Results of risk measuring tests can sometimes surprise you

The tests assign you points based on your answers which helps in knowing how much risk you can take.
Comment E-mail Print Share
First Published: Thu, Feb 07 2013. 07 46 PM IST
I work as a manager with a multinational firm in Mumbai and I earn Rs.70,000 a month. My husband works with his family business. Every year I invest around Rs.1 lakh in Public Provident Fund (PPF) and a life insurance policy. Since my husband earns enough, I do not have to contribute to the household expenses. So the money left after the investments is put in my savings bank account. Could you please suggest some investment options I can consider?
—Sudha Raman
It is recommended to maximize your tax savings within the constraints of your financial goals. There are many tax-saving instruments prescribed under section 80C of the Income-tax Act. And the key is to choose which is suitable and benefiting the most. PPF is an all-time favourite and yes it fits the bill if the investment is meant for long term.
Insurance is case specific: are you considering it to provide a life cover or as an investment? The product in the category has to be picked up accordingly. But buying insurance only for the purpose of tax saving and without understanding the nature of the product is not a good idea. There are many investors who do exactly this, but this is to be avoided.
You can plan your monthly savings in mutual funds (MFs) via systematic investment plans. Before you start saving you need to determine your risk profile: risk capacity and risk appetite. Prima facie you have the capacity and it is the appetite which you need to know. It is to know how comfortable you are in taking risks and hence investing in equity. There are various questionnaires available on financial websites that will help you understand this better. They ask questions such as how will you react if the markets fall by 20%? They assign you points based on your answers which helps in knowing how much risk you can take. Many a times, the results surprise investors.
At the same time, it is recommended that you invest some portion of your savings in equity as it helps in giving an inflation-adjusted return. Since you have a long horizon, you can consider 4-5 MF schemes. Large-cap funds you can consider are ICICI Prudential Focused Blue Chip and Birla Sunlife Frontline Equity. In the diversified category, Reliance Equity Opportunity fund has done well. In the hybrid category where equity exposure is a minimum of 65%, HDFC Balanced and Tata Balanced have been consistent performers. Among monthly income plans (MIPs), where equity is limited to 30%, you can pick Reliance MIP in the moderate category and Birla Sunlife MIP II Savings 5 Plan in the conservative category. In the pure debt space—dynamic and short term—you can look at Templeton Short Term Income Fund and Birla Sunlife Dynamic Bond Fund.
You should also ensure that you and your spouse are adequately insured for both life and health. If protection is the main aim, go for online term plans.
Queries and views at
Comment E-mail Print Share
First Published: Thu, Feb 07 2013. 07 46 PM IST
blog comments powered by Disqus
  • Wed, Jul 29 2015. 07 55 PM
  • Wed, Jul 22 2015. 07 12 PM
Subscribe |  Contact Us  |  mint Code  |  Privacy policy  |  Terms of Use  |  Advertising  |  Mint Apps  |  About HT Media  |  Jobs
Contact Us
Copyright © 2015 HT Media All Rights Reserved