financial planning for parents

POSTED BY Ajinkya Darshane ON August 8, 2011 6:07 pm COMMENTS (7)

MY parents want me to do thier financial planning; especially their retirement planning, they have almost 8-10 years in their hand; We have decided that Equity:Debt raito would be 60:40,

for debt part:- GPF+PPF+NPS(they are government employee so it is mandatory for them)

for equity:- My age is 23 and i dont consider myself an expert stock picker so I should go for mutual funds; I have some views on MFs (I dont know whether they are right or not):-

1. they must have 8-10 years track record

2. they should have performed well in bear cycle( loss of capital should be less than benchmark index)

3. they must beat Index by 5% in long run (means more than 5yrs in this context)

I have selected following funds:-(ALL SIP investments)

1. frankalin india bluechip – Rs. 2500

2. hdfc top 200 – Rs. 2500

3. fidelity equity – Rs. 2000

4. dsp br equity – Rs. 2000

5. sundaram select midcap – Rs.1500

6. birla sunlife dividend yeild plus – Rs.1500 

I am confused regarding diversification in style of investing, and no of funds..please comment on this portfolio..I am waiting for ur valuable suggestions..


7 replies on this article “financial planning for parents”

  1. Ajinkya Darshane says: this is the site from which i borrowed d strategy..but i couldnt able to find d exact link..i downloaded a pdf from here..may be dat contains some stuff related to this..
    give ur email id..i wil send it to u..
    regarding no of shares..when i made my portfolio wid above 4 funds on it showed dat i hav gt almost 200 stocks in my kitty..dropping one fund would modify dis no by 50 ie. i would hav around 150 wht should i do? according to u is it still a cluttered portfolio?

    1. Ramesh says:

      Go through the whole strategy of his again. and check whether it works out for you.

      If you have too many stocks then they wont be making any serious effect over the returns of your portfolio. Thats the problem of having too many funds. So keep funds which cater to different mandates and styles. Otherwise, lesser the funds, lesser will be the headache of managing them.

  2. Ajinkya Darshane says:

    thanks a lot! i wil definitely keep learning abt personal finance and planning..
    btw for opportunity funds, value funds, i have strategy in mind..i have borrowed it frm,
    select 6 funds a year for diff styles other than growth( continue SIPs in them ), then do lumpsum investment eg. 5000 in each fund for 2 months..divide funds accross d whole 1 fund for 2 months..then 2nd fund..its similar to SIP but i m investing once in 2 months time…in this way i would have max diversification..wht is ur take on dis?

    1. Ramesh says:

      can you post an exact link to the startegy you have mentioned?
      thanks for pointing to a good site.

      though I do not know the exact strategy, but the way you have mentioned it, there are some issues in it:
      1. growth funds (core) + 6 funds (satellite). this way, your money is too much fragmented. even if one of the funds performs greatly, overall effect over your portfolio is not going to be much.
      2. Managing all those funds will prove to be a headache too.

      What you can do is. Make a similar kind of portfolio in your SIP in growth funds and your 2 monthly lumpsum in other 6 funds. Over the past year. Check the whole portfolio then and see how many stocks are there in it. 200 stocks are not going to help you, imo.

  3. Ajinkya Darshane says:

    1.yep..they will retire after 8-10 years
    2. i did mention my age becoz i m young, new investor, still learning tricks nd trays..and not an expert by any means!
    3. i hav discussed with my parents abt equity exposure, as they have a strong debt reserve of PPF, GPF,NPS, FD..they are comfortable wid equity exposure of 60%..i have assumed annualised returns of 12%..which are anyway higher than other instruments
    4. regarding ur suggestions i m only comfortable wid templeton india growth fund, all the rest of the funds are either new as per my standard and little bit risky in terms of handling bear far as the style of investing is concerned they are not pure value funds..they are blend type( value research)..i was unable to find good funds thats why i went for all growth funds..according to me following are basic investment fund styles( i may be wrong ) :- 1. opportunity funds (eg.uti opportunities) 2. value investing style 3. blend 4. dividend yeild funds 5. contra funds (like religare) could be possible that i have mixed some styles or confused between any two..give ur feedback.. do we have enough well performing funds to have diversification in style widout compromising d returns?
    4. u have stated the basket strategy.
    ..can u guide me if i want to follow dis strategy for lumpsum amounts becoz still SIPs in growth funds luks to be a safer bet..5. i will definitely try to follow that but it would be interesting to see in future how i handle d pain if i loss of capital happens..thanks for ur quick reply..i hope u wil reply to this post as well..

    1. Ramesh says:

      1. Ok. You also need to strategise the proposed life span after retirement. Think about 25-30 years. And the type of allocation you would want to have for them in those years. The financial planning should be comprehensive and take a holistic view.
      2. You keep learning throughout. whether you are 23, or 33 or even 63. Your basics look ok to me. 🙂
      3. ok.
      4. a 10 year fund criteria applies for TIGF only. Morningstar categorises it as a Value-fund ( The same fund manager (Mark Mobius) is managing Templeton India Equity Income fund (which is a value fund with international exposure). In the end, you have to decide which funds you want to keep.
      Regarding your classification, my thoughts are Opportunity funds are aggressive funds which seek relatively short or medium term opportunities in stocks (not a buy-and-hold). Dividend yield funds canbe considered part of Value funds. Blended funds are because some of the value-stocks have appreciated and their PE is more, but not like Growth funds (so blend). Contra funds – look for contrarian bets. Apart from the name, you should also look at the underlying mandate of the fund, the AMC and whether they consistently follow it.

      There is no single style which works across time. You have to remain committed to a particular way, with a flexible attitude. short term fads should be identified and stayed away!
      Read some of the books written by well-known and respected people. And keep an open mind.

      The basket strategy can work with SIP + lumpsum as well as staggered lumpsums. But not with regular SIP.

  4. Ramesh says:

    My thoughts:
    1. 8-10 years are related to what? their retirement age or what.
    2. Your age being 23. What does that have to do with the financial planning of your parents? In what way?
    3. Your criteria for selection are very good. I agree with the list as well.

    Franklin India bluechip and hdfc top 200 are large-cap oriented funds. Fidelity Equity and DSPBR equity are multicaps. Rest 2 are mid-caps.
    In my opinion, just consolidate the money in 3 groups – large cap (keep franklin india bluechip), flexi-cap (fidelity equity) and in the midcap section (keep both the funds or select either of them). Giving you a max of 4 funds.

    1. Keep the SIPs intact in future.
    2. You can make some allocation changes, on a yearly basis, according to debt and equity ratios. The ratio which you have kept is good. So, 50-65% for overall equity allocation is good to have. Decide today what is comfortable for your parents.
    3. Regarding style of investing, all your funds are “growth” oriented. No specific “value or blended” fund is there. In the large cap/flexicap value-style section, Templeton India growth and templeton india equity income funds are there and ICICI discovery and Franklin smaller companies fund are in mid-small cap value funds. All these mentioned funds are also good according to your criteria.

    4. Overall, you can put equal baskets of both growth style and value style funds (or unequal like 60:40, etc). and then allocate your SIP / lumpsum accordingly. eg, say growth style funds have performed poorly in the recent 6 months, you can put some extra money in them, etc).

    5. Have a written investment statement, so that you / your parents do not get confused or deviate much.

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