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Home loan EMI woes
Is there a simple way to become a millionaire? How much should you invest every month to become a crorepati in 15-20 years?
Which are the best mutual funds, tax saving funds to put your money now? If you have some surplus cash then should you retire your home loan first or invest that amount in stocks or in mutual fund SIPs?
What do you do in times when the interest rate on your home loan has doubled in the last four years?
To answer these and various other money and invetsment related queries, financial planning expert Vetapalem Sridhar, hosted a chat with GA readers on August 27. For those of you who missed the chat, here's the unedited transcript:
raj k asked, hi sir, i have taken 4 mutual fund ,icici pru 25000/- reliance banking 25000/- &jm basic 50000/- all growth fund in january 08 now my portfolio is almost 40% down, i have invested this 5 yrs ,should i hold this or sell it with 40% loss? need your help.
Vetapalem Sridhar answers, Dear Raj, when u hv invested the money with a 5 yrs horizon, why r u thinking of selling it after 7 mths. Equities contain risk of volatility, which u r experiencing now. If u r able to bear this risk and not sell now, over time u will see that the equity mkts go up and deliver reasonable returns. Would suggest that u stick with ur investments.
ssv123 asked, Hello Sir, I have started SIP in following mutual funds. Shall I continue investing in these funds or Is there any change required in my portfolio? 1) DSP MERRILL LYNCH T.I.G.E.R FUND - GROWTH 2) KOTAK OPPORTUNITIES-GROWTH 3) RELIANCE [Get Quote] GROWTH FUND - GROWTH PLAN - GROWTH OPTION Equity 4) SBI [Get Quote] MAGNUM TAX GAIN SCHEME - GROWTH 5) PRINCIPAL PERSONAL TAX SAVER
Vetapalem Sridhar answers, Hi! The portf u hv indicated is more towards the aggressive side. Pick just one of the tax schemes. Of Kotal and Reliance Pick one one. Would suggest that u add 2 large cap/diversified funds to bring stability to ur portf. Some of the gud choices would be HDFC [Get Quote] Growth, Reliance Vision, Sundaram Select Focus, DSPML Equity etc�
Arun asked, Dear Mr. Sridhar Kindly help me in choosing 2 Mutual Funds from the following:- one from DSPML Top 100 or HSBC Equity or Kotak 30 G and the second from Reliance Growth or Reliance Reg. Saving Equity. I want to start SIP of Rs.2500/- each. Presently I am investing into Magnum Tax saver and HDFC Growth. Kindly tell me am I going in the right way? Thanks
Vetapalem Sridhar answers, Hi Arun, it is not possible to say with certainty which fund will perform in future. All the shortlisted large cap funds r gud. Pick any among them. I thing among Reliance, Regular Savings Equity Fund would be a better choice.
MMMM asked, GA Sir, to make 2-3 crore in 15 years max. 20years, how much to invest monthly & where. Plz tell em, I will follow the same.
Vetapalem Sridhar answers, If u continue to invest 25K each month into Equity Mutual Funds over the next 15-20 yrs, u should be able to build between 2-3 Crores. Start a SIP in a portf of 4-5 different funds. U can pick a mix of large cap and mid-small cap funds. Among large cap - HDFC Growth, Reliance Vision, SBI Contra, Sundaram Select Focus, DSPML Equity r some of the choices. Among aggressive funds u can look at Sundaram SMILE, Reliance Regular Savings, SBI Midcap, etc...
girdhar asked, Hello sir, my portfolio comprises of Fidelity tax advantage, dspml tax saver fund, hsbc tax saver equity fund, sbi magnum tax gain, sundaram select focus and HDFC growth fund. Suggest any change if required and which funds to invest in for a well diversified portfolio. I fall into the mediocre category as far as risk is concerned.
Vetapalem Sridhar answers, Dear Girdhar, over time consolidate ur Tax Funds. Just one of the ELSS funds is gud enough. The other funds u hold r gud.
pinkey asked, sir i want to buy a flat in NCR ..which bank shd i choose for housing loan
Vetapalem Sridhar answers, Hi Pinkey, if u hv time and r willing to put in some additional efforts a public sector bank should be able to offer u better home loan rates. Bank of India has one of the most competitive rates. But if u want things to happen fast, then an organisation like HDFC, IDBI Bank, etc should be the natural choice. Here interest rates should be a slightly higher.
Jacob asked, Hi Mr. Sridhar, My Annual CTC stands are 6.6Lakhs. My quaterly SIP is 20000(HDFC Tax Saver + Bharti AXA Wealth confident).Iam paying 16500 per month HL which is in my mom`s name. I have been recently married. Since the HL is not in my name, I am not able to get any tax benefit. Please advice how can i streamline my financial plans.
Vetapalem Sridhar answers, Hi Jacob, U should have put ur name as the joint holder in the house as well as become the co-borrower in the loan. A little planning in advance would have been able to save u a lot of money. U need to definitely evaluate ur entire financial state and get a proper plan in place. Get urself an adequate TERM Insurance Immediately. U can look at Reliance TERM Plan, ICICI [Get Quote] Pru Lifeguard WROP, SBI Shield, etc as options... DO NOT invest into anu ULIPs. As ur savings potential increases, u should invest more into SIPs of Mutual Funds.
babu_9901 asked, Dear Sir I have 30,000 Rs to invest in ELSS to save my tax,Kindly suggest me the best funds.Thanks.Waiting for ur reply
Vetapalem Sridhar answers, The following are the ELSS funds in my watchlist: Sundaram Tax Saver, Franklin Taxshield and HDFC Tax Saver.
jai asked, What are the tips for becoming a millionaire?
Vetapalem Sridhar answers, Hi Jai, there r very simple and basic rules that u have to follow to build wealth: 1. Invest regularly with DISCIPLINE. 2. Remain invested over the long term with PATIENCE and let the magic of compounding play its role. 3. Be FOCUSSED on ur goal of building and growing ur Wealth. DO NOT let emotions affect ur decision making regarding ur Investments. 4. Be aware about your money and wat is happening to it. Put EFFORT into learing about Investing and various Investment options.
arindam asked, Sir, Could you tell me the name of one Mutual fund scheme so that I can invest Rs. 1000 per month for next 10-15 years in view of my son's education.
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Vetapalem Sridhar answers, To start of with I think a HDFC Grwoth or Reliance Vision or a Sundaram Select Focus would be a gud choice. Plz read thro the following link to know more about building funds to secure the future or ur child. Investing for children A Slide Show, click NEXT to read thro.
mumbai asked, Dear Mr. Sridhar. How are you doing? I want to invest 1500 per month in four Diversified MF. I have shortlisted 6-7 funds. Thses are: Birla Sunlife Frontline Equity, DSP ML Top 100, DSP ML Top 100, HDFC Top 200, HDFC Equity, HSBC Equity, Kotak 30, Kotak Opportunities, Magnum Contra, Sundaram Select Focus. I am not able to choose four funds among these. Pls. advice.
Vetapalem Sridhar answers, Hi! Funds other than Kotak Opp and HDFC Equity that u hv shortlisted r large Cap funds. Just Pick any 2 large cap funds and the above mentioned 2 funds to build a portf. Invest with a long term focus.
Manikandan asked, My annual income is 6 lakhs and I am 32 now, I have 3 yrs old son, i have sufficient term plan and other traditional insuarance plans. I am putting 1000/- each in Franklin India Prima and Sundaram Select Midcap for last 2.5 years and 1000/- each in Tata infrastructure and JMEmerging Leaders fund last 9 months. Is this enough for my retirement life and to give good education to my son in 15 yrs down the line
Vetapalem Sridhar answers, I think that u should increase ur investments over time into MFs. A 4K SIP pm, over the next 15 yrs should grow to around 25L.
ASHISH asked, Dear Sridhar, I have 25 thousand which I want to invest for my child,daughter is 6 months old. which is the best ,Insurance,MF?suggest best scheme for 18-20 yrs term?
Vetapalem Sridhar answers, Dear Ashish, it is not possible to know before hand which will be the best fund in future. U should get urself a TERM Insurance Cover. For ur child DO NOT invest in a Insurance scheme. Invest for ur child into Mutual Funds via a SIP. Read thro the link that I have already provided in a previous answer regarding investing for ur child. Pick one Large Cap (some options r HDFC Growth, Reliance Vision, Sundaram Select Focus) and one Aggressive Fund (Sundaram SMILE, JM Emerging Leaders Fund, SBI Midcap, etc).
bhavana asked, I am having SIP in the following funds since last 2 months - HSBC equity, Rel growth, DSPML Top 100, Rel regular savings fund, and DWS Opportunity. Pl advise whether this portfolio is good for an investment period of minimum three years.
Vetapalem Sridhar answers, Hi Bhavana, stick with ur portf with a 4-5 yrs horizon and continue to keeping doing the SIPs. U should be able to make reasonable returns.
SHIVA asked, Hi Sridhar, My CTC is 7 lacs and I am 30 recently married. I have Jeevan Anand (sum assured 1.5 lacs) and Bima Kiran (sum assured 1 lac). Do I need to add some more insurance cover. If yes which one should I go for? Please suggest....
Vetapalem Sridhar answers, The only other insurance cover that u should add is a TERM Insurance Cover. U can determine how much cover u need by keeping the following points in mind. Insurance is to cover risk (in financial terms only). Hence if a person dies and there r people dependant on him/her (in financial terms) then they will be put into financial discomfort. Hence the role of insurance should be limited to the extent of this financial discomfort. It is not an easy task to put a figure to this financial discomort. It would include all existing liabilities and future living cost of dependants (minus current assets, future earning potential of any other earning member). Hence when current assets exceeds the liabilities and future living cost of dependants then the need for insurance no longer remains. Evaluation also needs to be done whether a non working member of the family can take up work and earn if the need arises in this estimation.
cshah asked, sir can u suggest me Pension plan (except Unit Link pension plan)
Vetapalem Sridhar answers, Existing Pension products r highly inflexible. Although it ensures discipline (the problem which most people face), there r better alternatives available thro which u can create more wealth in the long run. If invested with discipline Equity oriented MFs would be a superior alternative to create wealth over the long term.
srinivas asked, sir i had loss my bisness 40 lacks in year 2001 now i am recovering it now i am geting every month profit in my biz 100000 aprox but i have not done any investment till now how to go for investment my age is 36 now
Vetapalem Sridhar answers, Dear Srinivas, it is very important to work out a strategy, over time to delink ur financial need and the cash flows generated from the business. All money should never get reinvested into the Business. Over time build enough funds that would support ur and ur family's life into a Mix of Debt and Equity assets. No matter wat, never withdraw this money to put into ur business. From ur mthly profits start putting aside some money into a bank and some into a SIP in Mutual Funds. Also do take up an adequate TERM Insurance cover.
jaggu asked, For a long term growth prospect to build good savings in mutual funds, is it advisable to invest in growth payout option or the dividend payout or the dividend re-invest.
Vetapalem Sridhar answers, Picking a growth option is recommended in majority of cases. Plz read thro the link to get more clarity on the issue. Dividend Vs Growth MFs....
vg asked, Hi, I have invested through SIP in HDFC Equity,Reliance VIsion and SBI Magnum GLobal fund in Aug. 2007 which I extended by 1 year this aug. I have a long term horizon for this investement (5-7 yrs.) I also invested in Kotak Opportunities,JM Basic Fund,DSPML opportunities fund using lumpsum amount in Jan 2008 (5-7 yrs. horizon). Although,i have losses in all of them but still I am waiting for gud time of the markets. All my MF are Growth funds and equity diversified. I want to invest more right now(2 lacs).My question is 1. whether I should increse the SIP amount of my current SIP investments ? 2. Should i invest lumpsum in some new MF. 3. Should I use STP plan ? can you explain STp plan and also tax implications of this as I am not in favour of paying tax on my investments. Thanks and Regards
Vetapalem Sridhar answers, Hi! U portf is more tilted towards the aggressive side. Over time replace one or two funds with Large cap funds. 1. If u can afford to it does make sense to increase the SIP amts. 2. When Mkts correct then lumpsum injections into the existing portf definitely is recommended. Avoid any new funds. 3. In STP u will invest into a debt fund and then transfer a predecided amt into ur equity fund. In case of huge investment there maybe some net advantage. Not sure whether it would be so beneficial in ur case.
TISKURA asked, Dear Sir, 1.Where is the home loan sector heading towards? Is it advisable to wait for correction in home loans? 2. I'm 29 & earning 5L p.a., what are the best possible retirement options considering saving of Rs.3L out of this in present scenario? 3. Which is the best term insurance plan?
Vetapalem Sridhar answers, Hi Tiskura, 1. There is a chance that home loan rates may rise a little more in the near future. When interest rates r higher the property prices drop. So if u worry about interest rates now, the property prices will rise as the interest rates drop. So it is best to buy property when they are available at lower prices by taking up a floating rate housing loan. As interest rates fall, the property prices will rise later. 2. As u r young and hv many years before retirement, invest into equities with a long term horizon to build wealth. 3. Among TERM Plans some options r Reliance TERM Plan, ICICI Pru Lifeguard WROP, SBI Shield, etc....
gana asked, I am interested to invest the money in to MF but i don't know which fund is better and how to invest. My expection is yearly rise the money 15 to 20% i am able to invest amount is upto 1ack pls. suggest me which fund i have choose
Vetapalem Sridhar answers, Ur return expectation is reasonable. Plz read thro the following link to know some factors to evaluate when picking a Mutual Fund Scheme. How to select a good mutual fund A Slide Show, click NEXT to read thro. U can look at funds like HDFC Growth, Reliance Vision, Sundaram Select Focus, SBI Contra, etc.
naksh2neets asked, now due to inflation home loan rates are also soaring high, why is it that banks increase the tenure compared to amt, i was aghast that day to read a column in rediff itself that a 20 yr loan has been extended to 37 yrs, i mean what if we want to pay more emi midway as in after 5 yrs of taking a loan for 20 yrs, i want to increase the emi amt? can i do that? if so will the bank agree to do so?
Vetapalem Sridhar answers, Most Housing Loans can be prepaid to a certain extent subject to certain conditions without any pre-payment charges. The borrower does have an option to increase the EMI instead of the Tenure. Most companies increase the tenure so the higher EMIs do not put too much strain on the borrower.
Arvind asked, Hello Sridhar, I have Rs 50000 pm surplus to invest. Currenty I have around 45000 exposed to the following MF's HDFC growth, Sundaram Smile and SBI Magnum. My net take home is 1.4 L per month and I have no debts currently. Please advice
Vetapalem Sridhar answers, Hi Arvind, I think u r in a comfortable state and can afford to invest into equities with a long term focus. Continue to do a SIP into the funds u already own.
Vetapalem Sridhar says, Thats all for today! Will catch up soon again.....
Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at firstname.lastname@example.org.
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