Mint, along with the Hindustan Times and NDTV, brings you a personal finance show called Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-linked issues. This is an edited transcript of the show that was aired over the weekend on NDTV Profit and NDTV 24x7.
Natarajan: We’ve championed the case of equities as the best investment for creating long-term wealth in 2011 and just two weeks into January 2011, worries around equities and stock markets have surfaced in a big way. The Nifty is down 11% from the peak of last year and 6.5% from 1 January till date, and this may not be the end of the correction. Stock markets could see some more pressure. The question is...should you be worried?
Portfolio advice:Manisha Natarajan (left) and Monika Halan hosting the Let’s Talk Money. Ankit Agrawal/ Mint
Halan: ...Market is simply saying that there are worries about inflation, bad governance, corruption and simply a dysfunctional government. The market is pricing all of that in and showing us where it is going. So short term, yes there is a worry, but in the process of change we know that when things will go wrong, either the governance will change or the government will change. Long term, Indian growth story will continue.
Natarajan: Let’s welcome our first live guest:
Avinash Shukla, 26, information technology professional, Bangalore
I...have monthly take home salary of Rs 40,000. I’m a married guy with dependent parents at home. My wife is a schoolteacher in a private school and she also earns around Rs 15,000 monthly. We both together save around Rs 20,000-25,000 per month...
Till now my portfolio has: (a) Rs 5,000 in Axis Bank Triple Advantage Fund-growth (took policy six months back); (b) Ulip (unit-linked insurance plan) of HDFC SL-Crest with Rs 50,000 yearly premium (10-year plan); (c) Rs 10,000 into PPF (Public Provident Fund); (d) My regular monthly PF contributions of Rs 2,900; (e) I have my company stocks which is of current worth Rs 8 lakh (but again, being a stock, it is uncertain). I can sell one-fourth stocks per year, that is Rs 2 lakh per year from 2011 onwards. Other than this portfolio, I have employer provided health insurance to me and my dependents up to lump sum Rs 5 lakh.
My questions are:
(1) Please suggest me some good investment options to balance my portfolio, considering my age and income.
(2) I am confused about taking one proper life insurance and health insurance (family floater) plans. Do I need these plans? If yes, please suggest me the plans.
My priorities are:
(1) I have my younger sister who will be getting married in another three years. I need to support my father financially.
(2) To buy a house in Bangalore.
Halan: Yes, Avinash, it’s good to see, 26, family responsibilities, parents to look after, sister to get married and the feeling that you are not doing enough. I think...that at 26, you have a little bit of investments going and you have these right thoughts, it’s really a great way to start. Let’s take your first question first. You are worried about your health insurance and life cover, it’s always a good idea to have your own life cover and for your parents, simply because suppose you were to move from this company and these benefits don’t continue, your parents will be left without a life cover. So a health cover is essential, you could take a small policy for yourself, but do take a separate cover for your parents. (For) Life cover, same thing goes. At 26, the kind of premium you will lock yourself into will be something that at 30 you will have to pay a multiplier for, Rs 5 lakh cover is not enough. Take cover at least seven times of your annual income, just lock in that premium now. At least (a) 30-year term you should take.
Second, you are wondering about the investments that you have already made. I have seen your portfolio, the Axis plan that you have is a balanced fund between equity debt and gold. I am not sure why you have put into that because there are other good balanced funds in place. (Your plan’s) performance has not been so good. Wait for a year, if it doesn’t gain speed, you will have to redeem.
You said you have got Rs 25,000 per month of fresh investments Rs 25,000 year-on-year for 20 years at 12%, you have Rs 2 crore and 30 years by the time you are 56. At 12 % you have Rs 7 crore, I am not counting in your increment, I am keeping that for the EMI (equated monthly instalment) that you would want to take. So just by putting this away into mutual funds, large-cap, small-cap—and you are coming from IT sector, you may have a view on the sector itself—you can look at a sector fund if you think sector is going to do well.
Third, about your stock options in your company, not more than 20% of your portfolio should be in your stock options. It’s always a dangerous thing; don’t have all your investments in the same company.
Natarajan: And he still has four years for his sister’s marriage, so even a well-balanced diversified equity fund should get his corpus up to meeting his sister’s marriage, 26 and worried about financial planning, ready to shoulder his entire family. What can we say Avinash, you are really a Let’s Talk Money hero. We can give you that designation.