Require guidance on financial planning

POSTED BY Ashwin B N ON February 12, 2012 1:41 pm COMMENTS (29)

Hi All,
I went through many website to know on financial planning, but I thought this website has lot of information so dropping this thread.
I Just started my career as an engineer,
My monthly take home is 28k
Monthly expense will be 10k
Remaining amount 18k
At present I have one health insurance called HDFC ERGO, where am investing 640/month for one year. It has coverage of 3 Lakhs per year for 2 years.
Now am planning to start investment , but confused where and how to start. Daily many agents will call and explain many plans.
My aim is to invest on small and long term. After my monthly expense I will be remaining with 18k, in that how much amount I can invest because I have to save at-least few thousand for emergency.
I thought my portfolio should have these type of investment as follows:
1. SIP
2. Life+accidental+pension plan insurance
3. Guaranteed returns like PPF, NSC
4. On stock
5. ULIP
6. Chitfund.
I don’t think I can start investment in all sector with this small amount, if possible please guide me for financial planning or suggest me in which all sector I can invest.
I think minimum 5k I have to keep as emergency fund in my remaining amount of 18k, so that i can have 60 k/ year as my emergency fund in my saving account.
Tanks in advance, looking for guidance. the guidance from all people in form will be great help.

29 replies on this article “Require guidance on financial planning”

  1. Dear Ashwin, Please feel free to ask as many questions you want to. In case I’m not in position to answer immediately, I ‘ll answer it with a gap of 2-3 days.

    Regarding selection of MFs, first of all please understand that MFs do not mean only Equity funds or should I say Share funds. MFs have a lot of variety now a days. There are Pure DEbt funds investing in bond papers of Govt. of India, Corporate bonds, other debt papers, Eq. funds, Gold funds, combination of these different asset classes (Debt, Eq., Gold).

    As far as question of selecting Eq. MFs, First of all please start investing in Large cap funds like HDFC Top 200, Franklin India Bluechip. These funds ‘ll create a solid platform for your portfolio.

    You may read a lot of articles on http://www.jagoinvestor.com on basics of Mutual Funds.

    Thanks

    Ashal

    1. Ashwin B N says:

      Fine. I will read first and come back .

  2. Dear Ashwin, DTC stand for Direct Tax Code. The Govt. is planning to change income tax rules in a big way & the same falls under the name DTC.

    As of nw DTC is merely talk & no actual walk. Hence no reason to worry for ELSS.

    Thanks

    Ashal

    1. Ashwin B N says:

      Thank you Ashal

    2. Ashwin B N says:

      From a discussion about financial planning i have understood few things. My next question is

      How to choose a company for mutual fund investment. On what basis we have to invest. Also their are different type of mutual fund like Mid, large and micro. so, where to invest and in what ratio or on what basis we have to decide a company. If we take example like 48 k I need to invest on what ratio I have to invest.

    3. Ashwin B N says:

      Hi Ashal,

      From a discussion about financial planning i have understood few things. My next question is

      How to choose a company for mutual fund investment. On what basis we have to invest. Also their are different type of mutual fund like Mid, large and micro. so, where to invest and in what ratio or on what basis we have to decide a company. If we take example like 48 k I need to invest on what ratio I have to invest.

      Daily I am coming with lot of doubt so can i post more and more question in this forum, because you also an engineer, so I don’t know how much work load or busy you will be.
      so, let me know if I am trobelling you.

  3. VIGNESH BASKARAN says:

    Hi Ashwin

    I just want to remind you , you are nearing the end of the financial year. all other investments(except ppf and tax saving mutual funds) can be started at your own convenience. But these(ppf and tax saving mutual funds) things u need to do with in march 31 st to avail the benefits.

    U can have a plan for the next financial year also. But u need to look into DTC . then only we will be able to clearly plan our tax saving investments.

    Happy investing!!!

    1. Ashwin B N says:

      Thanks Vignesh , Actually am planning for next year. Because just few months back i started my career.

      I didn’t got what is DTC. Many people mwntioned in forum that ELSS may be taxable from next year but we have to see DTC. I am very poor in financial thing so asking.

  4. Dear Ashwin, Yes is the answer. Please act now on the points discussed till date & we may come to discuss more as & when you may require so.

    Thanks

    Ashal

  5. Dear Ashwin, that EPF contribution is eligible for tax benefit. So 1685 mly translates into some 20K Rs. yly. So your short fall for that 1L Rs. limit is 80K Rs. Please open a PPF account & invest at least 30K in it. Invest remaining 50K on 4K mly basis in tax saving MFs like HDFC Tax saver, Fidelity Tax advantage.

    In my opinion, please do not think of purchasing a house for at least next 5Y. Your current income & investment level are not enough to provide a window for a loan emi.

    Thanks

    ashal

    1. Ashwin B N says:

      Thank you very much Ashal for your valuable guidance.

      As you mention I will open RD and keep 10 K monthly as Emergency fund.
      30 K in PPF yearly.
      20 K goes to EPF yearly.
      50k into tax saving mutual fund: Here I will invest in SIP I.e monthly 1k into one company like that I will choose 4 company for mutual fund.

      Totally it goes to 2,20,000.00 per year.

    2. Ashwin B N says:

      Thank you very much Ashal for your valuable guidance.

      As you mention I will open RD and keep 10 K monthly as Emergency fund.
      30 K in PPF yearly.
      20 K goes to EPF yearly.
      50k into tax saving mutual fund: Here I will invest through SIP I.e monthly 1k into one company like that I will choose 4 company for mutual fund.

      Totally it goes to 2,20,000.00 per year.

  6. Dear Ashwin, in the light of the new info that your father is also having a mediclaim policy, no need to purchase another one. For your Tax saving investments, please do tell are you eligible for EPF or not? If yes, what’s the contribution?

    Thanks

    Ashal

    1. Ashwin B N says:

      Ya i Have EPF for which monthly am paying 1685/-.

    2. Ashwin B N says:

      Ashal I also like to add one more thing i.e, i am planning to have home atleast in 3 years from now for that i should have min amount to pay as down payment . remaining amount any how i have to go for loan. As am staying in bangalore, here land rate is too high.

      1. Dear Ashwin, as of now please do not think of home purchase for next 5Y or so. Your current salary & the over all asset & investment position does not allow you to go for a home loan & paying EMI.

        first build a base below your feet then only think to jump in for a home loan.

        thanks

        Ashal

  7. Dear Ashwin, keeping the condition in mind that proper medicare facilities are not available to your parents, do 2 things –

    1. purchase a mediclaim policy of say 3L Rs. for you & your parents. Please opt that policy which has maximum networked hospital in the nearby city to your parent’s village.

    2. Start creating an emergency fund for parent’s medical needs. Open a bank RD of 10K for next 12 months.

    Thanks

    Ashal

    1. Ashwin B N says:

      Thank you for your sugessition , but my company policy kept aside for them i.e, 2.5 lakhs. Even my dad also took one new policy of Rs. 2 lakhs. And i will open Rd and save 10 K as emergency fund for next 12 months.

      But from this year I have to invest , otherwise i have to pay tax. Will RD comes under tax exception. If it comes also still I will be remaining with some amount for investment. Please look into my first post once.

  8. Dear Ashwin, In all probability you & your parents are not living together due to your job. What’s the medical facility available to you from your employer for yourself as well as for your parents if any.

    Also what’s the condition of medical facilities in the city, town your parents are living?

    I’m sorry if you feel I’m asking too many questions & not answering you right away but down the line once all the required info from your side is with me I ‘ll surely provide my inputs to you.

    Thanks

    Ashal

    1. Ashwin B N says:

      2.5 lakh from employer for both me and my parents.

      My parents are in village, so not much good. For emergency one Govt. hospital their that to not near by home.

  9. VIGNESH BASKARAN says:

    Dear Ashwin

    1. SIP (Long term goal is necessary)

    Chosse some two or three funds (diversified . dont go for any sectoral fund)based on your risk aptitte and start investing the money which u dont need for any of the short term goals. if you are a conservative one start with Balanced fund.

    2. Life + pension plan + accidental

    As of now u are not married. So No need of life insurance. in later stage of life dont forget to take term insurance. Avoid all ENDOWMENT AND MONEY BACK POLICIES.

    In india we dont have proper pension fund(some pension fund is offered by some AMC, as all are new you cant take a risk).And NPS is the one which is brought by govt. but it has got some problem. so we hope this will be solved and till then invest ur money in mutual funds thru SIP.

    Accidental cover is not required . still u feel u need go ahead.

    3.For your short term goals have a Recurring deposit.
    U can open a ppf account (long term).
    The emergency fund can be kept in the Sweep account . U can take the amount whenever u want. u can convert the normal acc with this Sweep in facility which will put the excess amount after a threshold amount in Fd and withdrawl is also possible at any time.

    4,5,6. For all the above numbers My only answer is NO NO.

    In later stages after understanding the nuances in the stock market u can start investing.

    No to the chit funds. And ULIP , Investment and insurance is always different. Dont try to combine.

    Hope I am clear.

    Happy investing!!!

    1. Ashwin B N says:

      Thank you very much Vignesh , One more question what about gold equity. i don’t no wether am using correct word for gold equity.

      1. VIGNESH BASKARAN says:

        Dear ashwin,

        Intially i was also thinking of buying gold. Then ashal only prompted me of not over investing in gold.

        We can have 5 percent of our portfolio in gold. and that too its better if we buy it in GOLD ETF. There are many post in this forum for comparision and cost effectiveness in gold investment.

        if you have any goal like sister s marriage or some othr goal for which gold is needed u can go ahead and buy(calculate the amount of gold u need and buy it every year proportionately to reach the required amount). or else pls avoid gold investment.

        The above advice i got from ashal..Thanks ashal.

        regards
        Vignesh.

        Happy investing!!!!

        1. Ashwin B N says:

          Thanks Vignesh for your advice. Even ashal also recommended how to invest. I have posted my plan , so if you have any guidance over that please guide me.

  10. Dear Ashwin B N, First do tell some thing more about you.

    Your age,
    Married or not
    If married, Family size & what about spouse’s income if any
    No. of dependents
    Current investments if any
    Any life insurance you have as on date
    Are your employer providing any PF

    There may be a lot more questions.

    Please do understand, if you feel that I’m asking for too much personal data, you have the option to contact either dear Manish (owner of this forum) or me.

    Thanks

    Ashal

    1. Ashwin B N says:

      My age is 24.
      Not married.
      No. of dependents 2 (Dad and mom).
      Basically from agriculture family i.e. my dad is looking property.
      At present from my side 1680/month will be deducted as PF Fund.
      I have one health insurance from HDFC called HDFC ERGO which provides me a 3L health insurance coverage every year for 2 years. I am paying 660 Rs as EMI for one year.

      Other than this I don’t have any investment.

      1. Dear Ashwin, are your the only Son of your parents or are their any siblings?

        If you do have siblings, what’s their position?

        Thanks

        Ashal

        1. Ashwin B N says:

          First of all i have to thank for your immediate responding and helping me.

          Ya, I am the only son. And we don’t have any other income other than income from agriculture. But, that was taken care by dad.

    2. Ashwin B N says:

      As income from agriculture is looking by my dad. I don’t have much idea on that and I think it wont come for my income as property in my dad name.

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