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How to achieve your financial goals

Last updated on: November 28, 2013 15:50 IST

How to achieve your financial goals

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In an online chat with Get Ahead readers, Sailesh Multani of Edelweiss Financial Planning answered queries on building a successful financial plan.

Here's the unedited chat transcript:

Ajay Prasad: Im 57 - no debt, own house. Need 1lakh/month and add 7% inflation - expected 80 yrs life. What corpus I need now and how to plan,

Sailesh: hi, you will need a corpus of Rs. 2.75 crore approximately.

suman singh: I don't trust financial advisors. They only loot their customers by asking them to invest in instruments that benefit only them. What precautions must I take before appointing a financial advisor? How can I assess if s/he is planning something for my benefit and not her/his benefit?

Sailesh: hi, your investment advisor should advise you investments in line with your investment goals, investment horizon and risk profile. You should ask the advisor as many question you can before you sign on the dotted line. Besides, you should ask the advisor about the payout he will receive for suggesting the third party products. Lastly you should do a reference check before you sign up.

subbu: Since the rate of return for any secured deposit schemes is very low & inflation is always in rising trend. GOI also does not bother thru. its financial org. to ensure at least a decent survival for post retired, be it pension plan, health insurance, etc. How do we do for our self? For employees in Pvt. org. post 50 seem to be endangered.

Sailesh: hi, I agree with you and that is why retirement planning is becoming very important these days. To build the desired retirement corpus, one should start young. Traditional debt instruments like PPF, EPF can be of limited help. It is important to diverisify one's portfolio by investing into equity funds. While one cannot eliminate risk completely, it can certainly be managed.

anuj gupta: Hi,I have home loan remaining amount 11 L. I am saving around 30k per month. Should I prepay home loan/increase home loan EMI or save it in PPF/FD

Sailesh: hi, you should prepay your home loan to the extent possible. It is always better to do away with the liabilities in your portfolio. This will help you reduce the insurance requirement as well as the contingency fund requirement. Last but not the least it will confer peace of mind!

tushar: What are best investment instruments where I can put my money to retire by teh time I am 60. I am 30 mow and can invest Rs 30,000 every month. Plz advice

Sailesh: hi, your retirement corpus should consist of equity funds, debt funds like FMPs, bank fixed deposits, PPF, EPF and gold ETFs. Since your retirement is far away, your investments should be predominantly into equity funds followed by debt and gold. Also take adequate life insurance cover as well as health and critical illness cover.

dananjaypuri: How can I bring down the cost of making a financial plan? Going to professional financial planners liek you would cost me a bomb. How can I find a financial advisor that will best take care of only my financial interests?

Sailesh: hi, most financial planners charge fee anywhere between 10,000 to 25000 for writing the financial plan. In my view one should have a financial plan in place before one starts the investment process. Also financial planning is more than investments. It assesses one's complete financial health - contingency fund, insurance cover, risk profile among others.

Vinay Shukla: What should your net worth be at any specific point in time?

Sailesh: hi, there is no way one can say what is an ideal networth. In my view networth should be uses as an indicator to determine one's financial health. One's networth should increase year after year which sginifies a health financial situation.

Vinayak Tavade: What are the basic things I should take care of while building a financial plan?

Sailesh: hi, please make sure that your goals and dreams are well articulated to arrive that the right amount. Besides, give precise information about your finances to your advisor to ensure that your plan is realistic and implementable. After the plan is prepared please make sure to execute the same as most people lose out on execution.

suman singh: I don't trust financial advisors. They only loot their customers by asking them to invest in instruments that benefit only them. What precautions must I take before appointing a financial advisor? How can I assess if s/he is planning something for my benefit and not her/his benefit?

Sailesh: hi, your investment advisor should advise you investments in line with your investment goals, investment horizon and risk profile. you should ask the advisor as many question you can before you sign on the dotted line. Besides, you should ask the advisor about the payout he will receive for suggesting the third party products. Lastly you should do a reference check before you sign up

Nitin Deshmukh: How much money do I need to save every month to build a corpus of Rs 1 crore in the next ten years? My monthly income is Rs 1 lakh and I save more than Rs 0k every month?

Sailesh: hi, assuming an average return of 9% p.a. over the next 10 years , you should invest a sum of Rs. 50k (approx.) to achieve the target of Rs. 1 crore.

Aatish Jagmanani: What makes up an ideal financial plan?

Sailesh: hi, an ideal financial plan should guide you on how should you go about achieveing your financial goals. It should also suggest course correction in case one is not able to meet the financial goals. the plan should also analyse one's expenses and suggest suitable changes in the life style if necessary. Also it should help you build the necessary contingency fund.

also you financial plan should suggest the right insurance cover for life, health, critical illness and personal accident.

Abdul Warith: What is the importance of financial advisors in building an achievable financial plan?

Sailesh: hi, an honest and competent financial advisor is as important for your financial health as is a medical doctor. Investment is a specialised job which is best left to the experts. One can manage his/her portfolio reading books / blogs but it is important that final decision is taken in consultation with the financial / investment advisor.

Jenny Dsouza: Sir, I have two daughters who are now 9 and 11. In the next ten years I will need almost Rs 2 crore for their higher education and marriage etc. How should I go about achieving this? My monthly take home is 90,000.

Sailesh: Hi, you should build a separate portfolio for each child for each goal - education and marriage. Since these are long term goals you should invest primarily into equity funds. Besides a small portion should be invested into debt instruments like bank FD. 5-10% allocation should be made to gold ETFs. Avoid children plan from insurance companies to meet these financial goals.

Amol chille: I have Rs 10 lakh invested in PF, post office savings, stock markets, bonds and mutual funds. I want to invet another Rs 10 lakh in teh next two years. Where should I invest and what kind of returns can I expect in say, next 20 years. I am 42 now.

Sailesh: Hi, you have invested in the best of traditional debt instruments, you should now look at investing in debt funds like fixed maturity plans. these are market linked and can deliver returns higher than fixed deposits. FMPs are more tax efficient. However, be careful of the FMP portfolios. Generally bank CD portfolios are considered to be more safe.

hi, you can also look at investing in diversified equity funds with proven track record. A portfolio of 4-5 funds from different fund houses should constitute a good portfolio.

Jeswal: Sir, I can invest Rs 40,000 every month. Where can I invest? I want to have Rs 20 lakh in next three years to fund my MBA dreams. I am 25 now and earn Rs 1.2 lakh per month.

Sailesh: Hi, since you goal is less than 3 years away you should invest your money in fairly safe investments like bank fixed deposits, fixed maturity plans and ultra short term bond funds.


Photographs: Dominic Xavier/Rediff.com