With Budget knocking on the door, it's high time you planned your investments. Are you baffled by various investment options?
Do things like mutual funds confuse you? Are you aware of the investment options they provide? What are the best mutual funds available in the market? Which funds accrue maximum profits?
What are the crieria for evaluating a fund? Which funds provide the best SIP options? Are SIPs the easy way of making quick bucks? When and how should one buy mutual funds?
In an hour-long chat with rediff.com on Thursday, personal finance expert Rahul Goel replied to many such readers' queries. Here is the transcript:
Rahul Goel says, Good Afternoon! Let's start!
param asked, In recent Money Simplified - Easy Steps to Tax Planning (MSTax08.pdf), there is an error (in my opinion). In Pg 7 (Pg 5 of 16 in pdf - left side), last line mentions STT of 0.025% - this should be 0.25% instead. I had sent this feedback to personalfn & 2 follow up mails, but they neither responded nor corrected the error. Not sure of the reason for such stubbornness? Can you intervene? Thanks.
Rahul Goel answers, at 2008-02-28 13:20:59param, hi. thanks for the feedback... personalfn does reply to all emails within 24 hrs. seems like we slipped up here. will look into this.
param asked, Q1. Before abolishing entry load for direct investors, how got the commissions from such investments - the AMC, the Fund or some random distributor? Q2. After abolishing entry load for direct investors, who gets the trail commissions (built into the expense ratio) - the AMC, the Fund or some random distributor? Thanks in advance.
Rahul Goel answers, how this works is that if there is no broker code on the form, then there are no commissions paid out - upfront and trail. even earlier i understand if there were no broker code, no commmissions were paid out.
param asked, Are you aware of any insurance companies planning to come up with no-distributor model (similar to Quantum) for reducing the cost to customer? Will that help IRDA come up with similar direct purchase model without commissions (similar to SEBI)?
Rahul Goel answers, with sebi having come down heavily on commissions paid out by mutual funds, the disparity between the commissions from mutual funds and life insurance policies has increased. there is an urgent need for IRDA to step in and rationalise this... else the intensity with which insurance is mis-sold will only grow. as of now there is no insurer which offers an option where the "entry load" if you will is waived off in case of a ulip.
param asked, I have a broader question on financial planning - unrelated to MFs. How can one plan effective estate planning using wills/nominations/trusts for a simple family (spouse & one minor child)? What are the approx costs (one-time & recurring) involved? Does personalfn provide any services on these lines? Please advise.
Rahul Goel answers, presently personalfn does not provide estate planning services; but we plan to do so at some point in time.
BPL asked, Hi rahul, where can I put my money to save tax at this last moment?
Rahul Goel answers, hi. there is still a month left for you to complete your investment. i recommend that you do not rush into any investment. there is sufficient time to understand your needs, risk appetite, tenure of investment etc. once you have clarity on that, you can invest the monies. remember, with the same money, you can save tax as well as contribute to another plan where you are saving for say your retirement.
Suraj asked, Good Afternoon Rahul. I am 35 and have just built the MF porfolio and paid the first SIPs to each funds. Please comment on my selection. SIPS/MONTH: DSPML EQUITY - 2K, SBI MAGNUM CONTRA -2K, FRANKLIN PRIMA PLUS - 1K, HDFC PRUDENCE - 2K, DSPML TIGER 2K, ONE TIME ELSS OF 12K MAGNUM TAX GAIN 93. Thanks
Rahul Goel answers, suraj, hi. you definitely have invested in some good schemes. however we do not recommend that investors put their monies in thematic funds (Tiger). and we also avoid recommending contra funds. we prefer the regular diversfied equity funds. i am assuming that you have appetite for risk and plan to be invested for the next many years in these funds. if not, then you will need to re-look at the entire portfolio.
rana asked, I have been investing in Reliance vision,HDFC grwoth, Kotak 30, and SBI contra mutual funds thorugh sip from the last 5 months.Do u think my portfolio is Ok ? Is there any need to add some more or change the existing one funds?
Rahul Goel answers, rana, hi. you can definitely do a lot better with your porfolio. for starters we would recommend you have funds like hdfc equity and franklin india flexicap. you should also consider adding value style funds like dsp ml equity and also quantum long term equity (disclosure - this scheme is from quantum mutual fund; both quantum and personalfn share the same founder). the idea is to have a portoflio of 5 - 6 schemes which are diversified across fund managers, styles of management. this will ensure that over time you are able to earn an attractive risk adjusted return. you should seek professional help to build your portfolio.
bik asked, Hi, for a one and half year period FD , MF or Eqity is better
Rahul Goel answers, hi. equity shares or equity mutual funds are not suited for investment horizons less than 3 years in our view. for a one and a half year period consider FMPs or bank deposits.
Bhargav asked, HI, I am brand new to mfs i had invested in sbi mf for tax benefits
Rahul Goel answers, bhargav, hi. if you are brand new to MFs then before you commit any more monies you need to do the following two things - one, read up a lot of mutual funds (start with the money simplified available on www.personalfn.com). the other, employ the services of a honest financial planner. unless you are an expert, you should not attempt to build you own mutual fund portfolio....
fin asked, Hi Rahul, I am an investor in ELSS and have invested in HDFC TAX saver-G and LTA fund-D. I have also invested in Magnum TAxgain my total investment is about 1lakh through SIP's. I have an ULIP where I pay 6k a quarter and till now I have paid about 54k in it. Apart from these investments I have a PF of about 20k. What do u think about my investments. I am 24yrs old.
Rahul Goel answers, hi. you are saving a disproportionate amount of money via the ulips route. ideally you should stick to mutual funds for savings and a term insurance for life cover. you definitely have an early start in terms
of svaing money. try and fine tune your allocation. if you can take risk, and are willing to inevst for atleast 5 yrs, equity funds should be a large chunk of your portfolio.
umesh asked, MY ENTIRE INVESTMENT IS IN EQUITY BASED mf.shoud i re-aalocate it
Rahul Goel answers, umesh, hi. you definitely should not have 100% of your monies in equity funds. depending on your long term needs, you should allocate some money to gold, debt and other assets. The exact allocation will depend on several factors. If you get this right, you would have taken a giant leap towards a wealthy future.
sheela asked, goodafternoon to you to......I don't know anythin about share or mutual fund how do I start
Rahul Goel answers, sheela, hi. simply, start by reading our websites - www.equitymaster.com and www.personalfn.com
Anjali asked, Dear Mr Goel, I had bought a tax-saving fund last year and also availed of tax concession on it when I filed my returns. However, now my friends tell me that when the MF matures and I get my money back, I will have to pay tax on it. So what is the point in buying ELSS if I am to be taxed later? Have I been taken for a ride by my MF advisor? Please help.
Rahul Goel answers, anjali, hi. if you have invested money in a tas saving fund, which is an equity fund, there will be no tax implication.
king asked, What are the five best mutual fund schemes which are more secure and provide significant returns?
Rahul Goel answers, hi. if you are looking for a secure investment its best you stick to deposits and maybe FMPs. equity oriented funds are risky and there is always a chance that you can lose capital.
samira asked, Dear Sir This is Samira. This year I have saved more than 1 lakh. My portfolio is like this 1. PF contribution Rs. 5000/- per month 2. LIC (Sum assured Rs. 2 lakhs, Monthly premium Rs 683, 30 years) 3. A policy form Reliance Life Insurance Company Limited (Sum assured Rs. 1.8 lakhs, Half yearly premium Rs 3165/-, 30 years) 4. ULIP form Birla Sun Life Insurance Company Limited (Sum assured = Rs. 3 lakhs, Monthly premium Rs.1097.50, 15 years) 5. ULIP form ICICI Prudential Life Insurance Company Limited (Sum assured = Rs. 1 lakhs, Monthly premium Rs.1500/-, 10 years) I have a baby girl of 2 and half year. I take care of her study and marriage. Is my portfolio is all right? Or I have to invest more? If I have to invest more then suggest some good options and some good funds. My take home salary after paying for LIC and PF is 10k only. I need your valuable suggestion Thank you.
Rahul Goel answers, samira, hi. why so many insurance policies?!! you surely seem to have been misguided into buying all these ulips. you need to take an urgent relook at your entire portfolio. focus on mutual funds for wealth generation. take term insurance for securing the future of your faminly. with regards to the ongoing ulips, when does the minimum paying term end? maybe you should consider opting out of some of these ulips; the cost of the same will need to be factored in.
vipin asked, I have taken Personal loan of Rs 1.5 lacs. I have fix deposit of rs 1.25 lacs. Should i close my loan account or I invest money in Stock i.e IPO to get better retruns.
Rahul Goel answers, vipin, hi. the loan is something where you incur a cost every day; irrespective of what happens. in the stock markets, there is no guarantee of a return. why would you want to take on a fixed cost for an uncertain return. so from this perspective it does not make economic sense to borrow to invest in the stock markets. best would be to repay your loan.
Rohan asked, I have about 20 lakhs in spare can you please tell me best safe and secure investment?
Rahul Goel answers, rohan, hi. if you are looking for safe and secure, this could be a good time to put some money in Fixed Maturity Plans (FMPs). these funds offer attractive post tax returns over the investment horizon.
arushi asked, what is general lockin period for investment in mf under sectiong 80
Rahul Goel answers, arushi, hi. that would be 3 yrs for a tax saving mutual fund.
divesh asked, Hello Rahul , This is Divesh Rastogi works for a MNC in blore. I would like to invest four lakhs in mutual funds. I am not sure which particular sector i should choose now to invest. Can you guide me some good funds?
Rahul Goel answers, divesh, hi. why do you want to invest in a sector fund?! in our view the risk reward trade off mostly does not pay off for such funds. the best would be to opt for the well managed diversified equity funds. if you are new to this, then best would be to employ the services of an honest financial planner.
VJ asked, Hi Rahul, I am interested in investing in mutual funds but not sure where to start. Is there some kind of starter kit i can refer to, or any other information that should be referred to before i start investing. I did identified some mutual funds like SBI magnum taxgain which has showed good returns in the past, and so the criteria i have chosen in purely on good returns with less risks. Is this a good mutual fund to invest in?
Rahul Goel answers, vj, hi. i recommend that you start by reading www.personalfn.com. and you should also read the free guides -Money Simplified, which are available on the website. once you are done, you will be able to make more profitable decisions!
suri asked, hi, I have 5 lakh investible cash. and I want to invest for growth purpose with 2 yrs horizon, please suggest good way. I am expecting around 20% upside
Rahul Goel answers, suri, hi. for a two year period, the portfolio would need to be predominantly debt oriented... in this case the return to expect should be about 8.5 - 9.0% post tax per annum. investing mostly in equities for such a short tenure is out of the question.
Rahul Goel says, Thank you all for participating in the discussion. If you have any queries, please do write in to
info@personalfn.com Budget 2008: Complete CoverageChat with Rahul every Thursday at 1 pm
(Due to circumstances beyond our control, date and time of chat may change)
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