×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Ask Mint Money | Evaluate savings potential first, then decide on asset allocation

Ask Mint Money | Evaluate savings potential first, then decide on asset allocation
Comment E-mail Print Share
First Published: Thu, Oct 06 2011. 09 32 PM IST
Updated: Thu, Oct 06 2011. 09 32 PM IST
I am a 34-year-old married man with two children. My monthly salary is around Rs 90,000. I have a life cover of Rs 9 lakh for myself and Rs 2 lakh for my wife with an aggregate annual premium of Rs 43,000. I have taken a home loan of Rs 20lakh for which I pay an equated monthly instalment of Rs 19,000 and a car loan for which I pay Rs 10,000 per month. I have invested in Kisan Vikas Patra (KVP) and expect Rs 5 lakh upon maturity. I have also invested Rs 50,000 in tax-savings bonds and Rs 2 lakh fixed deposits (FDs) in the name of my daughter and son each. How much should I ideally invest in stocks and what amount should I set aside for a child plan? I have a few traditional plans. I have a mediclaim for my family.
—Mohan Chetri
What you need to provide is a long-term asset base and this will need a disciplined approach. A very simple way to do it is to determine the surplus funds you have every month. This can be determined by reducing expenses. This saving needs to be invested over the long term in various asset classes. Once you have determined the availability of funds, next is the asset allocation.
As of now you are investing whenever there is surplus money in your bank. There is no rationale in savings. You need to make monthly savings. Investments in KVP and FDs do not make sense. Yes, to a certain extent you should be having fixed deposits. But that should be limited to bring liquidity in the portfolio. All these investments are taxable in the hands of the investor and even if they are made in your kid’s name and they are minors, the income is clubbed in the hands of the parents. Hence they are not very tax efficient. The good part in your case is that the need is long term, hence you can invest in equity. However, the best way for retail participation is through mutual funds. You should start systematic investment plan in various asset classes within equity. Large-cap, diversified equity, mid-cap, hybrid equity and gold can form part of your portfolio. Good funds to pick are DSP BlackRock Top 100, Franklin India Blue Chip from the large-cap stable. In the diversified category, you can pick from HDFC Equity and Templeton India Growth. Good mid-cap performers are IDFC premier Equity and HDFC Midcap Opportunities. And Hybrid funds such as HDFC Balanced, Birla Sun Life 95 are good options. For gold, you can invest either through exchange-traded funds or fund of funds.
Your insurance cover is inadequate. You need to have a cover of at least 5 times your annual income. Go for a term insurance and consider buying it online. You have not mentioned the kind of health insurance you have. However, please evaluate if it provides essential covers.
Surya Bhatia is a certified financial planner and principal consultant with Asset Managers
Queries and views at minmoney@livemint.com
Comment E-mail Print Share
First Published: Thu, Oct 06 2011. 09 32 PM IST