I am 28 years old and not disciplined when it comes to tracking my investments. I had a life insurance endowment policy with an annual premium of Rs.30,000, which I stopped paying after two years. I had invested Rs.1 lakh in a friend’s business, but haven’t reaped any benefit from it. I traded worth Rs.2 lakh in the stock market and lost all the money. Now I want a plan that can help me build a corpus. I don’t have any particular goal. I can invest Rs.15,000 every month. Are there funds that can give me decent returns without having to keep a track of them?
You have tried to earn money fast but it did not work. Actually, what happened was a blessing in disguise: there was a lesson to be learnt. But you ended up learning the hard way. The idea now is to make you understand the correct investment strategy and the right way to grow your assets over the long term.
Past investment: Your investment in a friend’s business was a very high-risk one and could be compared with an unlisted small-cap stock which besides carrying credit risk also carried liquidity risk. Your stock market investment was equally aggressive. Trading in equity markets carries the risk of erosion of capital and that’s what happened. However, since you lost all your money, then prima facie it appears to be a derivative future and options trading. This strategy is not recommended for any new investor.
Your investment in an endowment plan where you paid for only two years was again not a correct decision. As you have not paid for the minimum three years period, you need to check the revival procedure of the policy and typically it is converted in a modified policy—a new policy is created and the premiums paid are adjusted with the new premiums. You may also need to submit a personal statement regarding health.
Future course: All the above setbacks should make you serious and you should start saving regularly with a long-term view.
You can start monthly investment through systematic investment plans in 3-4 mutual funds. If investments can be made for the long term, then you can consider equity as a tool to build wealth.
In the large-cap space, Birla Sun Life Frontline Equity and DSP BlackRock Top 100 are good funds. In the mid-cap category, funds such as IDFC Premier Equity and ICICI Prudential Discovery Fund have a good performance track record. For multi-cap funds, choose between Reliance Equity Opportunities and UTI Opportunities. Lastly, you can have a hybrid fund, where HDFC Balanced and Tata Balanced have done well.
A combination of the above funds should help you create a long-term portfolio, which doesn’t need to be actively reviewed. However, you should review the portfolio once in a quarter to check if any changes are required in the portfolio.
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