Help regarding financial planning

POSTED BY bharani ON March 20, 2012 3:08 pm COMMENTS (12)

Hi,

My name is Bharani. Following is my investment details, please review and let me your comments /

recommendations.

SIP for Rs.2000 monthly on

1. uti retirement benefit pension fund

2. HDFC top 200 fund

3. (Planning to start on either Sundaram SMILE or HDFC Mid cap)

Regarding insurance, I have jeevan anand, new bima gold and jeevan saral policies for a total

premium of 40k. I am planning to make all of them PAID-UP (realised my mistake after reading

Manish’s article 🙂 ). Will take term insurance once LIC online term insurance is available.

Have a PPF account with SBI, planning to start doing NEFT of 1000rs monthly to it.

Started purchasing Gold Bees ETF one unit on a monthly basis.

I am looking to increase my SIP amount in HDFC top 200. Please advice by what percent I should increase SIP installments..

Also suggest between mid cap funds or balanced funds to start SIP..

my monthly income: 60k.

whether i am in the right track..need to invest more? Please provide your advice

 

12 replies on this article “Help regarding financial planning”

  1. bharani says:

    This is what I got as reply from HDFC..

    Dear Mr.Bharanidharan,

    We thank you for having invested with HDFC Mutual Fund.

    With reference to the below mail we wish to confirm that SIP frequency is available monthly or quarterly.

    If you want to increase your SIP amount kindly submit additional SIP ECS form to the under signed.

    Please find attached the SIP ECs form for your reference.
    For any further assistance, please do contact us and we shall be glad to assist you.

    Thanking you and assuring you of our best services always.

    Sincerely,

    Anupama S

    Client Services
    Tel : +91-427-3982680
    Tel : 1800 3010 6767 (toll-free) or 6000 6767 [between 9:30 am and 6:30 pm from Monday to Friday and from 9:30 am to 1.30 pm on Saturday]

    HDFC Asset Management Company Ltd.| 1st Floor Ram Complex | 454/3, Meyanoor Main Road |
    Salem – 636 009. | Website : http://www.hdfcfund.com

  2. bharani says:

    thanks for the reply Ashal. Will compare the funds.

    Meanwhile I got to know from a news channel that we can even have SIPs scheduled for weekly instead of monthly transactions. it makes sense to me, since weekly the volatility of markets helps our SIP to get averaged well than monthly one. but when checked with hdfc helpdesk, they said only monthly / quarterly is possible..

    Any idea on this..

    1. Ramesh says:

      Please make a study to compare the utility of having weekly vs monthly SIP. If there is any significant finding, please tell us.

      Mathematically and by probability theory, there should not be any major difference between weekly/monthly/daily/ or even quarterly SIPs.

      The only good reason to have monthly SIPs is that, you get salary on a monthly basis. So you invest according to that time schedule. Change your SIP duration, if that is a different thing.

      So, if you get irregular lumpsum payments (in business or otherwise), you should not opt for SIPs. You should then just do irregular lumpsum as and when you have money and accordingly the amount.

      1. I am not sure if a detailed study has been carried out to prove weekly/monthly etc. are better . Daily is too much book keeping so that is enough reason to push it away. (VRO once had an article where Daily SIP in fact underperformed).

        In my personal case my weekly SIPs have returned on an average 0.75% higher than monthly SIPs as calculated in Moneycontrol.com. Just assuming the increased annual 0.75% yield stays for ever for someone contributing 20k each month the:

        Corpus growing at 12% = =FV(12%/12,240,-20000,0,1) = 19,982,958.38
        Corpus growing at 12.75% = FV(12.75%/12,240,-20000,0,1) = 22,135,741.35

        a difference of 10.7% good enough for some minor goal/additional indulgence in 20 years (21 lacs).

        I don’t say that these returns will stay forever that way but having gained significantly over 3 years is some reason to believe it could possibly continue.

        Weekly SIP also involves some tracking (I do a STP though) but that is a very minor irritant.

        1. Ramesh says:

          It could have been the opposite too. Is there any reason for this to occur?

          On an individual basis, you could go to moneycontrol.com and check that SIPs done on 1st have been better than SIPs on 25th or vice versa. But will that repeat in future.

          Just projecting a statistical anomalous behavior in excel sheet is, in my opinion, wrong.

          For eg, i had calculated the returns of monthly SIP vs quarterly SIP (total invested amount same) since Apr 2001 to Apr 2012. The quarterly SIP have given a return of 26.31% over monthly SIP giving 26.14%. Same thing with another fund.
          But changing the time period changed the values (so for apr 2002-apr 2012), the returns are exactly the same. while for 2000-2012, the returns are more for monthly than quarterly.

          What do you say?

    2. I will be surprised if HDFC said that. I have weekly SIPs running for many HDFC schemes since ages.

      If other AMCs/schemes dont have weekly SIPs opt for multiple monthly SIPs (Instead of 1 monthly SIP of 5k start this for say, 7,14,21 and 28 monthly with 3*1000 and 1*2000 = 5k)

  3. bharani says:

    Sorry for the delayed response. Ashal – can you explain why UTI Ret. Benefit plan does not interest you.. i have chosen it to avoid any chance of risk in my retirement corpus. i have been doing sip in it for past 2+ years.. you have suggested Quantum Long Term Eq fund. is that balanced fund? does it makes sense to quit from UTI ret. and switch to this now..

    and regarding hdfc prudence..somewhere in this site. i have seen manish as quoted saying hdfc prudence and hdfc top 200 shares same managers and almost same risk profile and holding both of those.. is like duplicate.. any comments..

    1. Dear Bharani, Thanks for the update. There is a general myth that Retirement oriented investment should be done only in instruments having a word Retirement or Pension attached to it. What I meant was – From now on wards for next 15-20 years, invest in Eq. MFs or balanced funds & later on once a good fund value is there, you shift a part of money to Debt fund. If you are not comfortable with the idea of Eq. heavy retirement oriented investment, even a Low Eq. fund like HDFC MIP Long Term Plan can do the trick. Please check the below link.

      http://www.valueresearchonline.com/funds/h2_fund_compare.asp?mode=performance&objective=compare&select1=1930&select1=281

      Regarding HDFC Prudence & HDFC Top 200, both funds for you, well my dear friend, yes Fund manager is common in both funds & up to some extent shares are also common but Prudnece is a balanced fund where as Top 200 is a Large Cap oriented fund. In case you want to swap one of this, My take ‘ll be to go for Franklin India Bluechip in place of HDFC Top 200.

      So your final fund list ‘ll be like this –

      HDFC Prudence – balanced fund
      Quantum Long Term Eq. – Multi cap
      Franklin India Bluechip – Large cap

      Thanks

      Ashal

  4. bharani says:

    Thanks for the response Ahsal.

  5. bharani says:

    Thanks for the reply Ahsal. Makes sense to buy a term insurance asap. Will do that.

    regarding emergency fund, i have around 9-10 months expenses in a SBI savings sweep account. (MOD)

    please suggest regarding MF..

    1. Dear Bharani, from your first 2 funds, I’m not interested to start for your retirement planning with UTI Ret. Benefit plan. For your retirement needs also, you may invest in pure Eq. funds or better in balanced funds.

      So my choice ‘ll be like this –
      HDFC Top 200
      Quantum Long Term Eq.
      HDFC Prudence

      Just 3 funds as of now. Invest your money in these funds systematically.

      Thanks

      Ashal

  6. Dear Bharani, a car runs on 4 wheels but we keep 5th in the boot space. Why? The reason is there is a possibility of a running Tyre getting punctured & you may need that extra tyre.

    Now compare this situation with your term plan coverage. Please purchase one from pvt. insurer as of now. As & when LIC offers the one, you may go & purchase the same.

    Regarding your MF, please first ensure that you have 6-9 months expenses funds in your SB account as an emergency funding. Then only it make sense to dicuss other investments.

    Thanks

    Ashal

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