Jagoinvestor
December 3, 2009
Questions and Answers , Part 6
I am putting some questions answered by me to users on “Ask a Question” form . I am putting 3 questions and there answers . If you have any comments or better suggestions please feel free to add as comment . You can see other questions and answers done in the past Here .
You can also ask your questions from other experts on recently started Jagoinvestor Forum
Question 1#
I’d like to invest Rs 5,000 – 7,000 a month through SIP to build a corpus for my child’s education in 20 yrs from now. I think I will need around 20 lakh (which will be around 60 lakh when we count the inflation). I’d like around 80% to go in equities for 1st 15 years and then switch to a more risk averse equation. Which funds do you suggest? Child will be born in Apr 10, can I start rightnow?
I’ve a term plan for 70-80 lakhs. So, ULIP would not be appropriate for this goal, right?
Answer 1 :
Excellent , congrats on planning this .
>>> 7000*(1.01)*(1.01**240 – 1)/.01
6994035.4332886515
7000 per month can make around 70 lacs assuming 20 yrs and 12% yearly (1%) return . This is as per your requirement , which looks achievable easily , considering you review your investments every year and maintain your asset allocation .. .
You can put some amount (20-30%) in PPF (child name or yours) .. and then rest divided in some 2-3 good funds through SIP .. this should do the job .
you can choose any good fund listed on the article some days back .. You can also look for Balanced funds if you dont want to take too much risk ..
Question 2#
I am planning to invest my money in some CHIT fund scheme where in on an average you get more interest than in SB/Fixed deposits. What is your view on it and can we really trust these chit fund companies.
Following are links of couple of chitfund companies:
Answer 2:
I havent looked at what they have to offer , but without seeing that I am telling you dont invest in these .. Have you every heard these names from more than 3-4 people , Might be they have made some money out of this , but is that under law and are there contracts which are legally binded .
There are cases of frauds in these kind of chit funds . I found some complaints against these chit funds on net .. please go through them .. they might be offering higher returns but always remember that anyting above 8% is with risk 🙂 otherwise everyone will go with them only .. Don’t get into this unless you are ready to loose all your money someday ..
https://www.consumercomplaints.in/complaints/shriram-chit-funds-c41300.html
https://www.consumercomplaints.in/complaints/margadarsi-chits-karnataka-pvt-ltd-c217337.html
I feel even options trading is safer than these .. because you only loose because of yourself there , not someone else .
Question 3#
I would like to invest Rs.7000/ month by auto SIP ( for 2to 4 Years. My risk profile is moderate and my preference is to invest in Balanced Fund, Debt Fund & Diversified fund. My age is 45 years. Please recommend some of the good fund and amount to be invested per month.
Answer 3:
2-4 yrs is a modetate time frame .. You should go for Equity funds or Balanced funds only if you can take some risk on your investments , Risk does not mean negative return , it means below normal returns also ..
If you are ok to invest 7k per month , then even if you invest in something which gives 10% , you can generate around 4.14 Lacs . If you take risk and target equtiy funds , you can get 15% returns also , which will make 10 Lacs ..
Incase your Goal after 4 yrs can be met by 4 lacs , then i would recommened 10% route which will involve mostly debt funds or Balanced funds .. or Debt funds + Equity funds (30-40%) ..
You have to ask your self if you want your goal to be met or Generate higher returns with RISK 🙂
The best thing I think would be
- 3k in Debt fund or FD
- 1k,1k in 2 Balanced Fund
- 1k,1k in 2 ELSS funds (equity , tax saving also)
Have a look at
Best of Luck , Dont hesitate to ask any other question and reply back if there is any doubt yet
Do you have a question ? Ask it here on “Ask a Question” Form or talk to others readers on Forums
Hi Manish,
I have invested my money in the below listed funds for last 3 years…
1. ICICI prulife — lifetime super ( 18000 pa)
2. ICICI prulife — lifetime gold return gurantee fund (50000 pa)
3. LIC Jeevan Anand — (7332 pa )
I invested my money into these plans without knowing much as I was very new in this field. I have a plan to take a policy for my retirement… Please suggest me how to go ahead and which are the good ways to build my wealth ..
Recently I have done Jeevan Tarang from LIC … I think I have done a mistake, Now please suggest me how to achieve my goals ..
Thanks,
Kishalay
Kishalay
You should mainly use Mutual funds (equity oriented) to achieve your goals . Stop your ULIPs and take the money after 5 yrs if you cant handle ULIP’s .
For LIC products , you will have to take painful steps of surrendering it if you are in the start of the tenure .
Manish
Hi Manish,
Thank you very much for all your informative blogs.
Can you let me know how can I find out the existing cost of completing courses like MBBS (in India) and MBA/MS in top universities (US/UK)? I’m finding it difficult to get this information. Any pointers would help (for financial planning for my kid’s education).
Thanks,
Prashanth
Prashanth
hmm.. thats a tricky one 🙂 . For MBBS its tough to arrive at one figure as it differ a lot from one college to other , but better take the max figure .
Manish
Hi Manish,
Amazing to see your quick response! Thanks!
I’m actually looking for top rated colleges. Looks like I’ll have to consult a financial planner who I believe will have this kind of information. Also, can you recommend a good financial planner in Bangalore? I’m ready to pay whatever fee they specify.
Thanks,
Prashanth
Will let you know
I still don’t understand why people get so excited about chit fund, I have read numerous cases of fraud, may be these people never read newspapers.
S Singh
Yes, most of the times people are attracted to those high returns . Some of the chit funds are ok i would say .
Manish
Hi,
I have small doubt in my mind thought of clearing with you. If CAGR of 12% appreciation is expected over next 20 year or so, what will be the sensex levels or nifty levels and how about indian GDP over next 20 years from today, Do you think all these are practical returns over long term. I believe stock markets/global economies are more or less become trading platforms, though we could see 100% or 200% returns from time to time over next 5-10 years, i some how suspect this returns are really sustainable in long run,because of the hidden reasons which we are not aware today?,
Am i sounding too pessimist, but the reasons are,
1. Last 10 years were I.T industry created lot fo employment directly and indirectly, which indians never seen before in decades such as 40K,50K, hence inflation shooted at sky rocket levels.
Now, where are we finding the right opportunities for our unemployed youth in order to convert them to users.
Indians are traditionally conservative, so indian consumption story some how i doubt to appreciate at the rate of 12% CAGR.
Last, yes there are some companies which might outperform, but we will only come to know, when it is done.
Please share your views.
Purna
CAGR of 12% from equity does not mean that index levels also rise to that level . one can achieve 12% using diversification , rebalancing techniques . If market moves up and down and come back to same level . its 0% increase , but if you use SIP techniques , with same situation the returns are positive (non-zero) .
Manish
Specific to your statement “If market moves up and down and come back to same level . its 0% increase ”
If this is the case, then don’t you think that a average customer required to put lot of attention to portfolio(specific to equity) and NOT just after 1 year or even 6 months. In that case it doesn’t prove the modern phenomenon that promotes a traditional user to invest into stock market/MF as it is needs high intelligence to be in good profit.
Your views please
Nilesh
May be you didnt see the whole comment , Definately direct investing is tough , however if a common investor does follow rebalacing technique for long term , he can acheive good returns because of ups and downs in the market . Not sure which point confused you , can you ask again with specific points .
Manish
thanx for the links
but can u please tell what should one look for while buying the shares.
Vivek
If it was so easy to answer “What should one look at while buying the shares” ,then everyone would be a good investor . there are lot of things one has to look while buying the share . There can be a seperate post on that which I am not a expert.
Long term investment is something you learn from practice and lot of hardwork . I Would suggest your read Rohit Chauhan and Tip guy blog . They are good ones to learn stuff on value investing .
Manish
hi manish
i recently went through ur article on akruti city crash. wat i got is u hv mentioned a link to nseindia.com to knw the history of any stock, my question is , is it right to take the stocks which is having more delivery then trading, i mean is it one way of picking the stocks. u got me, nah……..
Vivek
In a sense yes , you can do that . Share trading heavely and not being kept by people .
Manish
HI MANISH
CAN YOU PLEASE EXPLAIN WHAT IS PE RATIO, EPS,FACE VALUE OF A SHARE.
WHAT ARE THE THINGS ONE SHOULD LOOK WHILE INVESTING IN STOCKS .
PE : http://stocks.about.com/od/evaluatingstocks/a/pe.htm
EPS : http://stocks.about.com/od/evaluatingstocks/a/eps1.htm
Face value : http://en.wikipedia.org/wiki/Face_value
Manish
Hi Manish
I have taken ULIP policy on June 2009 for next 20 years. My premium is 48000 per year but they are charging 440 rupees per month. 5280 rupees per annum, but as per new IRDA policies, how much they need to charge me? and also I contacted them about new IRDA policies and they said the new rules for only policies which are sold after Jan 1st 2010, for the old policies they continue to charge as per the previous charges only. is this true? if this is non compliant as per New IRDA policies, who and how do we complain about my insurarer,
Appreciate your inputs if any in this regard,
Thanks in advance.
Purna.
Nope, as per IRDA rules , all the new policies has to comply with IRDA rules . Ask them for detailed explaination on this . Go to their compaint section.
As many others mentioned this blog is very informative for one’s financial planning. Ok here here goes mine and I don’t think I am in the correct peg (realized after going through these blogs)….kudos to you…..
I am now investing in LIC (jeeva shree – ~25000/- p.a, money plus (ULIP) – 10000/- p.a, jeevan tarang – ~27000/- p.a.) and in 20000/- p.a. in ULIP of a private bank. So investing close to ~80K in just insurance and ULIP. I am now planning not to invest in ULIP once they complete the lock-in period. I did realize that the SIP would be primary option (then EPF) for me to go with to get the best return over a long period of time (25-30yrs). Apart from these I normally invest in delivery trading (NOT marginal trading) but that is just a hobby.
Am I going wrong with my assumptions?Please throw some insight, also I would like to know how the returns would be calculated sort of any math expression.
-Srikanth
Srikanth
You shoudl take a term insurance asap and then invest your rest of the money for each goal systematically . Also your hobby is very expensive one 🙂
Dont use the word “investing” with Delivery trading . Its just tradng and very risky . Are you making much money from trading , if yes ,then continue .
For understanding the formulas , you can look at the video i created for basic formula see Archives 🙂
Manish
Manish
Thanks for your dynamic response. Can you brief on “You shoudl take a term insurance asap”?? I am in an impression that Jeevan Shree I am going with is already a life insurance policy, isn’t the case? Or you meant in addition to this I should take one more?
May I know if you were me how would you invest? (assuming the goal is just getting the best realistic returns in log term).
I started to trade just to experiment my understanding of certain market segments in real time, though the earnings are not discouraging, I don’t want to invest big chunk of my savings in trading.
Thanks in advance, I would certainly go through your video.
-Srikanth
Jeevan Shree is a Insurance policy , agreed . But how does that solve the problem.
The issue here is that you might not be covered adequately and with proper cost . I am sure that the cost you are paying for your current policy is extremelly high and you are obscenely undercovered . Let me know how much is your cover as % of your annual salary . I feel its less than 300% .
Trying out trading to understand thing is a impressive statement and it shows that you are keen to learn. But just make sure that the fees you pay is not too much to learn . Better mock trade a lot and then trade with real money .
If I were you , I would first make sure what I want in my life , my financial goals of future . then i would first make sure that My family is adequately coverd . iWould take cheap term insurance and good health insurance . After my protection is complte , I would then go goal based investing in Equity for long term because I would understand that Equity gives superior returns over long term .
Manish
thanx for that prompt reply,
but can u tell me which one is the better amongst these 7 options to start with and when to switch over to other option, and please tell me about the better ULIPS.
Naresh
I would suggest you stay away from ULIPs , Its not suitable for you, which is fine 😉
better go with simple products like mutual funds , ETF etc … When to switch in a ULIP is a question which is very tough to answer and need great expertise 🙂
manish
I am planning to start a investment club with a group of about 10 friends with small capital and later expand it to bigger investments. I want to invest in shares, real estate, start a business like hotel / hospital / school and others in the future. I would like to know the legal issues and procedures for starting it. Any advice and guidance will be highly appreciated.
Vijay
I am blank my self on the legal issues 🙂 . better consult a lawyer 😉 and let us know 🙂
Manish
what is icici life time gold plan can you give some detail about it.
anyways, your blog is very informative. thanx
Its a regular ULIP from ICICI . Here are the features .
• A regular premium Unit-linked endowment policy that offers potentially higher returns through the Multiplier Fund.
• Option to choose from 7 different investment funds.
• Systematic withdrawal of money from fourth year of Policy term.
• Higher of the fund value and sum assured payable as death benefits.
• Option to switch between funds up to 4 times a year, absolutely free.
• Available with optional Waiver of premium Rider.
• Tax benefits under Sections 80C, 80D and 10 (10D) of the Income Tax Act, 1961.
So nothing differnet in this ULIP . If you want to buy ULIP only , there are better choices .
Manish
hi again
but manish i m a doctor, i have seen the documents ,ofcourse it has some exclusion like all other mediclaim policies,but it covers the cost of hospitalisation,operations,accidental injuries,cost of doctors,drugs,nurses,investigations or tests. I, myself is a cardiac anaesthetist ,i see the critical care part also.but the thing i dont understand if operation, accidents and hospitalisation for more than 24 hours are not critical care then wat type of critical care the critical care rider includes.
ok . Then you dont understand what is Critical illness insurance .. Under critical insurance there is list of illnesses they cover like Cancer etc .. and once your are diagonised for any thing , you will get the lumpsum amount .
So if you have 5 lac of cover and you are diagonised for any illlness in the list , you will get 5 lac .
Manish
hi manish
i m planning to take a term insurance.
i have a mediclaim policy (family floater) frm star health with SI of 5 lakh.
should i take the term policy with riders or plain term policy.can u please explain about these riders.
Depends on wheather your your Health insurance is providing the things rider would provide .. Do they provide critical illness cover , i dont think so ?
In that case you should buy riders 🙂 which is not present in Health insurance , you will have to take the pain of digging your Document policy 🙂
Manish
I dont know manish, However i cannot save more than 20,000 rupees per month, after considering PPF and reserves for short term expenses i reserved myself to invest not more than 20,000 rupees because thats the amount which is surplus for me. Would you suggest, how much do i have to invest if i need make 1 cr in 10-15 years.
Purna
My aim here at jagoinvestor is to empower people to learn things, not just give them answers 🙂 . So if you dont know the answer , find out !! . Try your best first that how to calculate this stuff .. so if you want to generate 1 crore in 20 yrs and you expect 12% yealy return , how much you need to invest per month . Find this out !! ..
I will give you answer here , but at the end story does not end , untill you become self dependent in finding this out . you dont need to depend on me or this blog or anyother person to find it out 🙂
So for if you want to make 1 crore in 20 yrs , you need to invest 10k and for if you want it in 15 yrs , then you need to invest 20k per month .
Also you can do another thing , invest 11,500 for 15 yrs and then let if grow for another 5 yrs , that way also you can make 1 crore in 20 yrs 🙂 . I have explained all this in a video on this blog . find out and let me know when you are done .. I want to make sure you know how to calculate this .
Manish
Thanks manish, I really like the idea of “Self dependent”. I appreciate you.
Great !! .. So did you find that out ?
Manish,
I am looking for your advise, i am 35 years old with spouse 2 kids, earning 2.4 lakhs per annum ( Surplus money after my expenses which i can invest for any long term 15-20 years, single income family my wife does not work).
Objectives:
1. to work not more than 15-20 years from now.
2. aim to achive 1 cr by 2020. or early whenever my investments achive 1 cr.
Would you be able to adivse whether investing in the above 2 funds, will achive my target by 2010? or you do you suggest any thing else in my investing profile?
Yes you can invest in those funds .. however i would say use some debt also like 20% in PPF .
Do you know how much contribution you should make per month to achieve the target ?
Manish
Thanks Manish, I have been wandering to get answer for this, You have made it pretty clear.Thanks again. Hence Can i just invest in HDFC top 200 and DSP Black Rock 100, in these two funds in SIP manner for next 10-20 years.? Please advise.
yes .. put money in both
Manish
Purna
You have valid arguments and this is something one has to understand well to understand Equity .
You have ask question like what is Equity and what is stock market , what do they signify ?
Stock market are the barometer of economy its development . So all the economies which are already developed like US and Japan , will face the issues you pointed out . Japan has a different case . US markets are dragging to move up because of its bubble created all these decade and bad decisions.
Other thing is when you invest in Equity , you dont just leave it and forget for long term , you have to atleast monitor it every year and take appropriate decision as and when situation changes .
India , China and other asian countries are now entering a mode of “becoming developed countries” and hence for next 30-40 yrs we will see explosive growth in these economies which will result in making these economies ahead of US and UK by 2050 + . Thats the reason I dont see any other investment avenue better than Equities in India in coming decades .
Manish
Hi Manish,
I have the following questions, could you please comment.
1.If EQUITIE’s are really good for long term capital appreciation, why Japan stock markets are not recovered since 1990.not even half of the 1990 heights.
2.Why US markets are dragging at the same level of where they were at 10 years ago. ex. Dow was struggling at 10,000 since 10 years.
3.Do you foresee any such kind of problems will/might happend to indian sensex in this decade? between 2010 till 2020.
Could you please give me your analysis by comparing history of work equity markets as well. I am basically long term invester, however i can stay any long time such as 20-30 years. But I dont want to loose my money. Please let me know your reply.
I need to find out more on this .. What are your goals .. Get income for your needs or for investing ?
Goal is to get monthly returns @10,000. Postoffice MIS gives 6,000 per month for 9 lakhs @ 8% pa + 5% as bonus at the end of the term ie 6 years. Is there any other instrument better than this as monthly payout which is safe,not related to equity which provides better returns on a monthly basis.
Vijay
There are no safe products which can give you more than MIS . there are products like MIP from MF , but then its risky .
manish
Hi Manish,
Need you analysis on Post Office MIS since I have been building up 2-3 lakh to scale up to 9 lakh (joint account) so that it should pay me a regular montly payout. Need you suggestion as to how to invest for montly returns if any. Thanks.