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POSTED BY ON February 2, 2011 4:42 pm COMMENTS (7)
Hi Manish,
Me and my husband need some financial advice from you.After reading you blogs ,we badly realise the weak face of our finance!
We both are working with nearly 64K joint salary evry month.We have total EMI of almost 30K(Home+Car).We want to build a corpus of atleast 5 crore in next 20 years.
We are planning to start SIP of Mutual funds @1000 each.We have planned for the following funds.
1/ DSP Top 100
2/ DSP Equity Fund
3/ HDFC Top 200
4/HDFC EQUITY Fund
5/ Reliance Equity Opportunity Fund
Also we are plannig to invest 6k in PPF every month.
We seek your advice whether this looks good or should we redesign something.
Thanks a lot in advance!
rgds,
Sudarshana
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I hate to be such a downer, but you want to save 20k per month and after 20 years want something like 50 million rupees (Rs. 5 CR)….ouch.
For that to happen you will need to get around 20% annual return. ANY financial planner on this forum can tell you that is not possible.
At 10% per year for 20 years, you would need to contribute 70k per month to achieve 5 CR.
At 15% per year for 20 years, you would need to contribute 38k per month to achieve 5 CR.
@Sudarshana
I feel that funds what you have choosen are perfect because they have proven past record and more importantly my idea would be to avoid debt funds because when you are parking some funds in ppf than its better to go for pure diversified equity funds.
Again I agree to ramesh towards ELSS but it will reap you benefit for only 2 financial years i.e. March’11 &12. Once Dirct tax code comes into picture the sheen of ELSS will be lost. Iam not sure about the lock in period of 3 years would continue or not after 1.4.2012.
Again your priority seems to be in building a corpous. My views will be that you stick to Diversified Equity MF.My top picks will be all 1st four that u mentioned.
@Ramesh— Thanks again for your response.:)
thanks a lot for your suggestion!
Just to clarify a little doubt. Regarding the PPF,would it be resonable to keep 20 K every year as a debt fund and also for tax savings.
As I see it presently, it will be nicer if you can invest into ELSS for this year and the next year, so as to get the max benefit of 80c.
After that, you can use PPF as the tax saving tool. treat PPF as a debt option. actually a little less that a debt fund. if you want to invest in a debt part of your investment portfolio, and you have already made your max 80c / tax-savings by whatever means. then choose a debt fund over a PPF.
also, keep the PPF to the min. do not close it (well you cant also).
How have you arrived at the figure of 5 crore after 20 years? Just asking.
My view is “you should go with maximum growth potential of your money!”. Setting a money target does not help much in way of achieving it. It just helps you to get the proper investment vehicle.
For you, it will be largely equity (70-80%).
If you save 20k per month, increase the investment amount @10% per year, and get a 12% long-term return on your investments, then in 20 years you will have about 4 crore.
this is a reasonable rate of return.
use max 2-3 funds and not more.
i would say use 2 equity multicap funds and a debt fund. My suggestions:
1. Templeton India equity income / templeton india growth (multicap)
2. IDFC Premier equity fund (mid-small cap, but really very good fund).
3. reliance regular savings fund (multicap).
And if you want from your selected funds- go with dsp equity / hdfc equity.
Do not chase returns / top performing funds. keep to your owned funds. all of them have good management.
Regarding debt funds – i would go for bsl dynamic fund / kotak bond regular. even bsl mip savings 5.
Be clear. Be simple.
Ramesh
@ Remesh : Thanks a lot for your advice!
Let me give you a clearer picture of our current financial situation.Both me and my husband are in our late 20’s and don’t have kids yet.
We earn 64K.After paying off our EMI’s (Car+Home) and House hold expenses ,we are left with 20 K.
Earlier we had few ULIP’s (LIC Market Plus+ Max New York) which we have surrended after 5 yrs to pay back our debt. Now , we want to invest this 20K every month to build our retirement corpus.
Regarding Life and Health Insuarance we have,LIC policies.
We are also planniing to take up Term policy from ICICI with 50Lac cover each.
All these policies we pay from our annual incentive.
Now,please suggest where we should invest our 20k each month so that we can get our financial goal of getting a corpus of 5 Crore after 20 years.
Best Rgds,
Sudarshana
Please go through the multiple discussion threads in the forum regarding the financial planning.
Particularly this post, http://localhost/jagoforum2/portfolio-review-request/1001/
Also go through this, http://www.subramoney.com/2010/12/create-your-financial-plan-like-this/
For the next 20 years, you should have equity as the mainstay and not the nearly 50% allocation to debt, which you seem to be doing.
Principles:
1. Get all insurance requirements completed including life, medical, etc.
2. Keep a proper contingency plan.
3. KISS (keep it simple).
4. Remember, equity MF are a tool to get into the market. If you will have 5-6 similar funds, it would not help you in getting extra return. You will get more index-like returns at relatively higher management costs. Keep 2-3 diff types of funds. Get a dynamic debt fund too rather than getting into PPF.
We can continue the discussion after you go through this whole exercise.
Hope this helps you out.
Ramesh