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'Investing Rs 70K per annum can make you a crorepati'
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October 30, 2007

Is there any quick fix to become rich in a short time span? What are the habits/ traits required to generate wealth for you and your family?

Is it possible to become a crorepati in your lifetime by investing Rs 70,000 per annum? Which are the best mutual funds that can help you make money in the long-term?

In a chat with Get Ahead readers on October 26, financial planning expert Vetapalem Sridhar answered these and several other queries related to financial planning for you and your family.

For those of you who missed the chat, here is the transcript.

Part I: Want to achieve financial security? Here's how


shikhar asked, hi i am shikhar from bareilly. please tell idea available at the aga of 23yrs with investment money of Rs 10,000/-per month.

Vetapalem Sridhar answers, Dear Shikhar, there is no quick fix idea to create wealth. To create wealth u should invest regularly (DISCIPLINE), allow the magic of compounding to play its role (PATIENCE), not let emotions affect decision making (FOCUS) and be aware about your money and wat is happening to it (EFFORT). U have to do very few things, but do them right to generate wealth. U r starting young, so u have age on ur side. Pick 2 diversified Mutual Funds and start an SIP into them with a 15 - 20 yrs horizon.


vero asked, Hello Sridhar. Last time you advised me to pick from value research 4-6 funds for a 20 yr period sip. I have selected the following funds; franklin bluechip, dspml equity, hdfc equity, reliance growth or sundaram midcap, magnum contra and icici dynamic. Please advice if it is acceptable to you or any changes are required before I proceed forward. Many thanks.

Vetapalem Sridhar answers, Dear Vero, It does work out to be a well rounded portfolio. There are 2 changes that I would recommend. Pick HDFC [Get Quote] Growth instead of one of the 3 large cap funds. In the midcap, do evaluate JM Emering Leaders fund before u take a decision.


Boman asked, After 1 year of investment and escaping the capital gains tax, if i exit from the mutual fund with the entire corpus, what is the implication on income tax? In the sense, would the corpus be subjected to income tax and should i delcare the money in my IT returns?

Vetapalem Sridhar answers, There is no income tax on the the coprus. But u would need to declare the money in ur returns.


raju asked, hi sridhar my monthly payout is Rs 15,000. can you tell me how should i proceed with an investments plan? when i am 37, i would like to get the monthly income of Rs 5,000. after 5 years is it possible?

Vetapalem Sridhar answers, Roughly if u invest Rs 6K pm into a diversified Mutual Fund for the next 5 yrs, and then start withdrawing 5K each mth at the end of 5 yrs, u should be able to continue this 5K withdrawal for ur entire life. But be aware that the purchasing power of this 5K will reduce over time.


luckychoudhary asked, i am earning 17000 per month and i have invested rs 35000 in elss and 20,000 in RDPSF.i have 02 SIP of rs. 1000 each. my annual contribution to LIC [Get Quote] is 19,000. i have 01 ULIP based pension plan of ICICI [Get Quote] for 10,000 per annum. please analyse my porfolio and suggest improvement measures.

Vetapalem Sridhar answers, Hi, 1. Take adequate Term insurance cover. 2. Instead of RD, allocate the same towards a SIP in a diversified MF. 3. In future consider stopping the ULIP and Pension plan in favour of Mutual Fund investments.


Daniel asked, Hello! I am a 24 yrs old software engg. I have 7 lakhs in cash now and can invest at least 25,000 every month. How can I make a crore in next 6 years?

Vetapalem Sridhar answers, 10-12 yrs would be a more realistic time horizon to reach ur goal with the type of saving and investing tht u r planning. In 6 yrs u should be able to reach 45-50L if u are able to grow the money at a rate of 15% annualised return.


piyush asked, hello sir i m 26 yrs of age earning around 20 l pa. i have invested in property and paying 35000 emi for loan of 10 yrs. i have also started sips worth 25000 a month. i have term insurance for 30lacs. going to be married soon. how can i further plan so that i work only till i m 45-50 yrs.

Vetapalem Sridhar answers, Dear Piyush, The info provided is not complete, but it seems that if u plan things properly u can achieve Financial Freedom by ur age 40 yrs. You can afford to invest a majority of ur savings towards asset classes like real estate and equities. U already seem to be doing that. Do not try to time the mkts and remain invested till u r age 40.


neha22 asked, hi sridhar intially with how much amount we can start investing? and which one is best either going for long term funds or short term funds?

Vetapalem Sridhar answers, Hi Neha, u can start investing in certain Mutual Funds with as low as Rs 500. Plz do check up with the Mutual Funds for the minimum that they accept. U will make gud returns if u invest with a long term focus, say 5 yrs or more.


Sophie asked, Hi Shridhar i hv recently started invested in the stock market, i earn 15000 pm, the intial money i invested was 15000 rs., i buy and sell scrips as soon as the prices is a little high i.e i keep the scrips for around 10-15days, is it the correct way or shud i keep my investment for a longer time? shud i be a short term player or a long term player?

Vetapalem Sridhar answers, U may be experiencing something called as beginner's luck. U can continue trading, but do not increase the 15K initial investment that u have made. If u r able to consistently grow this money for the next 3-5 yrs, then u would be among the few rare persons in this world who has such an ability. At the same time start investing into equities thro a SIP in a Mutual Fund, with a long term horizon -- 5 yrs and more.


HJS asked, For long term ..say 15years, are ULIPs ok as they provide both growth and insurance cover. Moreover you culd have enough money for needs like your child's education.

Vetapalem Sridhar answers, In very rare cases would you end up in a better state with a ULIP, when compared with the combo of TERM INSURANCE and Mutual Fund. ULIPs may prove to be better only if the fund mgmt charges (2 to 2.5% in Mutual Fund) is far less than that of the Mutual Fund. If Fund mgmt charges is similar, then ULIPs would definitely work out expensive in the long run.


Sushant asked, Hi I am 25 year old. now i am in a govt. organization for temporarily earning less than 10,000 per month. I have 4 members in my family and except me no one earns. Pls tell me how can i invest?

Vetapalem Sridhar answers, The need of the hour is to get a suitable TERM COVER. Govt employees have a tendency to put money blindly into tradition policies of LIC. Plz fight this tendency. At a later date when ur savings potential increase, start a SIP in a diversified Mutual Fund.


vasa asked, I wish to start investing in equity -- but friends are cautioning against as the market is too high. Is it safe to enter now - I do have a long term horizon of atleast 5 years, but it is for this reason that I am prepared to wait for 1 or 2 months if that would be better entry -- that is if the fall takes place within this period. If I do invest now, what kind of return I can expect in 5 year horizon? regards vasa

Vetapalem Sridhar answers, With a 5 yrs horizon u should be able to roughly double ur money (a return of 15% annualised). Timing the mkt is not a gud idea. keep 30% of the money aside, so that u can invest it as a lumpsum if the mkts correct. Of the remaining amount do a SIP. If mkts do correct put in all the residual money left and cancel the remaining SIP installments.


Sharat asked, Hi Sridhar, am 24 now earning 24000 per month and have a savings upto 2 lakhs. my question now is i have an education loan of 1.8 lakhs pending, but am in a plan to buy an individual house in my home town worth 20 lakhs taking a home loan.. what do you suggest repay my educational loan and wait one year to buy a house or keep both running parallely. and with a earning of 24k per month @ age 24 with 2 year work experience and working in a private software company am i eligible for taking a home loan? Thanks in advance.

Vetapalem Sridhar answers, If the existing Education loan is not affecting ur ability to borrow for the house, then the decision is upto u. But if the Amt of housing loan that u r getting is less due to ur existing Edu loan, it would make sense to prepay it.


priyanka asked,  Hi Sir, I am a woman and earn 40k/month in hand. I am 27yrs old - have LIC policy emi 13000, icici pru life - worth emi 18k, aprt from this have a home in faridabad pay emi as 27k/month. Please suggest some planning for me.

Vetapalem Sridhar answers, Hi, Insurance (other than equity based ULIPs) is merely a saving tool. It will not help u create wealth. Start a SIP into a Diversified Mutual Fund to create wealth over the long run.


Raj2156 asked,  Hi Sir, I am Raj, 27 yrs old. I earn 4.5 lakhs per annum. How can I invest and save my money so that I can get maximum tax rebate as well as accumulate wealth in next 10-15 or even 20 years? Also would like to know if there are options which give quick returns, with less risk involved. I can invest (spare) Rs. 70,000 per annum. How can I earn (or accumulate) Rs. 1 crore, and how long will it take (approx.) if I invest 70,000 per annum?

Vetapalem Sridhar answers, Investing for saving tax is not the correct approach. U should have an overall investment strategy of which tax planning is just a small component. Having said that, ELSS Mutual Funds would help u do both. Invest the 70K into an ELSS MF and remain invested for the next 10-15 yrs. It should take u around 22-25 yrs to accumulate 1 Cr with an annual investment of 70K into an ELSS MF.


kamalmoorthy asked, Hi, I have a 1 year old kid. I have started a HDFC UNIT LINKED YOUNG STAR PLUS, for her, I pay 30K every year for 15 years. what is your suggestion on this, i hear few people say "that i made a mistake taking this policy". pls answer.

Vetapalem Sridhar answers, Hi, Be focussed on ur objective and not wat people r telling u. The below advice is specifically applicable only to the HDFC UL Young Star, as it does have among the least cost among ULIPs. The decision to stop midway will do the real harm. Continue to pay 30K for the next 15 yrs without missing a single installment. It will really benefit ur child.


Vetapalem Sridhar says, It was gr8 answering ur queries....Will meet up soon again


Part I: Want to achieve financial security? Here's how

Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at vetapalems@rediffmail.com.


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