Beat the inflation, invest wisely

Investment Are you always at a loss while planning your finances?

Are you aware of the investment options available in the market? How best can you plan your finances?

What are the crieria for evaluating an investment option?

Are mutual funds profitable investment options? When and how should one buy mutual funds?

In an hour-long chat on rediff.com, financial planning expert Sailesh Multani offered some valuable tips. Here is the transcript:

Sailesh says, Hi, goodafternoon and welcome to this chat session.

NageswaraRao asked, I am getting my take home salary is around 1 lac. saving around 10k per month as Insurance and ULIPS also PF goes to 16k. can you please suggest me to manage my finance. I am planning to invest 50k per month.
Sailesh answers, at 2010-07-15 12:59:54Hi, first identify your investment goals what will you finally do with the money you make. Have a clear idea of your investment goal, the time period within which you wish to achieve your goal and the risk you are willing to take. Accordingly decide your asset allocation (i.e. the mix of equity, debt and gold) based on your risk profile. In other words, your investments should be guided by your investment plan. Having an investment plan in place for each financial goal is a must without which you run the risk of not meeting your goal. Since financial planning is a specialised activity. I would recommend that you take help of a professional and competent investment planner/advisor.

Phil asked, Which are the best Mutual funds for SIP at the moment
Sailesh answers, Hi, there is no such thing as a best mutual fund. You should invest in a mutual fund that is best suited to help you achieve your investment goal within the stipulated period and in line with your risk appetite. If you are long term investor (with an investment horizon of 5 years and more) and willing to take high risk, then diversified equity funds are ideal for you. If your horizon is less than 5 years then a combination of equity and balanced funds should considered. Equity funds that I recommend include HDFC Equity Fund, DSP BR Equity Fund and Fidelity Equity Fund.

Atul asked, Hi, i have ICICIPru UlIP life insurance for ovr 4 yrs now. is it a good option to come out now? coz i dnt see much return in it...20K/Yr
Sailesh answers, hi, ULIPs typically take 7-8 years to break even, This is mainly on account of the high administrative cost that is deducted from the premium on the initial 5 years. Unfortunately this is not disclosed to the investors by the agent. And guess what? A large portion of the cost deducted from your premium is the commission paid to the agent. Hence my recommendation is never for ULIPs. Since you have already paid the premiums for 4 years, you have no option but to continue paying the same. Surrender the policy when you start making money.

Patricia asked, Hi.... I would like to know what would be the best way to invest Rs.10000 today as an investment option with moderate risk?
Sailesh answers, hi, the best investment for someone with a moderate risk is balanced funds. these are mutual funds that invest 65% and more of the total corpus in equity and the rest in debt. Your investment horizon should be 3 years to invest in these funds.I recommend HDFC Prudence Fund to investors

rsm asked, I have invested through sip4000 Rs in hdfc top 200,1500 UTI opportunities fund ,2000 ICICI discovery ,2000 Fidelity Equity and 2000 in Reliance Equity opportunities fund. My investment will be for at least 5 years .I need the money for my little daughters wedding.I am 41 years of age .Plzadvice if I couldinvestthrough sips in other schemes I can invest another 5000 . Thnak you
Sailesh answers, Hi, my vote is for HDFC Top 200, Fidelity Equity Fund and ICICI Discovery. I do not recommend Reliance or UTI funds. You can consider DSP BR Equity Fund. Continue with the SIP till your daughter gets married. Keep reviewing your portfolio to ensure that your returns are on track.

MultaniSailesh asked, Hi I am 31 year old not married. Having 3 LIC polices monthly and quaretley basis. My monthly salary is Rs.20,000. I have 4LAK FD in my SB Account from past 2 years. Also there is available cash balance of 1 lakh. Now guide whether should go for Fixed deposit or should I invest in MF or Govt bond. pleas suggest
Sailesh answers, hi, you are overly exposed to debt. Since you are young, you should be investing a larger portion of your savings into equity funds. Equity funds are the ideal investment vehicle to help you reach your long term goal like retirement. Always maintain a balanced portfolio comprising of equity, debt, gold and real estate.

vadiraj asked, Is Gold or a best investment option.Please clarify me.
Sailesh answers, hi, in my opinion gold is a must in every portfolio. One should have 10-15% allocation to gold. Gold acts as an insurance in times of crisis. The returns from gold have typically been higher than inflation. therefore it also acts as a hedge against inflation. Invest in gold through the ETF route

Investor asked, Hi, I am invested in Birla SL Dividend Yield Plus, ICICI Pru Discovery , ICICI Pru Dynamic Plan, DSP BR Top 100, DSP BR Equity Fund and Religare contra fund. All are in growth options. I am invested via SIP route from past 7 months and wish to hold the investments for 3-5 years term. Is the portfolio good ?
Sailesh answers, hi, except for Birla Dividend Yield and Religare Contra, my vote is for all your funds in the portfolio

Archi asked, My total income per year is 3 lacs. I had taken 10 lacs home loan. can you please suggest me how much I can save and what should i do to save my tax?
Sailesh answers, hi, the amount of savings will depend on you. It is always prudent to save as much as you can. The thumb rule is that an individual should save 40% of this total income. Study and analyse your spending pattern to se if you can save more. for tax saving you can claim benefit under section 80C and deduction in respect of interst pais on your home loan

bala asked, what are all parameters, have to looked up on, when going for life insurance policies except IT deductions?
Sailesh answers, hi, first and foremost you should only go for Term Plans. these plans offer higher sum assured for relatively lower premium. Dont choose insurance to plan your financial goals. For meeting your goals you need to invest in equity, debt and gold. the best way to invest in these asset class is through the mutual funds. Compare the premiums of all the term plans. Look at the other benefits that come with them. Lowest premium is not always the best. Also, look at the claim settlement record of the company.

Nitin asked, Hi, I get 50k as my take home salary. I can easily pay a Home Loan EMI of around 20k. Still, I am not in a mood to get into any property affair. I feel other investments, such as mutual funds, NCDs and fixed deposits more suitable. What is your say?
Sailesh answers, Hi, I agree that real estate property should correct in a major way. The stock marktet corrected and ran up but property prices are at dizzying heights. I do not recommend investment in real estate at this juncture. In my opinion its a bubble waiting to burst. Invest in equity markets through the mutual funds. Banks FDs and Gold ETFs are also an option one should consider.

ac asked, Hi, my daughter is 1 yr old and i want to accumulate 20 lakhs in 15 years for her higher education....kindly sugggest me the best option how to accumulate and with monthly investment amount.
Sailesh answers, hi, your investment horizon is 15 years. The best investment is equity funds. Invest in large cap biased diversified equity funds. Invest via the SIP route.

raj singh asked, can you tell me best tax saver mutual funds ,I want to invest in them
Sailesh answers, hi, I recommend Fidelity Tax Advantage and Franklin India Taxshield among others.

timus05 asked, How can i invest in gold without having to keep physical stock of gold & what is the cheapest method to buy gold ?
Sailesh answers, hi, the best way to invest in gold is through the Gold ETF. Every unit of Gold ETF is backed by half or one gram of physical gold. The units of Gold ETF are held in demat form. Hence, there is no botheration about safekeeping of gold that is associated with physical form. Also, the gold held by Gold EFTs are backed by physical gold of 0.995 fineness which is secured and insured. Gold ETF score on the wealth tax front too; they are not considered as wealth for Wealth Tax purpose. Physical gold is considered as wealth for wealth tax purpose. Also, Gold ETFs are treated as long term capital assets if held for more than 12 months from the date of purchase. One can avail of the indexation benefits claim concession from long term capital gains tax, if any. Don't rush in to buy gold. Invest a small a sum every month. Spread your investments over the next 6-12 months.

Amitgoel asked, I have invested in these funds .Can you please let me know ur view on my selcetion of funds 1)IDFC Mutual Fund 2)HDFC equity fund 3)RELIANCE REGULAR SAVINGS FUND -EQUITY PLAN GROWTH OPTION 4)ICICI Prudential Focused Bluechip Equity Fund Retail Growth 5) DFG ICICI Prudential Discovery Fund- Growth
Sailesh answers, hi, you need to restructure your portfolio completely. In my opinion you do not have the flagship funds in your portfolio like HDFC Equity Fund, DSP BR Equity Fund, Fidelity Equity Fund and Franklin India Bluchip Fund. These funds have an impressive track record of over 7 years delivering an average annaul return of 20% and more. Add these funds to your portfolio first and then consider any other fund.

Investor asked, Hi, Thanks for the advice. Which MF you will suggest for a shortr term ? I heard that MidCaps are a good buy for the shorter term ? Which Mid Cap to opt for ?
Sailesh answers, hi, all equity funds including midcap funds need time to grow and the ideal time horizon is 5 years. For the short term (2 years and less) the best option in today's time is Bank FD. If you really want to invest in midcap then increase your horizon to 5 years and be ready for higher volatility. I recommend Sundaram BNP Paribas Select Midcap to investors.

bipin asked, which kind of Debt fund one should invest to keep capital intact?
Sailesh answers, hi, in today's scenario I can only think of liquid funds that can ensure that your captial remains intact.

udare asked, Hello Sir. Also i want to give a birthday gift to my wife, my budget is rs 25000 . should i buy gold or should i give some financial asset. what do you recommend?
Sailesh answers, hi, your wife will be more happy to get a birthday gift of gold from you! If you do not have gold in your portfolio then by all means go ahead and gift her gold. Invest in gold via the Gold ETFs. You can buy units of equity funds for her which of course have the potential to grow your money faster compared to gold. But it does carry more risk. Equity funds will build wealth over the long term and can be used as a part of retirement portfolio. The choice is yours!

LULLA asked, i want to invest fr 3 yrs can i invest in ft bluechip and hdfc prudence
Sailesh answers, hi, yes go ahead and invest. Invest more in HDFC Prudence Fund

gsg asked, Is it right time for redemption of equity fund?
Sailesh answers, hi, redeem your equity fund if your goal has been achieved. Also if your asset allocation needs to rebalanced because of the tilt in favour of equity, then go ahead and redeem your fund; otherwise stay put.

mitz asked, i need to invest 22L for 1-1.5 yrs. Please suggest me some investment options where i can get max return
Sailesh answers, hi, your objective here should be mor of capital preservation rather than maximum return. The best investment for 1.5 years according to me is Bank FD. Anything that is market linked can result in loss of capital.

MONEY asked, , I am investing Rs 1000 each in HdFc top200,Sbi Magnum contra,Uti Wealth Builder seriesII fund.Time horizon is for 7 years.Should i continue with the same or switch to some other funds.Kindly suggest any funds.
Sailesh answers, hi, Except for HDFC Top 200, redeem all your other funds. you can invest in the funds earlier recommended by me.

udare asked, thanks a lot sir. i am planning to buy a commercial property for my wife since she is a dcotor. do you recommend i take a huge loan and buy it now or accumulate savings and buy it 5 years from now.
Sailesh answers, hi, the answer depends upon how urgent is the need for a commercial property. If its very urgent then you have no option other than to take a loan. If you can wait for 5 years then by all means start accumulating the funds required for the same. Do not forget to factor in the inflation @ 10%. Invest in a mix of equity and debt. A 50:50 allocation should be ideal

akhandk asked, Hi! I have invested in following mutual fund, pls help which all I shd hold or suggest few good one - ICICI Infrastructure (G), S BNP Capex Opp (G), JM BASIC FUND (G), JM EMERGING LEADER FUND (G) , KOTAK OPP (G), SBI - Magnum Contra (G)
Sailesh answers, hi, in my opinion you should exit all the funds you current have in your portfolio. You may consider investing in funds with a porven track record of more than 5 years, the ones recommended by me earlier in the chat.

rajpalsingh asked, is MIP good for short term 1 - 2 years? Which one do you suggest?
Sailesh answers, Hi, Monthly Income Plans (MIPs) are offered by most mutual funds in the country. MIPs are hybrid funds with 10%-30% exposure to equities and balance to debt. While the debt portfolio is designed to generate regular income and add stability, the equity portfolio aims for increasing the overall returns. Since there is an equity component, the investor should be willing to take some degree of risk. Also, the returns are not guaranteed or assured unlike a bank fixed deposit. Although the name Monthly Income Plan, monthly income by way of dividend is not assured. Dividends are paid subject to profits made by the fund. If you are opting for dividend option, then quarterly dividends are ideal. If you are not aiming at generating regular income, then growth option is the best. These funds are treated as long term capital assets if held for more than one year from the date of investment. You can avail of indexation benefit to reduce your long term capital gains tax on the appreciation, if any. The ideal investment horizon to reap the benefit of investing in an MIP is 18-24 months. Expected returns should be in the range of 8%-10% p.a.

tosarvan asked, Hello, I have real estate property worth 36L (only land , no rentalincome), apartment from the house I live. I am planning to retire in another 10 years. My current take home is 80K. Can you please suggest me, how much money I need to retire & how do I utilize my real estate investments after my retirement. Thanks.
Sailesh answers, hi, you need to sit down and draw a detailed retirement plan for yourself. Your aim should be to build a corpus that will ensure a comfortable life post retirement. The corpus should be large enough to generate regular and assured income to meet all your post retirement expenses. It should last your life time. I would recommend that you take help of a professional financial planner who can help you with the same. The real estate can be used to generate rental income. Or you can sell the same, invest the proceeds into FD and earn regular interest on the same.

mvd asked, I have ICICILifetime pension plan of yearly premium 10k. My portfolio amount is 54k against premium paid 50k for 5 years. I've stopped paying premium since last 2 years, because of not much benefit. Should I continue to pay premium or shift to other pension plan? which one? My age is 31 years.
Sailesh answers, hi, since you have already stopped paying the premium for the past 2 years it doesnt make any sense to restart paying your premium again. In my view surrender your policy and reinvest in equity funds. Equity funds are ideal for building long term portfolios for objective such as retirement. In my view taking a pension plan to ensure a comfortable retired life doesn't help.

chalu1 asked, shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar? shall i invest in gold or buy mcx sugar?
Sailesh answers, hi, in my view retail investors should invest only in gold when it comes to commodities. gold is a precious metal that never loses it value over the long term. In my opinion while the gold will shine forever, sugar may sooner or latter turn bitter. So go for Gold!

Sailesh says, We have run completely out of time. I thank you all for participating in this chat session. If you have any questions which were not answered during the chat, you can mail them to me at: sailesh.multani@rediffmail.com.