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How to invest smartly before Budget

February 24, 2011 16:57 IST

InvestmentsAre 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.comfinancial planning expert Sailesh Multani offered some valuable tips.

Here is the transcript:

Sailesh says, Hi, good evening and welcome to this chat session

Sailesh says, Hi, we are in the last leg of tax planning season and lot of investors would want to know the names of good Equity Linked Savings Scheme (ELSS). One fund that has been consistent in its performance and is highly recommended is Fidelity Tax Advantage Fund. Another fund that can be considered is Franklin India Taxshield. For the benefit of all the participants who are planning to start SIP or invest lumpsum in equity or balanced funds, I recommend, among others, HDFC Top 200, DSP BR Equity Fund, Fidelity Equity Fund. In the balanced fund category I recommend HDFC Prudence Fund.

neha asked, hi ,which is the best tax saving investment
Sailesh answers,  at 2011-02-24 15:59:21Hi, to save tax under section 80C of the income tax act, you can choose from the following popular options - Public Provident Fund (maximum investment allowed in a year is Rs 70,000, the tenure of this account is 15 years), Equity Linked Savings Scheme (ELSS), these are diversified equity funds with a lock in of 3 years. If you want to avoid taking risk and invest for a relatively shorter period then you can consider NSC. Life insurance premium paid during the year also qualifies for deduction under section 80C

sudin asked, Hai Sir, i have just started my professional career and i have an education loan of Rs 80000 now i have to repay the amount as per bank aggrement , Now i want to do my financial planning for the next fiscal . How do i plan that- pls advice.
Sailesh answers, Hi, you need to focus first on repaying your education loan. If you have surplus left after paying your EMIs then you should channelize the same into equity funds via the SIP route. SIP is the most simple and trusted way of building wealth over the long term.

vishal asked, how about bond funds ?
Sailesh answers, Hi, as far as bond funds go, it is a good time to invest in short term income funds. Liquidity is tight and likely to get tighter with the last instalment of advance tax due on 15th march. If you are a low risk taking investor with an investment horizon of over one year then short term income funds are ideal for you.

king asked, how is Reliance Gold Fund for an SIP
Sailesh answers, Hi. Reliance Gold Savings Fund (RGSF) is a Fund of Fund. Basically this fund will invest in Reliance Gold ETF. This means that RGSF will be suffering from higher fund expenses. I would not advise investors to invest in this fund. It would be better to invest directly in a Gold ETF.

Aditya asked, which is the best sector to invest for the long term
Sailesh answers, hi, it is always advisable to invest in a diversified equity fund that has the flexibility to invest across the sectors. th choice of sectors is best left to fund managers

ma asked, My investments for Tax Saving purpose are over now .. i just want to invest for future on long-term (5-10 yrs) basis. please suggest me ....... thanks in advance
Sailesh answers, hi, if you are willing to take risk then equity funds are best for you. You should start SIPs in 4-5 well managed diversified equity funds. I have given the names of the funds recommended by me at the start of this chat

praveenmkcg asked, sbi bonds- what should it`s place be in one`s portfolio- diversification or jst one more deposit.
Sailesh answers, hi, every investment you make should help you diversify your portfolio. This will be a function of your asset allocation which in turn depends on your risk appetite and investment horizon.

Ashok asked, What would be the position of stock markets this year. Which is the best avenue for investments in current scenarioo
Sailesh answers, hi, it is difficult to take a one year view on the market. If you are willing to invest for 5 years and convinced that India as an economy will do well over the next 5 years then equity investments are for you. I would advise you to take the equity funds route rather than investing directly into stocks.

vinod asked, what is the best fund to invest in prebudget
Sailesh answers, hi, never link your investment decision to any event or festival. Investors are carried away by big events like budget or festival like diwali. please bear in mind that these are one day events. Yes, markets do react to budget announcement but your long term investment decisons should be based on your investment objectives, risk appetite and investment horizon. these are the most important parameters to choose your investment options.

prasad asked, I have already Invested 4lacs per anum in HDFC Pension lan(ULIP). The policy says minimum 3 years we have to pay the premium. So should I continues the policy? If yes Does it give good return if I wait for atleast 7 – 10 years years?
Sailesh answers, hi, you have taken a ULIP. I do not recommend ULIPs in principle because these are vry high on cost especally in the initial 3 years. ULIPS take 7-8 years to break even. Since you have already taken the policy there is little you can do. Continue paying your premium.

GSG asked, Realty v/s Equity Mutual Fund-Which is better in 2011?
Sailesh answers, hi, both are good investment avenues. Depends on what the investos is comfortable with. It is easier to invest in equity compared to property. Also the initial investment amount is much smaller when it comes to equity compared to real estate. The most important differentiating factor in favor of equity is the fact that most of the bluechip companies are well researched which means that the probability of investment decision going wrong in the case of bluechip companies is low. On the other hand there is no research avaialable. Therefore investors can be taking too much of a risk.

Satya asked, Hi Sailesh, I want to invest in some taxsaver funds for Investment purpose. Can u suggest whether it is best time to invest now or wait till budget is over.
Sailesh answers, hi, dont wait. Invest in any one or two funds suggested by me at the begining of this chat

BRK asked, Hello Sailesh, I am 34 Yrs male and getting annual income of Rs. 11L (after tax). Can you give me some information on New Pension Scheme and its working ? For my tax exemption of Rs. 1L, I have been investing in NSS, PPF at the rate of 60K & 40K for the last 5 years and some amount into Tax Savings MF & Infra Bond. Can I also look at this NPS ? Thanks.
Sailesh answers, hi, NPS has not taken off in the manner expected. There is limited track record. I would not recommend investment in NPS at the moment. your current investment strategy looks fine to me. Continue with the same.

mili asked, In this current market scenarion which are right instruments to invest in?
Sailesh answers, hi, in the current scenario you should invest in equity funds via the SIP route if you are willing to take risk and invest for 5 years and more. If you are low risk taking investor with a one year investment horizon then you could invest in Fixed Maturity Plans (FMPs) or short term income funds. you could also start adding Gold to your portfolio by investing in Gold ETFs.

contactsuraj asked, I want to invest some money and withdraw it next year. How is the Reliance gold mutual fund?? Or is it safe to invest in physical gold??
Sailesh answers, hi, I would not agree with your investment idea of investing in Reliance Gold Savings fund with a one year view. I would also not recommend buying physical gold. If your investment horizon is one year then you should be looking at Bank Fd. Safety of capital should be your prime concern as against returns.

vikas asked, what are the short term investment, options available in the market??
Sailesh answers, hi, you could look at liquid funds, liquid plus funds, short term income funds and 90 days FMPs

Kunal asked, I have Fidelity Special Situations(D)
Sailesh answers, hi, this is a good fund. But this fund is not an all season fund. This fund tends to do well for a period and then underperforms. Nevertheless, its a good fund to hold in a portfolio because of the unique investment proposition.

Sailesh answers, hi, exit IDFC Premier Equity Fund.

prasad asked, Hi Sailesh, The HDFC Ulip i took can be broken in 5 years. SHould i go for it? or should i wait for 7 - 10years?
Sailesh answers, hi, please dont break it now. wait for atleast 7 years.

asadda asked, Can you recommend any ultra short term funds?
Sailesh answers, hi, you could look at HDFC Cash management Fund - Treasury Advantage

Natkats asked, Shailesh. How do you decide when to exit on an equity investment?
Sailesh answers, hi, the best time to exit your investments is when you have reached your goal. also, if your return from your investment is in excess of the targer return then it is a good idea to book profit to the extent of excess return over the target.

shravan82 asked, hi..sailesh..I am investing 6000/-every month in SIP's of HDFC Equity Growth - 2000/-, DSP Blackrock Small & Midcap - 2000/-, Reliance regular savings Equity Growth - 1000/- & Sundaram Finance Oppurtunites Equity Growth - 1000/-..i am looking for a term of 5 years..can u suggest, should i continue with this or shift to anything else.
Sailesh answers, hi, you are investing inthe funds which invest in high beta stocks. I would advise you to exit from funds like sundaram opportunities and HDFC Growth. Instead invest in funds like HDFC Top 200 and Fidelity Equity Fund

mk asked, are infra bonds a good option for someone in the 10% tax bracket who has exhausted the 1L 80C limit? or are there better investment options despite paying tax
Sailesh answers, hi, if someone is willing to take risk then I would not recommend tax saving infrastructure bonds. These bonds are for a tenure in excess of 5 years. This is a good time horizon for equity investments. One can ignore these bonds and invest in diversified equity funds.

chandan asked, Hello, can you please suggest some good MF for my daughters(1year) future needs...
Sailesh answers, hi, you can invest in the same funds recommended by me at the start of this chat.

pa asked, what about to invest in infrastructure bonds? which is best?
Sailesh answers, hi, there arent many institutions which have come out with these bonds. I have heard only of Larsen & Toubro and IDFC. Both according to me are good

naduchathadiyil asked, Mr. Sailesh, Are you convince about the India story. Now crude and geo political situation becoming unpredictable and flood inflation and deficit widening, foreigners looking India suspiciously as a country of mega scams and the country is becoming fast a third grade banana republic dont you thnik that India story is going into water
Sailesh answers, hi, I agree with you that the image of India has taken a beating with scams after scams being reported every single day. But given India's demographic, the consumption story is here to stay. India is a very big market to be ignore by foreigners. floods, droughts, geo-political tensions are not every day occurances. One should not get too much worried about the same. It is during periods like this that one gets an opportuity to invest at lower levels. I fail to understand that how can the view on a country change merely in three months. According to me this is an excellent opportunity to start investing in equity markets in India.

Ajay asked, HI Sailesh, I have to invest Rs 70000 for tax exemption under Section 80C. My risk appetite is low. Where should i be investing this money???
Sailesh answers, hi, you could invest in PPF or Bank Deposits.

majaz asked, should i sell my shares ? it was 5.20Lakh now it is only 3.20lakh
Sailesh answers, h, if the stock you hold are fundamentally good then I would advise you to stay put. dont panic.

moni asked,  Iam 51.Presently earning rs. 60000/month Regularly saving through SIP since last 1 Yr. in 1) HDFC TOP 200 Rs.5000/- per month 2) HDFC Prudence Rs 10000/- per month .3) rs. 5000/per month in DSPBR 100.Balance PPF +VPF+FD.(rs.20000/Month.). Kindly advice how long i will continue with this % of porfolio before retirement at 58 Yrs. such that i can make a handsome corpus for retirement.
Sailesh answers, hi, overall a good investment strategy. Continue with the same till you retire. Avoid investing more than 30% in equity funds when you are 3 years aways from retirement.

sggaurav asked, Hi Sailesh, I am investing Rs.5000/- each in HDFC top 200,IDFC premium equity and Reliance Growth as a SIP from last one year.But my Fund value is same as investment.Should i continue investing or Exit?
Sailesh answers, hi, there is nothing wrong with your portfolio. Though in the last one year sensex went up from 15,000 to 21,000 it is back to 17,500 level. the market has been more or less flat. I would advise you to wait for another 2-3 years. I am sure you will be laughing all the way to your bank by then.

invest asked, Hi Sailesh, Is ULIP so worst investment for 5 years horizon?
Sailesh answers, hi, yes. ULIPS are the most missold insurance cum investment product. The main reason being the highest commission paid to agents on these plans. Needless to say that this commission is paid by investors from the annual premium paid by them. you can safely igonore any kind of ULIPs that may be recommended to you. When it comes to insurance take a Term plan. If you want to grow your money, invest in equity funds.

peednas asked, I had 15 shares of ONGC pre split. However post split I have only 30 shares (should it not be 30 + 30). Please clarify Thanks
Sailesh answers, hi, if you had 15 shares then you will get 30 shares because of the face value is now Rs. 5. I hope you are not referring to the bonus for the additional 30 shares. Check if you purchased the shares before the record date of bonus.

Mukul asked, For Mutual Fund, What would you suggest, shall I go for Growth or Dividend. I have invested nearly 50000/- in Growth fund of SBI, HDFC, Fidelity 5 yrs ago. But return is hardly 10%
Sailesh answers, hi, if you want the power of compounding to work in your favour then go for the growth option. Dividend option is ideal for investors who are looking at intermittent cash flows.

prasad asked, Hi Sailesh, Can I expect atleast 10% return in HDFC ULIP(Pension plan) after 7 - 10 years
Sailesh answers, hi, you could expect that kind of a return if you are in an equity or balanced category.

rr asked, I am investing in SIP as HDFC top 200 (3000), Birla Sunlife Frontline Eqity (2500), Reliance Growth (1500) Reliance Regular Savings Equity Fund (2000), IDFC Premier Equity Fund (2000), DSP BR Top 100 (1500), DSP BR Small and Mid Cap (1000), Sundaram Select Mid Cap (1000), HDFC Prudence (500). I want to reduce some funds. Please suggest.
Sailesh answers, hi, exit IDFC Premier and DSP BR Small and Midcap

majaz asked, Shailesh i am investing 4000rs Every month in SIPs of Reliance pharma,3000rs HDFC top 200,3000 HDFC equity, please suggest which fund should be replaced by which?
Sailesh answers, hi, replace Reliance Pharma with fidelity Equity Fund

gourav asked, Hi I have started my investment in IDFC small & Mid cap and DSP Black rock micro cap fund from October onwards with 15000 in each fund as SIP. Should I continue or choose some other funds? Kindly suggest
Sailesh answers, hi, continue with your investments. small and midcap indices have fallen the most in the recent correction. It will take some time for these stocks to recover. I would advise you to hold on to these funds.

Sailesh answers, hi, you may refer to the names of the funds recommended by me at the beginning of the chat

Sailesh answers, hi, you may refer to the names of the funds recommended by me at the beginning of the chat

Dinesh asked, Hi Shailesh, Planning to start SIP. I am 30 yrs old, married with 1 yr old daughter and save around 50k per month. I believe in diversifying my investments. What should be the ideal strategy for me?
Sailesh answers, hi, immediately you should be planning you investments for your important goals - your retirement and daughter's education. Start building separate portfolios for each of these goals. your portfolio should consist of equity funds, bank Fds and Gold ETFs.

INIDS asked, Dear Shailesh request you to reply my below quiery. It will really help me Hi Shailesh, I am very new to bonds, stocks and Mutual Funds. I want to start off with minimum amount of Rs 20,000. Should i go for stocks or MF or Bonds. Please do suggest me on the same
Sailesh answers, hi, divide the amount equally between the 3 funds recommended by me at the start of this chat.

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: