First time investor in MFs. Need Advice

POSTED BY Harpreet Kaur ON April 17, 2013 3:09 pm COMMENTS (7)



My husband and I have not been really the saving kind of people and financial awakening is coming rather late to both of us.


But last year onwards I have started taking stock of the money we have flowing in and out. I would really appreciate your help in analysing the investments and insurance covers I am looking at:


I am 28 and my husband is 30 and still have good number of years before retirement.


Salary inflow :

Husband     70000

Harpreet.    47000

Total.        117000


Plus another yearly 1 lac odd of bonus or incentives which are not fixed or guaranteed every year.


Monthly outflow:

Home loan EMI.      38500 

Rent.                       11000 ( since the flat is under construction and should be ready by august)

Car EMI.                 9100

Living expenses       15000

Total                      73600



PPF                      40000 in both our individual accounts plus a monthly contribution per month of about 3500 each per month for both

FDs.                     4.5 L

Current RDs.        18 K / month

SIPs.                   10 K/ month in following funds

                              1) DSP BR top 100.                      2000k

                              2) ICICI focused bluechip              2000 K

                              3) Birlasunlife frontline equity.       2000 K

                              4) HDFC mid cap opportunities      2000K

                               5) ICICI Pru discovery                  1000K

                               6) HDFC Prudence.                      1000K


ELSS.             Bajaj New Unit gain policy 

                          current value 180000   (have paid 5 premiums of 40K each)


We are planning to buy online term insurances for each of us by next month worth 50 L each.


I have 2 questions :

1)  Do the investments look on track with the current market conditions?


2) The lock in period for the ELSS was 3 years and I have already paid 4 instalments of 40K each. Should I continue holding it or withdraw it once the market improves a little?


I am just starting out with personal finance so I’m sure I would have made some  novice mistakes. Please suggest.




7 replies on this article “First time investor in MFs. Need Advice”

  1. Dear Harpreet, please read one of my reply given today itself in another discussion for simplified financial planning.


    If you need more discussion, we can go ahead.



  2. Harpeet,

    Thanks for bothering to respond to everyone. May dont. Regarding children, please plan for how much more you need to save for their education soon. Also don’t plan anything heavily dependent on your salary once you are in the family way. It is very common for many women to be advised rest from the 4th month itself.

  3. Harpreet Kaur says:

    Thanks a lot Ramesh Sir , Ashal Jauhari Sir and Free Financial Calculators and for taking time to respond.

    As I mentioned, I am a novice – we both have come from environments where holding money in FDs and at the max gold is considered the BEST investment – that is why I ended up asking for help.

    The Bajaj policy was taken by my father on insistence of some ‘friend’ – bad call I understand now. I will try to understand the details of the same. Should I withdraw it now – ULIPs are a bad choice I understand due to high adminstration charges?

    As mentioned in the comments above, I checked the underlying portfolio in 1st 3 funds and yes they do overlap significantly – which one would you suggest to keep and which ones to get rid of? And should I just increase the amount in one or look at another MFs as well?

    Answers to Ramesh Sirs questions:
    1) What is the use of RD? What goal?
    I started them last year with the single most intent of moving money from spending account to another saving account.

    2) Have you got a decent emergency/contingency fund? If not, get one. If yes, how much have you set aside
    I have about 1.5 Lac liquid cash in our accounts at any given time – I understand from reading the blogposts that it should atleast be 6L – I will start working on this.

    3) WHen I mentioned 50L each I just wanted it to be indicative of the preimium amounts that will have to be spent towards term insurance. Yes I understand the income replacement concept – Thankfully we did not fall in trap for a LIC Magic plan one of our relatives was selling to us.

    @Ashal Jauhari Sir – I am starting out, reading a lot about what best I can do best with my money.

    @Free Financial Calculators – yes we have plans for kids by next year – hopefully no break in my job will be involved as I have family support.

    1. Ramesh says:

      1. Regarding Ulip, first read and understand it. Then see what you want to do with your money in a holistic manner. Then see, if this ulip canbe fitted in somewhere or whether it will be better to get rid of it. Most of the high expenses are already done. You now need to see, what expenses are there currently and do you have better choices available (so, you need to really know about the policy as well as the options and THEN make a decision).
      2. I have already suggested 2, any one of which will take care of all equity needs. HDFC Equity / DSP Equity work well. HDFC Prudence alone can work pretty well. A single fund helps you in managing other things of your financial life instead of trying to find the best one and wasting time in that. All 10k into that. Plus, whenever you get additional money which is for a long term, put into the same fund. Very simple. Once you are more comfortable with equity investing, you can explore more.
      3. RD option. It is part of debt component. Check the overall assets and see if the debt portion is very high. In general, debt never gives above-inflation returns (unless there is deflation, which is not applicable currently).
      4. Emergency fund=6L? Nope. Wrong. A simple thumb rule for One-Income family is 6 months living expenses. You have Double Income. So overall, you need a lesser amount (it will be very improbable that both of you lose your jobs simultaneously). And Living expenses are 73500 for you. Around 4 Lakhs is more than enough (in case you had Single Income). A reasonable value would be if your husband loses his job, practically speaking, which will give you a 74-47=27k deficit per month. So 1.5L is quite enough, in my opinion. Plus, you got FD and RD too. Too much of contigency fund is suboptimal. But modify these numbers according to your own mindset (whichever gives you most comfort).
      5. Magic Plan! Hahaha. Good.

      Keep learning.

  4. “Do the investments look on track with the current market conditions?”

    Wrong question to ask for long term investments. Right questions to ask:
    Am I saving enough? Have I diversified enough. Am I holding too many MFs (you are but don’t worry too much about it)

    Since retirement is a long time away invest more in MFs and less in PPF.

    Do you have children. do you plan to do so. If so are you going to take a break and work later? These questions are important for determining insurance sum.
    Since your husband earns more he needs more insurance (about 1-1.25 Cr). You would need about 80-90 L.
    You need to take into account child expenses into the sum insured if and when you have them.
    You also need to worry about saving for their education etc now or later.

    You do hold more MFs than required. Dont do anything about it now. Slowly consolidate the holdings in future and reduce the number of funds

    Bajaj New Unit gain policy is not a MF ELSS

  5. Dear Harpreet, there are 2 options with you. Invest your & your husband’s time to read, learn & understand on your own for this finance thing. Alternatively invest your money to pay the fee for a financial planner & let him or her guide you on the path of wealth creation.
    By the way that bajaj policy is a ULIP not ELSS.



  6. Ramesh says:

    1. Payoff your Car loan, instead of the FDs and RDs. Except for some rare condition, the interest rate of Car loan would be much more than what your FD/RD are getting.
    2. Simplify things.
    a. Check out your asset allocation. Do it yourself (I could have done that). Check how much is in equities, and how much in debt (FD, RD, PPF, all come in that). Bajaj policy’s asset allocation will depend upon the underlying funds which you have opted (Oops! you do not know which funds, then time to get acquainted with that).
    b. Use minimum number of funds and remove the overlapping ones. the first 3 overlap significantly, while the 4 and 5 do so too. A single HDFC Equity or DSP Equity will work similarly without needing to resort to 6 funds. (Read more and understand the reasoning. If even after you have done that and not understood, ask again here, but put some efforts behind it).
    c. Set a reasonable target of asset allocation and strive to get there slowly and surely.
    d. Remember, market conditions are temporary. Think in a longer term.
    e. 43k is the amount of money which you can save (or spend away). So make the best use of it.

    Some questions:
    1. What is the use of RD? What goal?
    2. Have you got a decent emergency/contingency fund? If not, get one. If yes, how much have you set aside.
    3. Why do you want 50L each of term insurance? Calculate your liabilities. And check the scenario 1: You husband dies (the only point of term insurance). You will be saddled with the home loan and car loan, but your salary will take care of your daily expenses (without touching your assets). So you will need to take care of that part. Same with scenario 2 of your death. So understand the need of the Income Replacement Insurance (Life insurance is a misnomer), and after proper calculations, do take a proper objective decision about the size of it.
    4. Which ELSS? I cannot see one. The Bajaj policy is not ELSS. Read its policy wordings properly and ask if you do not understand anything in it.

    Hope this helps you.

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