Query on SIP

POSTED BY Roopa G ON February 14, 2013 11:43 am COMMENTS (19)

Hi Manish,

I am planning to invest Rs.15000 per month through SIP in following funds. Please suggest if this is a good investment plan. Also, please suggest the minimum duration for the same.

1. HDFC Mid cap Opportunities Fund – Rs. 2500
2. HDFC Top 200 – 2500
3. Reliance Equity Opportunities Fund – Rs. 5000
4. SBI Emerging Business Fund – Rs. 5000


19 replies on this article “Query on SIP”

  1. Dear Roopa, as the ratio is 50-50, the cover requirement is 90L. At this point I w’d like that both of you should purchase term cover of 1Cr. each from online policies. Why 1Cr. & not 90L? The reason lies in the fact that due to high sum assured discount, the prem. for 1Cr. ‘ll be less than 90L Rs. Please do not go by my words. check on your own, this thing.

    Below is the list of online term cover providers. It’s an indicative list only & not the order of preference.

    Aegon Religare



  2. Dear Roopa, glad to know that we are able to help you. Regarding term insurance for both of you, @ 94-95K mly income, the yly income ‘ll be roughly 12L Rs. or even more. So @ 15 times multiple, your combined cover requirement ‘ll be 1.8Cr. Rs.

    Divide this 1.8Cr. Rs. between both of you in the same ratio of your & your husbands’ incomes.

    Please share your views.



    1. Roopa G says:

      Thanks Ashal for suggesting on the term insurance cover required for us. We contribute equally to our monthly income. Hence, we may have to take insurance cover of around 90lacs each as per your advice.

      Ramesh, the Thumb rule for buying a house makes sense!

      Yes, all the views and suggestions really helped us to get started!! Thanks Everyone!!

  3. Roopa G says:

    Ashal, thanks for sharing your thoughts. May be we have to postpone our desire to own a house till we are able to afford a house worth 20-25 lacs, which we are comfortable with (30K EMI is the Max limit we have set for ourself)

    1. Ramesh says:

      As a thumb rule, buy the house only if you can pay 50% of the amount from your pockets. Whether you do it or not at that time will be a tactical decision.

  4. Nitin says:

    Great Job Ramesh…..I really appreciate your detailed analysis and suggestions. Keep the good work ON.

  5. Biswa Singh says:

    FFC, Ramesh and Ashal gr8 job…. it really requires lots of patience and time to respond such query.

  6. Roopa G says:

    Thank you Ramesh for being patient-enough to read and understand my situation and for providing a detailed analysis and suggestions. I understand that I have to learn and understand many aspects of money management, but your response gave me a road map to understand where I stand now, where I need to go and what I need to do to reach there. Thanks a lot!!

    1. Ramesh says:

      You are welcome.

      Do update us, about what you have done. And do ask more, if you got any confusion.

  7. Dear Roopa, I did not mean that by giving nos. you had done any wrong. I’m ready to discuss all the things one by one.

    @ 30K EMI, it seems you are looking for a house costing around 40L Rs.

    Now sample this @ 9K mly rent = 1.08L yly rent, you are living in the same house very comfortably & your finance ‘ll also be under control.

    The Price of house to earning ratio (P/E) = 40/1.08 is around 40 times, which indicates that the price of the house is very high & it’s sensible to remain a tenant.

    Please share your views.



  8. Roopa G says:

    Thank you FFC for your suggestions. I would try your goal investment optimizer to arrive at the corpus I would need for my long term goals.

    Ashal, please do ignore the details which you feel are noss.
    Here are the details you are looking for:
    Current House Rent=Rs.9000
    EMI for new house=Rs. 30000 (Not more than this)
    Retirement Income=Not sure at this time as I find it complicated due to inflation rates. Based on our current income/expenses what amount we need to target?
    Child education=Rs.20 to 30 lacs (approx)

    1. inflation for child’s education should not be lower than 10%. For retirement you need to use as high an inflation as possible so that the monthly amt to be saved is achievable. Whatever the actual inflation is, one can only save so much!

      For retirement only your current expenses (deducting life insurance premium child school fee and loan emis) matter. You need to have rough idea of what course you wish your child to enroll and approx present cost and work with that. Of course things can change in future but that’s life.

  9. Dear Roopa, instead of discussing all the noss. given by you. I’m asking simple questions to you.

    What’s your current house rent? what ‘ll be the EMI for the new house you want to purchase?

    How much is enough for your retirement?

    Hopw much is enough for your kids’ education expenses?



  10. Roopa G says:

    From Ramesh and Ashal’s response, I realize that I need to provide clear picture of my situation so that experts will be able to give better suggestion/solution. So here it is:

    Me and my husband, 31 and 32 yrs old, are salaried professionals. We have a kid of 2 years.

    Monthy Income: Rs. 94,000
    Monthly (regular) Expenditure: Rs. 30000
    Additional Expenditure: Rs. 15000 (Although not incurred monthly, like hospital visits, travel to hometown, for my in-laws whenever they ask for, etc)

    Investments done so far:

    Open Funds Invested Closed Withdrawn
    2007 Metlife 45000.00
    2007 Birla Sun Life Tax Relief’96 Fund (Divident) 25000.00
    2007 SBI Magnum Taxgain Scheme – Growth 25000.00 Sep12 21510.53
    2008 HDFC TaxSaver – Divident 20000.00 Sep12 23632.2
    2008 Principal Personal Tax Saver Fund 10000.00 Sep12 17001.78
    2008 Reliance Natural Res Fund(Growth) 10000.00 Sep12 9340.43
    2008 Sundaram 20000.00
    2009 Sundaram 10000.00
    2009 Birla Sun Life Tax Relief’96 Fund (Growth) 10000.00
    2010 HDFC Top 200 Fund – Growth 20000.00
    2010 ICICI Prudential Life Insurance 25000.00
    2010 HDFC Long Term Advantage Fund – Growth 13000.00
    2010 HDFC TaxSaver – Growth 12000.00
    2011 ICICI Prudential Life Insurance 25000.00
    2012 ICICI Prudential Life Insurance 25000.00
    Bank FD (Total) 400000.00 Sep12 400000
    Gold (ornaments) 300000.00
    Total 995000.00 471484.94

    FD of around Rs.400000 was accumulated by keeping Rs.30000 to 50000 in FD and RD since last 2 years so that we could pay down payment for buying a flat in Bangalore. But we ended up buying a site worth Rs. 500000 in hometown, where we adjusted remaining amount by closing and taking out money from some of our mutual funds as shown above.

    1. Regarding Life Insurance, for the sake of Tax-saving, we started investing in ICICI Prudential Life Insurance(min 5 yrs), but I know that the cover is not adequate. Since we have to insure both of our lives, what should be the life cover for each and which insurance plan to choose?

    2. We both have our employer-offered Health Insurance of Rs.300000 each (including spouse and kid). Do we have to take additional cover?

    3. We thought of starting a SIP (without wasting any more time) to fulfill any of our following goals as they take priority. Hence we are planning to invest Rs.15000 per month through SIP in following funds. Please suggest if this is a good investment plan. Also, please suggest the minimum duration for the same.

    1. HDFC Mid cap Opportunities Fund – Rs. 2500
    2. HDFC Top 200 – 2500
    3. Reliance Equity Opportunities Fund – Rs. 5000
    4. SBI Emerging Business Fund – Rs. 5000

    4. Remaining Rs.32000 we want to keep in Bank FD again, so that we can accumulate down payment for buying a flat. Is this fine?

    Our Short-term goals:
    1. Buy a house/flat worth Max. Rs.3000000 in next 1 year (with loan).
    2. Own a car worth Max. Rs.500000 in next 2 years (with loan).
    3. Allocate Min. Rs.100000 per year for Child Education from 2014 till next Five years and then increase this allocation based on the Education costs at that time.

    Our Long term goals:
    1. Rent out the house that we would buy and live in Bangalore (which can form a part of our retirement income), and own an independent house at hometown during retirement.
    2. Regular Income during Retirement (right now I dont have an idea on what should be the retirement income)
    3. Funds for Higher Education of our son.

    We don’t have an idea on what corpus we need to/able to create to achieve our goals (especially long-term goals). We did try to consult some financial advisor, but fell pray to their biased advises (ICICI Prudential Life Insurance is one such case, where we were told it is “Wealth Management Stage II” plan, but later on we realized that it is an Unit-linked Life Insurance plan).

    Please do suggest a good investment plan and what modifications we need to do to our current portfolio so that we can achieve our financial goals.


    1. Dear Roopa,

      For your long term goals (retirement + childs education etc), to determine how much to save,
      use this goal investment optimizer


      To find out how insurance your family coupled with a comprehensive child-goal planner
      use the “Comprehensive Child Planner” available there.

      Once your are clear about how much you need to save, you can start investing according to your risk appetite (% in equity MFs, rest in debt like PPF etc.)

      Among the funds you have chosen
      1. HDFC Mid cap Opportunities Fund – Rs. 2500
      2. HDFC Top 200 – 2500
      3. Reliance Equity Opportunities Fund – Rs. 5000
      4. SBI Emerging Business Fund – Rs. 5000

      1,3,4 are risk mid-cap and small-cap funds. The core (70%)of your portfolio should be large-cap funds like Top 200, Franklin Templeton Bulechip among others. Rest can be mid and small cap funds.
      Quantum long term equity is a good large and mid cap fund.
      IDFC premier equity is a good mid- small cap fund

    2. Ramesh says:

      1. I assume your individual monthly income to be 50k, which is 6L a year. A simple rule of thumb of 10-12 times yearly income gives an amount of 60L. Add some liabilities and rounding off, 75L is more than enough for both of you EACH. Get any of the major companies’ online term plans- Aegon, Aviva, ICICI, HDFC, Kotak. Since you have from ICICI, I would advise to get from them. Easier to manage.

      2. I find your health insurance levels ok, with covers from both empployers. Good. Nothing more to do.

      3. Then check on one of my past comment. http://localhost/jagoforum2/need-guidance-for-investments/4510/#comment-16089

      I. Accordingly, set out your Emergency/Contingency funds (Basket 1).

      II. Aim for Child Education. It is a long-term goal (child is 2 years old). Invest predominantly in equity-oriented vehicle, eg HDFC Prudence fund, which will give you a 75:25 equity;debt balance without you needing to intervene. Whatever amount you put, just put in that fund. Estimating this at present levels will be mostly futile, since it is so long in future with a plethora of variables. In general, higher education inflation tends to be MORE than the general inflation (which in turn is more than CPI published by GOI).

      III. Aim for Retirement.
      – If you are ok with your current lifestyle, then accordingly, you will need (30k+15k) * 12= 5.5Lakhs per year. Assuming a usage of 2.5-4% per annum from the retirement corpus, if you have 5.5L * (25 to 40) = 1.3-2.0 crores (25 and 40 come by inverting 2.5-4%) presently, then you can retire today. So aim for that amount and increase the total amount by inflation numbers every year.

      – Then aim for a return of above inflation over longer periods of time. Equities and Real Estate will generally give you above-inflation returns. You want land and flat, good for you. But understand the leverage you are using (the Risk) as well as the illiquidity risks in real-estate investments.

      – My preference is 70:30 or 75:25 equity debt ratio. However, you can get the 70-75% equity group to divide between actual equities and real estate. Do your own maths in that. Keep 25-30 in relatively liquid debt instruments (which means not PPF or other illiquid debt instruments).
      Special note regarding Gold. I dont like gold. But if you want gold as an asset class, make sure, you keep it at 5-10% of your portfolio. Moreover, ornaments of use are not investments and they have poor liquidity and returns.

      At present, you seem to have 3 Lakhs invested in equities which have become ‘i dont know how much’.
      Debt = 4 lakhs.
      Gold = 3 lakhs. Since they are ornaments, they should not be classified as part of your portfolio.
      Real estate=5lakhs.

      In total: 3+5 : 4. Or 66:33 ratio. Good enough. Put the exact numbers there and get the proper result for you.

      Now you want to invest in more real estate by shifting from debt. Which will make the entire thing more risky both in terms of leverage (loan), as well as decrease in the debt component. Unless you KNOW that real estate will always go up and up only, do that, otherwise not. Always assume that you can be wrong and take necessary precautions.

      Next Steps:
      1. Simplify your investments in easily trackable and lesser expensive instruments.
      2. Keep minimum number of instruments, without sacrificing diversification.
      3. My suggestion will be to use HDFC AMC directly for all your fund management things.
      4. Do this, by opting for HDFC Top 200 / HDFC Equity – Direct Plans for equity exposure for your own needs, and HDFC Prudence for child’s future needs and HDFC Taxsaver, and HDFC Long term advantage for tax-saving purposes.
      5. Liquidate all others, including Birla, sundaram, SBI, Principal tax savers, Reliance natural resources fund. Also, Metlife fund may also be liquidated.
      6. You will have to look at ICICI Pru’s plan and see the details.

      So all future SIPs into HDFC fund’s direct plans. If it is 15k, put 1 year SIP into HDFC Equity (the performance should match HDFC Top 200 + Mid cap opportunities). Do not add more funds, which will just create a mess after 3-4 years. Investing in Equity is much more important than choosing 4 different funds.

      Meanwhile, during next one year, sort out your investments and plans, read more and widely (it is your own money and your responsibility), understand things and go slow.
      Hope this helps you.

      1. Raj says:


        I don’t have anything else to add on your advice, but have a query. How good is to stick with only one AMC for long time investment. I remember seeing a comment from you somewhere else in this forum saying that HDFC AMC is highly depending on its fund manager Prashant Jain who can leave!

        Won’t it be nice if we at least use two good AMC for fund management – especially when you have equally wonderful AMC like Franklin Templeton.

  11. Dear Roopa, are you investing for any goal or just for sake of investing with out any clear cut aim?

    Please clarify.



  12. Ramesh says:

    What is the purpose of this investment plan?

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