIPs. U can over time just keep one tax saving ELSS fund and add a large cap diverisifed fund like HDFC Growth or Sundaram Select Focus in place of HDFC Balance Fund. Remain invested with a long term horizon.
sunil asked, is it healthy to invest in real state in present scenario?
Vetapalem Sridhar answers, Dear Sunil, with interest rate softening it seems that over the coming few mths real estate prices may bottom out. It is unlikely that during the next yr real estate prices would rise substantially anywhere. As an investment option u should carefully evaluate the property that u get into. If u place to stay in the house u buy u can start looking for deals from now. Over the 3-5 mths whenever u find a suitable deal, I would suggest go ahead with it.
Johnny asked, hi sir, I am a life science graduate doing PhD. i am getting some stipend. I don't have PAN card! Can I Invest in Stock market if I get a PAN card? IF, yes, I what should I invest?
Vetapalem Sridhar answers, Dear Johnny, u cannot invest into direct equity or into Mutual Funds without a PAN card. It is a primary requirement before u invest. As u r new to investing into equities i would suggest u to consider investing via a SIP into a diverisified equity MF like HDFC Growth, Reliance Vision, etc.
kunal asked, Is there any chance that Home Loan interest rates will increase in next 1 year?
Vetapalem Sridhar answers, Hi Kunal, home loan interest rates over coming few mths r expected to go down further. It does not seem likely that it would rise during the next yr or so.
chris asked, Is it better to invest in Bank deposits or invest in Equity mutual funds at present with a 2-3 year investment horizon?
Vetapalem Sridhar answers, Dear Chris, if u need to use the money in 2-3 yrs time a bank FD would be a more safer option. If u can increase the horizon to 3-5 yrs, then u may consider equity Mutual Funds as a better alternative to bank FDs.
Sam asked, What are the options to save Income Tax for People who are already earning more than 10 Lacs/Annum?
Vetapalem Sridhar answers, Other than sec 80C, u have the option of buying a property by taking a housing loan. The interest component of the housing loan can be offset against ur income subject to certain rules. U should focus more on growing ur Weatlh by investing wisely. Returns earned thro Long Term Gains in Equity does not attract an tax as per current tax laws. Wealth is built by investing rather than by saving.
deepakkumar asked, Is there any clause to save income tax by giving the loan to wife (wife not working) (article on this was published in amar ujala 15 dec 2008, but no clauses mentioned there)
Vetapalem Sridhar answers, Hi Deepak, there can be no commercial consideration between a Husband and a Wife. Spend ur time on learing more about investing wisely instead.
saleem asked, Hi, do you any idea where the market will bottom out or do you think its right time to invest.
Vetapalem Sridhar answers, Dear Saleem, it is not possible to say with certainty how mkts will move. People can only speculate or make an informed guess about the levels that the mkts would go to. It is best to not fall into the habit of trying to Time the mkt. A more sound way to build wealth over the long run is to invest regularly with discipline and remain invested. A suitable Asset Allocation strategy if implemented would ensure u success in ensuring that u meet ur genuine long term Financial Objectives in life.
rtyg asked, SmartKid - New Unit Linked RP is good plan or bad for futer
Vetapalem Sridhar answers, Hi, it is better to build funds thro investing via a SIP in the Mutual Fund. The costs in a ULIP is greater. In case u plan to invest via a MF, then it is important that u get urself an adequate TERM Insurance Cover. For a TERM Cover u can look at options like SBI Shield, Reliance TERM Plan, ICICI Lifeguard, etc.
cooljassi asked, Hi Sridhar Last year I invested 1 lacs in ULIP plan of LIC and got units @15 and now NAV is at 7.5. Should I deposit my second year premium or exit? Plssssssss Repppppppplllllllyyyyy
Vetapalem Sridhar answers, U have to invest for a minimum of 3 yrs in case of a regular ULIP policy. Otherwise u will loose a lot of money. Considering this factor, it is wise to continue to keep investing. Over the long run ur average cost of investment will be lower and u will be able to make reasonable return.
sandy asked, for elss what shud be option dividend or growth or dividend reinvestment
Vetapalem Sridhar answers, Dear Sandy, investing in growth option in Mutual Funds is recommended. In case of a ELSS fund NEVER invest in a dividend reinvestment option. To have further calrity on this matter I suggest that u read thro the following link. http://www.rediff.com/getahead/2007/aug/09fund.htm Dividend Vs Growth....
Babloo asked, Dear Sir, I am working overseas and my CTC per year is approx 25 Lacs. Almost all my savings are in form of bank deposits. I have an insurance coverage of 10 Lakhs which is a term insurance. I am looking ahead for insurance coverage of atleast 25 Lakhs. Should I go ahead for ULIP insurance policies as I am looking for a long term investment which provides insurance coverage too. What losses do I have if I stop paying premium after Three years. The insurance companies say that the insurance is still covered. How godd and true is it??
Vetapalem Sridhar answers, Dear Babloo, if u r not working in a harzardous job, then u should consider getting ur self a TERM Cover. I think u may need to take a far higher cover than 25L. Plz get quotes for SBI Shield, ICICI Lifeguard WROP, Reliance Term Plan. A ULIP would work out more expensive in the long run. If u stop paying after the 3rd yr, then mortality charges r deducted from the balance each yr. The day the entire investment amt is consumed by this charge, the policy lapses. So if ur intial installments r reasonably high, then the cover may last for the entire duration of the policy.
sasikumar asked, hi sir, My self sasi working with a indian construction company getting salary of 12lac per annum, i want to invest in mutual & shares. i have lumpsum of 2 lac at present and monthly i want to invest 20 Thousand monthly, suggest me sasi
Vetapalem Sridhar answers, Dear Sasikumar, how secured is ur job. U should maintain around 5-6 mths worth of expenses in a bank FD. Once this money is in place, u should build another fund (u need to work out how much amount) that can be used in times of emergency. Once these r in place u can look at starting ur investing with a long term focus to build wealth. U need to work out a suitable asset mix that u would build in future. Based on this u can select different investment options. For money that u can definitely invest for a 5-7 yrs horizon, u should consider investing into equity oriented MFs via the SIP route. U can look at funds like Reliance Vision, Sundaram Select Focus, HDFC Growth, DSPBR Top 100 etc.
sampunein asked, Hi! I want to invest Rs. 50,000 for 15 years. I want safety for my money and reasonably good returns. Which MF/Equity shares you will suggest ? Approximately how will be the returns per anum??
Vetapalem Sridhar answers, Hi Sam, if u r OK with volatility in the short run, then u can invest the money into Equity MFs. 15 yrs is a long enough period to invest and the risk in equity investing is negligible over this tenure. Over a 15 yrs u can expect a 13-15% annualised return via equities. Ur 50K can grow to around 3-4L with such a return.
MS asked, Hi, I have the following investments in MF SIP. in the current scenario should I continue or reduce. Is my portfolio a good mix./(1)DSP BlackRock India TIGER Fund Regular Plan - Dividend (Rs.20000) /(2)Sundaram BNP Paribas Select Midcap - dividend (Rs.400) /(3)HDFC Equity Fund - Dividend(Rs 4000) /(4)Birla Sun Life Frontline Equity Fund -Dividend (Rs.4000)/(5)RELIANCE GROWTH FUND-RETAIL- DIVIDEND (Rs 4000)
Vetapalem Sridhar answers, Hi MS, ur portf consists more of a mid cap focus. A strong core portf is missing. DSPBR Tiger fund is primarily a infra fund. Sundaram Midcap, HDFC Equity and Reliance Growth have a midcap bias. It makes sense to build a core portf consisting of large cap diversified MF. Continue to remain invested in the funds. Invest future SIP into funds like HDFC Growth, Reliance Vision and Sundaram Select Focus to build balance into ur portf. Over time consolidate ur midcap funds. Also rationalising the amt of SIP to TIGER funds is suggested.
ranava asked, hello , can I claim tax rebate for second home build by taking home loan, my first house loan is NIL now (both loans not at same time)?
Vetapalem Sridhar answers, For second home u can get tax benefits. But this will form part of the heading of profit/loss from house and property. Here for 2nd house u will have to consider rental income from which u can deduct entire interest amt paid for the housing loan (and not just 1.5L as in case of self occupied property). If interest component is more than rent recd, u can offset this amt from ur other income thereby reducing ur overall tax liability.
pankajrathod asked, I have invested Rs. 1,50,000 in stocks and right now i am at loss of 50%, What should I do?
Vetapalem Sridhar answers, Hi Pankaj, if the companies that u have invested in are gud companies, I would suggest that u remain invested. The Sensex has fallen by more than 50% and hence most companies too would have fallen to a great exent. Over time as the mkts recover, if the companies that u r invested in are gud they too would recover. U have to wait patiently with a 3-5 yrs horizon for this to happen.
Vetapalem Sridhar says, Thats all for now friends! Wish u a Happy and a Prosperous New Year Ahead.